Beginning in July of 2018, two class action complaints were filed in the United States District Court for the Eastern District of New York (the “Court”). The first, filed on July 27, 2018, was styled Too v. Rockwell Medical, Inc., et al., No. 1:18-cv-04253. The second, filed on September 4, 2018, was styled Spock v. Rockwell Medical, Inc., et al., No. 2:18-cv-4993.
By order dated October 10, 2018, the Court ordered that the cases be consolidated under lead case Too v. Rockwell Medical, Inc., et al.; appointed Duck Pond Partners, LP and Robert Spock as Lead Plaintiffs for the consolidated action; and approved Lead Plaintiffs’ selection of Glancy Prongay & Murray, LLP as Co-Lead Counsel and Pomerantz LLP.
On December 10, 2018, Lead Plaintiffs filed and served their Consolidated Amended Class Action Complaint (the “Complaint”) alleging claims against all Defendants under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and also asserting claims against the Individual Defendants under Section 20(a) of the Exchange Act. Among other things, the Complaint alleged that Rockwell and the Individual Defendants violated the Exchange Act, and Rule 10b-5 promulgated thereunder, by making certain statements that Lead Plaintiffs allege were false and misleading. The specific statements that Lead Plaintiffs identify in the Amended Complaint and allege were false and misleading are: (i) statements regarding the likelihood of Rockwell securing separate reimbursement from the Centers for Medicare and Medicaid Services (“CMS”) for its iron-replacement drug Triferic, (ii) statements regarding Rockwell’s loss reserves relating to Triferic, and (iii) statements regarding the adequacy Rockwell’s internal controls over financial reporting. The Complaint further alleged that the prices of Rockwell’s publicly-traded securities were artificially inflated during the Settlement Class Period as a result of Defendants’ allegedly false and misleading statements, and declined when the truth was revealed.
On February 18, 2019, Defendant Rockwell filed its answer to the Complaint and the Individual Defendants filed their answer to the Complaint. From the outset of the Action, Defendants have denied and continue to deny that they violated the federal securities laws or any laws and maintain that their conduct was at all times proper and in compliance with all applicable law. Defendants have denied and continue to deny specifically each and all of the claims and contentions alleged in the Action, along with all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the Action. Defendants also have denied and continue to deny, inter alia, the allegations that any of the Defendants made, knowingly or otherwise, any material misstatements or omissions; that Defendants acted recklessly or with culpable intent; that any member of the Settlement Class has suffered any damages; that the price of Rockwell Securities was artificially inflated by reason of the alleged misrepresentations, omissions, or otherwise; or that the members of the Settlement Class were harmed by the conduct alleged in the Action or that could have been alleged as part of the Action. In addition, the Defendants maintain that they have meritorious defenses to all claims alleged in the Action.
Lead Plaintiffs continued their investigation into the claims asserted but they also recognized the risks attendant to this litigation. While the Parties believe in the merits of their respective positions, they also recognized the benefits that would accrue if they could reach an agreement to resolve the Action. They began to discuss the possibility of exploring whether a settlement could be reached through a mediation process.
On May 23, 2019, Co-Lead Counsel and Defendants’ Counsel participated in a full-day mediation session before experienced JAMS mediator Jed D. Melnick. In advance of that session, the Parties exchanged detailed mediation statements and exhibits, which addressed the issues of both liability and damages, and provided the same to Mr. Melnick. The session culminated in the Parties reaching an agreement in principle to settle the Action, an agreement that was memorialized in a memorandum of understanding (the “MOU”) executed on June 3, 2019. The MOU sets forth, among other things, the Parties’ agreement to settle and release all claims asserted against Defendants in the Action in return for a cash payment by or on behalf of Defendants of three million seven hundred thousand dollars ($3,700,000.00 USD) for the benefit of the Settlement Class, subject to certain terms and conditions and the execution of a customary “long form” stipulation and agreement of settlement and related papers.
Based on the investigation and mediation of the case and Lead Plaintiffs’ direct oversight of the prosecution of this matter and with the advice of their counsel, each of the Lead Plaintiffs has agreed to settle and release the claims raised in the Action pursuant to the terms and provisions of the Stipulation, after considering, among other things, (a) the substantial financial benefit that Lead Plaintiffs and the other members of the Settlement Class will receive under the proposed Settlement; and (b) the significant risks and costs of continued litigation and trial.
Defendants are entering into the Stipulation solely to eliminate the uncertainty, burden and expense of further protracted litigation. As detailed in ¶ 14 of the Notice, each of the Defendants has denied and continues to deny any wrongdoing, and the Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any of the Defendants, or any other of the Defendants’ Releasees (defined in ¶ 30 of the Notice), with respect to any claim or allegation of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that the Defendants have, or could have, asserted. Similarly, the Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any Lead Plaintiff of any infirmity in any of the claims asserted in the Action, or an admission or concession that any of the Defendants’ defenses to liability had any merit.
On September 12, 2019, the Court preliminarily approved the Settlement, authorized the Postcard Notice to be mailed to potential Settlement Class Members and the Notice to be posted online and mailed to potential Settlement Class Members upon request, and scheduled the Settlement Hearing to consider whether to grant final approval to the Settlement.