MCDERMID v. INOVIO PHARMACEUTICALS, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

PATRICK MCDERMID, individually and on

behalf of all others similarly situated,

Plaintiff, CIVIL ACTION

NO. 20-01402

v.

INOVIO PHARMACEUTICALS, INC., et al,

Defendants.

PAPPERT, J. January 18, 2023

MEMORANDUM

The parties have agreed to settle this class action after almost three years of

litigation. The Court issued an Order on August 31, 2022, preliminarily approving the

settlement. (ECF 150.) Plaintiffs now move for final approval of the Settlement

Agreement, Plan of Allocation, award for attorneys’ fees, expenses, and awards to the

lead and representative Plaintiffs. (ECF 156.) After reviewing all relevant submissions

and holding a hearing (ECF 160), the Court grants the Motion.

I

Patrick McDermid, individually and on behalf of others similarly situated, sued

Inovio, CEO J. Joseph Kim, CFO Peter D. Kies, and Vice President of Biological

Manufacturing and Clinical Supply Management Robert J. Juba, Jr. alleging violations

of sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and SEC Rule

10b-5. Plaintiffs claim that during the class period, Defendants made several false or

misleading statements regarding Inovio’s progress on a COVID-19 vaccine that

artificially inflated Inovio’s stock price. For example, on February 14, 2020, Kim

announced on television that “within three hours of accessing [COVID-19’s genetic

sequence] . . . we were able to construct our vaccine INO-4800.” (Second Am. Compl. ¶

97, ECF 129.) His announcement caused Inovio’s stock price to increase 7.5 percent.

(Id. ¶ 98.) On March 2, 2020, Kim met with then-President Trump, and while

discussing the COVID-19 pandemic, stated that Inovio had “fully construct[ed] [its

COVID-19] vaccine within three hours.” (Id. ¶ 99.) Inovio’s stock rose 69.7 percent by

the end of the next day. (Id. ¶ 100.)

After Kim’s statements, Citron Research—a well-known securities trading and

research firm—denounced on Twitter Inovio’s “ludicrous and dangerous” claim that it

designed a vaccine in 3 hours. (Id. ¶ 115). Inovio later corrected Kim’s statements,

conceding it had not constructed a vaccine in three hours, as Kim had claimed; rather, it

had designed a vaccine in three hours. (Id. ¶ 101.) Over the following months, further

misstatements were revealed, such as Inovio’s assertion that it could manufacture

hundreds of millions of doses of its vaccine. (Id. ¶¶ 103–107.) Within two days, Inovio’s

stock tumbled from $18.72 per share to just $5.70 per share. (Id. ¶¶ 115–116.) Over

the following months, further company statements—such as Inovio’s assertion that it

could manufacture hundreds of millions of doses of its vaccine—were revealed as

misleading. (Id. ¶ 74, 103–107.)

The litigation “was hotly disputed on both sides,” and both parties “were fully

prepared to take this case forward” to trial. (Hr’g Tr. 10:4–6, ECF 161.) McDermid

filed his initial Complaint on March 12, 2020 (ECF 1), and the Court appointed Manuel

Williams as lead Plaintiff and Robbins Geller Rudman & Dowd LLP as lead counsel in

June of 2020. See (ECF 54.) Plaintiffs filed their Consolidated Class Action Complaint

(ECF 60) in August of 2020, and a First Amended Complaint in September of 2020

(ECF 68). On February 16, 2021, the Court granted in part and denied in part

Defendants’ Motion to Dismiss (ECF 72, 86). Plaintiffs filed and fully briefed a Motion

to Certify the Class (ECF 99), to which the Defendants filed a thorough Response (ECF

107). Plaintiffs filed a Second Amended Complaint in February of 2022 (ECF 129), to

which Defendants filed another Motion to Dismiss (ECF 133). Throughout this time,

the parties engaged in extensive discovery consisting of over half a million pages of

documents. Plaintiffs deposed nineteen fact witnesses, and experts for both sides

prepared reports and were deposed. (Mem. L. Supp. Mot. Final Approval 9, ECF 156-

1.) The parties also participated in two mediations with a mediator with extensive

experience in complex class action cases. (Decl. of Tor Gronborg Supp. Mot. Final

Approval ¶ 4, ECF 156-2.) The parties eventually reached agreement, and the Court

preliminarily approved their settlement (ECF 150). On December 15, 2022, the Court

held a hearing on the Final Settlement Agreement (ECF 160).

Under the Settlement Agreement, Inovio agrees to pay an award of at least

$44 million. Of that total, $30 million will be paid in cash, with the remainder paid in

either seven million shares of Inovio common stock or $14 million worth of stock,

whichever is greater. (Mem. L. Supp. Mot. Final Approval 1, ECF 156-1.) Each

individual class member’s recovery will depend on when they purchased their Inovio

stock, how much they paid for their stock, and how many shares the individual

purchased. (Decl. of Tor Gronborg Supp. Mot. Final Approval ¶ 87, ECF 156-2.)

II

Pursuant to Federal Rule of Civil Procedure 23(e), class actions may only be

settled with court approval and only after a hearing that finds the settlement is “fair,

reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). The Court must: (1) determine if

the requirements for class certification under Rule 23(a) and (b) are satisfied; (2) assess

whether notice to the proposed class was adequate; and (3) evaluate if the proposed

settlement is fair under Rule 23(e). See In re Nat’l Football League Players Concussion

Inj. Litig., 775 F.3d 570, 581 (3d Cir. 2014).

III

The settlement class must meet Rule 23(a)’s requirements: numerosity,

commonality, typicality, and adequacy of representation. Fed. R. Civ. P. 23(a). These

requirements ensure that the named plaintiffs appropriately represent the class and

“effectively limit[s] the class claims to those fairly encompassed by the named plaintiff’s

claims.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011) (citations and

quotations omitted).

Because the numerosity requirement is generally met if the potential number of

plaintiffs exceeds forty, Stewart v. Abraham, 275 F.3d 220, 226–27 (3d Cir. 2001), the

“thousands” of class members who purchased Inovio stock during the class period are

sufficiently numerous as to make joinder impractical under Rule 23(a). See (Mem. L.

Supp. Mot. Class Certification 3, ECF 100); In re CIGNA Corp. Sec. Litig., No. 02-cv-

8088, 2006 WL 2433779, at *2 (E.D. Pa. Aug. 18, 2006) (“[C]ourts have recognized a

presumption that the ‘numerosity requirement is satisfied when a class action involves

a nationally traded security.’”).

The commonality bar “is not a high one.” Rodriguez v. Nat’l City Bank, 726 F.3d

372, 382 (3d Cir. 2013). A single common issue is enough to satisfy the commonality

requirement. See Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994). Typicality requires

the Court to assess “whether the action can be efficiently maintained as a class and

whether the named plaintiffs have incentives that align with those of absent class

members so as to assure that the absentee’s interests will be fairly represented.” Id. at

57. Here, both the commonality and typicality requirements are met. The issues of law

and fact in this case are common to all class members. For example, the question of

whether Defendants made false or misleading statements, and the extent to which

those statements affected Inovio’s stock price, is common to all class members.

Additionally, lead Plaintiff’s claims are typical of those of all class members:

Defendants made materially false and misleading statements that artificially inflated

Inovio’s stock price, which damaged class members when the stock price fell as the

truth was revealed.

The final factor—whether “the representative parties will fairly and adequately

protect the interests of the class”—is also met. Fed. R. Civ. P. 23(a)(4). The named

Plaintiffs’ interests align with those of other class members, and class counsel are

qualified, experienced and capable of litigating the class’s claims. See In re Warfarin

Sodium Antitrust Litig., 391 F.3d 516, 532 (3d Cir. 2004). The lead Plaintiff,

representative Plaintiff, and class counsel have protected the interests of the class, as

reflected by the substantial settlement.

The settlement class also “must satisfy at least one of the three requirements

listed in Rule 23(b).” Wal-Mart, 564 U.S. at 345. Rule 23(b)(3) requires that “questions

of law or fact common to class members predominate over any questions affecting only

individual members, and that a class action is superior to other available methods for

fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).

Predominance “tests whether proposed classes are sufficiently cohesive to

warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S.

591, 594 (1997). The predominance inquiry focuses on whether the defendants’ conduct

was common to all class members and whether all members were harmed by the

defendants’ conduct. In re Processed Egg Prods. Antitrust Litig., 284 F.R.D. 249, 263

(E.D. Pa. 2012) (citing Sullivan v. DB Invs., Inc., 667 F.3d 273, 297 (3d Cir. 2011). It

“tests whether proposed classes are sufficiently cohesive to warrant adjudication by

representation.” Amchem, 521 U.S. at 623. The predominance requirement is met

where there are issues of law and fact common to all class members regarding Inovio’s

false and misleading statements.

Superiority requires the Court to “balance, in terms of fairness and efficiency,

the merits of a class action against those of alternative available methods of

adjudication.” In re Warfarin, 391 F.3d at 534 (citations omitted). Rule 23(b)(3) directs

the Court to consider the following factors:

(A) the interest of members of the class in individually controlling

the prosecution or defense of separate actions; (B) the extent and

nature of any litigation concerning the controversy already

commenced by or against members of the class; [and] (C) the

desirability or undesirability of concentrating the litigation of the

claims in the particular forum . . . .1

Fed. R. Civ. P. 23(b)(3). All these factors are satisfied as nothing about this litigation

indicates individual control is a more favorable vehicle for bringing these claims against

Inovio. A class action is therefore superior to other methods of adjudication. See In re

Innocoll Holdings Pub. Ltd. Co. Sec. Litig., No. 17-341, 2022 WL 16533571, at *3 (E.D.

1 In the class action settlement context, the Court “need not inquire whether the case, if tried,

would present intractable management problems, . . . for the proposal is that there be no trial.”

Amchem, 521 U.S. at 620.

Pa. Oct. 28, 2022) (“Where there are potentially thousands of shareholders within the

proposed class, class resolution is preferable to multiple relitigations that would drain

both the parties and the courts of their resources.”)

Because all relevant Rule 23(a) and (b) factors are met, the settlement class is

certified for purposes of settlement approval.

IV

Before turning to the merits of the Settlement Agreement, the Court must next

determine that notice was appropriate. In re Am. Invs. Life Ins. Co., 263 F.R.D. 226,

237 (E.D. Pa. Dec. 18, 2009) (citations omitted). For all classes certified under Rule

23(b)(3), the Court must direct notice to the class members in the best way practicable

under the circumstances. Fed. R. Civ. P. 23(c)(2)(B).

The notice must clearly and concisely state in plain, easily understood

language: (i) the nature of the action; (ii) the definition of the class

certified; (iii) the class claims, issues or defenses; (iv) that a class member

may enter an appearance through an attorney if the member so desires;

(v) that the court will exclude from the class any member who requests

exclusion; (vi) the time and manner for requesting exclusion; and (vii) the

binding effect of a class judgment on members under Rule 23(c)(3).

Id. The Private Securities Litigation Reform Act of 1995 (“PSLRA”) also requires that

notice to settlement class members include statements regarding the recovery that

details the total amount of the proposed settlement, as well as the average amount

awarded per share; the potential outcome of the case; the attorneys’ fees or costs

sought; the identification of the lawyer’ representatives; and the reasons for the

settlement. 15 U.S.C. § 78u-4(a)(7)(A)–(E).

The notice meets all of the requirements of Rule 23. It includes information

regarding the litigation, the definition of the class and the claims and issues in the

litigation. See (Notice of Pendency and Proposed Settlement of Class Action ¶¶ 1–3,

ECF 156-8). It also describes the claims that will be released in the settlement. See

(Id. ¶¶ 54–60). The notice also: advises that a class member may enter an appearance

through counsel (Id. ¶ 63); describes the binding effect of a judgment on class members

(Id. ¶ 62); states the procedures and deadline for class members to exclude themselves

from the class or to object (Id. ¶¶ 64–69); states the procedures and deadlines for

submitting a Proof of Claim (Id. at 2); and provides the date, time, and location of the

final settlement hearing (Id. ¶ 71).

In addition, the notice satisfies the PSLRA’s disclosure requirements by stating,

among other things: the amount of the settlement determined in the aggregate on the

average per-share basis (Id. ¶ 3); that the Settling Parties do not agree on the average

amount of damages per-share that would be recoverable if Plaintiffs prevailed at trial,

and it notes the issues on which the Settling Parties disagree (Id. ¶ 4). It also states

that Plaintiffs’ Counsel intends to apply for an award of attorneys’ fees and expenses,

including the amount of the requested fees and expenses determined on an average per-

share basis (Id. ¶ 5). There is also contact information for Plaintiffs’ counsel (Id. ¶ 6),

and the reasons the parties are proposing the settlement is detailed (Id. ¶¶ 20–21). See

(Notice of Pendency and Proposed Settlement of Class Action, ECF 156-8; Mem. Supp.

Mot. Final Approval 5–6, ECF 156-1); 15 U.S.C. § 78u-4(a)(7).

The notice also complies with the Court’s Preliminary Approval Order and

satisfies the requirements of Rule 23. The Claims Administrator, Gilardi & Co. LLC,

began mailing the Notice Form and the Proof of Claims form on September 20, 2022, to

all reasonably identifiable class members. (Mem. Supp. Mot. Final Approval 6, ECF

156-1.) To date, Gilardi has sent 576,695 notice packets to potential class members,

including 4,722 packets to securities brokers and financial institutions who may have

clients who are class members. (Id.) Additionally, notice was published in The Wall

Street Journal and over Business Wire on September 27, 2022, and a notice was posted

on the website www.InovioSecuritiesLitigation.com on September 20, 2022. (Id. at 6–

7.) This notice was adequate and the best practicable under the circumstances.

V

The Court must determine that the proposed settlement is “fair, reasonable and

adequate.” In re Prudential Ins. Co. Am. Sales Prac. Litig. Agent Actions, 148 F.3d 282,

316 (3d Cir. 1998) (quoting In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods.

Liab. Litig., 55 F.3d 768, 785 (3d Cir. 1995)); see also Fed. R. Civ. P. 23(e). In the Third

Circuit, there is an initial presumption of fairness if “(1) the settlement negotiations

occurred at arm’s length; (2) there was sufficient discovery; (3) the proponents of the

settlement are experienced in similar litigation; and (4) only a small fraction of the

class objected.” In re Warfarin, 391 F.3d at 535 (quoting In re Cendant Corp.

Litig., 264 F.3d 201, 232 n. 18 (3d Cir. 1998)). Each of these factors is met:

negotiations occurred at arm’s length, including via a nationally recognized mediator in

securities matters; discovery was extensive in the number of documents produced and

depositions taken; Plaintiffs’ counsel has well-documented experience handling

securities class actions; and only one class member objected to the settlement.

Therefore, there is an initial presumption of fairness applied to this settlement.

With the initial presumption of fairness established, Rule 23(e)(2) and the Girsh

factors guide the Court’s in-depth fairness analysis. See Girsh v. Jepson, 521 F.2d 153,

157 (3d Cir. 1975).

A

Rule 23(e)(2) directs the Court to consider whether:

(A) the class representatives and class counsel have adequately represented

the class; (B) the proposal was negotiated at arm’s length; (C) the relief

provided for the class is adequate, taking into account: (i) the costs, risks,

and delay of trial and appeal; (ii) the effectiveness of any proposed method

of distributing relief to the class, including the method of processing class-

member claims; (iii) the terms of any proposed award of attorney’s fees,

including timing of payment; and (iv) any agreement required to be

identified under Rule 23(e)(3); and (D) the proposal treats class members

equitably relative to each other.

Fed. R. Civ. P. 23(e)(2). Rule 23(e) protects the unnamed members of the class.

Ehrheart v. Verizon Wireless, 609 F.3d 590, 593 (3d Cir. 2010); see also In re Pet Food

Prods. Liab. Litig., 629 F.3d 333, 349 (3d Cir. 2010) (“Under Rule 23(e), trial judges

bear the important responsibility of protecting absent class members, which is executed

by the court’s assuring that the settlement represents adequate compensation for the

release of the class claims.”).

1

Class counsel and the lead and representative Plaintiffs adequately represented

the class. Fed. R. Civ. P. 23(e)(2)(A). Class counsel was able to “develop enough

information about the [litigation] to appreciate sufficiently the value of the claims.” In

re Nat’l Football League Players Concussion Injury Litig., 821 F.3d 410, 439 (3d Cir.

2016). Counsel has vigorously pursued this case on behalf of class members from the

start. Counsel filed three complaints, responded to Defendants’ first motion to dismiss,

pursued class certification, conducted discovery involving over 500,000 pages of

documents, and took nineteen fact depositions. (Mem. L. Supp. Mot. Final Approval 9,

ECF 156-1.)

2

The parties negotiated the settlement at arm’s length. Fed. R. Civ. P.

23(e)(2)(B). Two mediations were held with an experienced mediator in securities

litigation. The first was on July 13, 2021, and the second on February 15, 2022. (Decl.

of Tor Gronborg Supp. Mot. Final Approval ¶ 84, ECF 156-2.) Following the second

mediation, the parties independently accepted an unsolicited proposal from the

mediator. (Id. ¶ 84.) As Plaintiffs’ counsel stated at the hearing, “to say arm’s length

is . . . an understatement here.” (Hr’g Tr. 10:14–15.) That the settlement was the

result of a mediator’s proposal after two mediations gives it additional weight. The

protracted and contentious negotiations, aided by an experienced mediator, was not

collusive. The use of “an independent mediator in settlement negotiations virtually

[e]nsures that the negotiations were conducted at arm’s length and without collusion

between the parties.” Kao v. CardConnect Corp., 2021 WL 698173, at *7 (E.D. Pa. Feb.

23, 2020) (quoting Bellum v. Law Offs. of Frederic I. Weinberg & Assocs., P.C., No. 15-

2460, 2016 WL 4766079, at *6 (E.D. Pa. Sept. 3. 2016).

3

The relief the settlement is expected to provide class members is adequate when

balanced against “(i) the costs, risks, and delay of trial and appeal; (ii) the effectiveness

of any proposed method of distributing relief to the class, including the method of

processing class-member claims; (iii) the terms of any proposed award of attorney’s fees,

including timing of payment; and (iv) any agreement required to be identified under

Rule 23(e)(3).” Fed. R. Civ. P. 23(e)(2)(C)(i)–(iv).

i

Continuing this litigation would cause the parties to incur substantial additional

costs and would have necessitated extensive trial preparation. As Plaintiffs’ counsel

noted at the hearing, “securities actions are notoriously complex and risky. They’re

difficult to prove, and they’re very expensive.” (Hr’g Tr. 11:2–4.) Counsel further noted

how “Defendants disputed every element: falsity, scienter, loss causation, and

damages.” (Hr’g Tr. 11:8–9.) Defendants continue to maintain that Inovio’s statements

regarding their clinical trials were not false or misleading and that loss causation could

not be proven because there is “no link between the alleged misconduct and Inovio’s

stock price declines on the relevant disclosure dates.” (Mem. L. Supp. Mot. Final

Approval 12, ECF 156-1.) Additionally, Defendants argue there was no price impact

from the alleged misrepresentations or the alleged corrective disclosures. (Id.)

Plaintiffs acknowledge that they would have had to counter Defendants’ experts

through their own at trial, and that “such a ‘battle of the experts’ would have

necessarily involved substantial expenses and risks.” (Id.) In addition to the inherent

risk to recovery involved in prolonged litigation, continuing through trial and

subsequent appeals would only delay any recovery class members may receive.

Additionally, Inovio’s financial condition makes a settlement prudent because it

eliminates the risk of a lesser recovery for class members. As discussed below,

Plaintiffs demonstrated that they weighed the “significant risk with respect to the

financial condition of Inovio” when considering the costs and risks of proceeding to trial.

(Hr’g Tr. 11–12.) The parties carefully weighed the relevant risks of further delay in

reaching this settlement.

ii

The proposed method of distributing relief to the class is effective. The notice

complies with Rule 23 and adequately informed the class members of how to submit a

claim form, the date by which the form must be postmarked, and the Claim

Administrator provided class members with the necessary Proof of Claim form. See

(Notice of Pendency and Proposed Settlement of Class Action ¶ 62, ECF 156-8; Proof of

Claim 1–8, ECF 156-8).

iii

The relief to the class remains adequate when considering the terms of the

proposed award of attorneys’ fees. Fed. R. Civ. P. 23(e)(2)(C)(iii). No class member has

objected to the amount of fees requested.

iv

Finally, Rule 23(e)(2)(iv) requires the Court to account for any agreements

between the parties required to be identified under Rule 23(e)(3). The parties disclosed

that they agree Defendants have the right to terminate the settlement if requests for

exclusion from the class exceed the criteria in the agreement. (Mem. L. Supp. Mot.

Final Approval of Settlement 16, ECF 156-1.) This supplemental agreement does not

affect the adequacy of the relief provided to the class.

4

The final element of Rule 23(e)(2) requires the Court to determine whether the

proposal treats the class members equitably relative to each other. Fed. R. Civ. P.

23(e)(2)(D). The notice states that “[t]he objective of the Plan of Allocation is to

distribute the Settlement proceeds equitably among those Class Members who suffered

economic losses as a proximate result of alleged wrongdoing.” (Notice of Pendency and

Proposed Settlement of Class Action ¶¶ 31, ECF 156-8). The Plan calculates a

“Recognized Loss Amount” for purchases of Inovio stock during the Class Period

depending on when the stock was purchased and sold. (Id. ¶ 35–42.) A member’s

“Recognized Claim” under the Plan is the sum of his or her “Recognized Loss Amounts.”

(Id. ¶ 44.) The Net Settlement Fund is then “distributed to Authorized Claimants on a

pro rata basis, based on the relative size of their Recognized Claims.” (Id. ¶ 45.)

“Specifically, a ‘Distribution Amount’ will be calculated for each Authorized Claimant,

which will be the Authorized Claimant’s Recognized Claim divided by the total

Recognized Claims of all Authorized Claimants, multiplied by the total amount in the

Net Settlement Fund.” (Id.) The settlement therefore treats class members equitably

relative to each other because each member’s recovery is proportional to his or her

actual loss suffered. All the Rule 23(e)(2) factors are met.

B

Courts within the Third Circuit also “employ a more expansive fairness inquiry”

by applying the nine Girsh factors. In re Innocoll, 2022 WL 16533571, at *4; see Girsh,

521 F.2d at 157. These factors are:

(1) the complexity, expense and likely duration of the litigation;

(2) the reaction of the class to the settlement;

(3) the stage of the proceedings and the amount of discovery

completed;

(4) the risks of establishing liability;

(5) the risks of establishing damages;

(6) the risks of maintaining the class action through the trial;

(7) the ability of the defendants to withstand a greater judgment;

(8) the range of reasonableness of the settlement fund in light of the

best possible recovery; [and]

(9) the range of reasonableness of the settlement fund to a possible

recovery in light of all the attendant risks of litigation.

Girsh, 521 F.2d at 157. The Court addresses each factor in turn.

1

The first Girsh factor is the complexity, expense and likely duration of the

litigation. As discussed above, securities class actions are complex, costly, and time

intensive. Approaching three years in duration, this litigation required complex and

skillful work on the part of both parties. Should it continue, the parties would have to

continue retaining experts, incurring additional expenses. Plaintiffs’ counsel have

incurred expenses of over $800,000 to date, and “to continue litigating it would have

been [to] run into the several millions of dollars through trial and appeals.” (Hr’g Tr.

11:3–7.) Should the case go to trial, Plaintiffs will have to obtain class certification

and maintain the class through trial. The settlement allows class members to receive

their payments quickly; further litigation would delay any potential recovery while the

parties continue to incur additional expenses.

2

The second Girsh factor “attempts to gauge whether members of the class

support the settlement.” In re Prudential, 148 F.3d at 318. In Prudential, the Third

Circuit held that the district court did not abuse it discretion in finding that 19,000 opt

outs—out of 8 million policyholders to whom Prudential sent the class notice—was

“truly insignificant.” 148 F.3d at 318.

Here, after 576,695 notices were sent out, only eleven exclusions were received.

(Hr’g Tr. 3:17–23.) Additionally, there was only one objection, (Hr’g Tr. 4:2–7),

something counsel correctly termed “overwhelmingly positive.” (Hr’g Tr. 14:7.) No one

objects to the settlement amount, proposed attorneys’ fee award, expense request, or

the lead Plaintiff and representative Plaintiff’s award request. (Hr’g Tr. 29:15–16.)

The class supports the settlement, indicative of its fairness.

3

The third factor to consider is the stage of the proceedings and the amount of

discovery completed. Courts are instructed to examine the amount of discovery

undertaken to “ensure that a proposed settlement is the product of informed

negotiations.” In re Prudential, 148 F.3d at 319.

Here, the parties completed fact discovery before agreeing to settlement.

Discovery consisted of over 500,000 pages of documents and nineteen depositions. (Hr’g

Tr. 9:18.) The parties retained experts in various fields and engaged in two rounds of

contested mediations with a nationally recognized mediator. (Hr’g Tr. 9:18–24.) Both

parties had a clear sense of the strengths and weaknesses of their respective cases, and

this factor cuts in favor of approval of the settlement.

4

Girsh factors four and five “survey the possible risks of litigation in order to

balance the likelihood of success and the potential damage award if the case were taken

to trial against the benefits of an immediate settlement.” In re Prudential, 148 F.3d at

319. Plaintiffs acknowledged the continued hurdles they would face at summary

judgment, trial, and then appeal. (Mem. L. Supp. Mot. Final Approval 11, ECF 156-1.)

At trial, Plaintiffs would face the uncertainty of proving each element of their case, all

of which the Defendants aggressively contested throughout the litigation. Specifically,

Defendants maintain that the statements regarding Inovio’s Phase One, Two, and

Three clinical trials “were not false or misleading and were non-actionable honestly

held opinions,” or “were forward-looking statements protected by the PSLRA safe

harbor.” (Mem. L. Supp. Mot. Final Approval 12, ECF 156-1.) Overcoming Defendants’

claims that they lacked the requisite scienter could prove difficult, as could

demonstrating loss causation: Defendants contend “there is no link between the

alleged misconduct and Inovio’s stock price declines on the relevant disclosure dates.”

(Id.) Conflicting expert testimony at trial would introduce further uncertainty into all

of these issues. These risks weigh in favor of approving the settlement.

5

The next Girsh factor considers the risks of maintaining the class certification

through trial. Plaintiffs filed a motion to certify the class (ECF 99), which Defendants

contested (ECF 107), before the settlement was reached. Even if the Court granted this

motion, classes may be decertified or modified at any time if the class becomes

unmanageable. In re Prudential, 148 F.3d at 321. Because there is always a

“possibility of decertification, and consequently the court can always claim this factor

weighs in favor of settlement,” this factor merits slight weight. In re Prudential, 148

F.3d at 321 (explaining how “examination of this factor in the standard class action

would appear to be perfunctory” due to the inherent risk of decertification); see also In

re Cendant, 264 F.3d at 239 (acknowledging that “proceeding to trial would always

entail the risk, even if slight, of decertification.”).

6

The seventh Girsh factor “is concerned with whether the defendants could

withstand a judgment for an amount significantly greater than the Settlement.” In re

Cendant, 264 F.3d at 240. This settlement has a total value of at least $44 million,

including $30 million in cash and the greater of either seven million shares or $14

million in Inovio stock. Therefore, the Court must consider whether Inovio could

withstand a judgment significantly greater than this amount. In re Cendant, 264 F.3d

at 241 (noting that “[t]here is inevitably a measure of speculation involved in this

determination” of how much a defendant can bear before reaching the possibility of

bankruptcy).

After the first quarter of 2022, “Inovio reported a net loss of $79.1 million, and

$61.9 million in net cash used to support operating activities.” (Mem. L. Supp. Mot.

Final Approval of Settlement 13, ECF 156-1.) The second quarter ended with a

“reported net loss of $108.5 million, and $112.4 million in net cash used to support

operating activities.” (Id. at 13–14.) Additionally, as of August 9, 2022, Inovio

announced it would reduce its workforce by 18 percent. (Id. at 14.) At the hearing,

Plaintiff’s counsel stressed that Inovio’s precarious financial situation was a factor

during the negotiations and decision to agree to a settlement. Counsel stated that to

continue to litigate this case would cause “the insurance proceeds [to] dwindle,” as

would “the company’s wherewithal to kick in additional shares or money.” (Hr’g Tr.

11:16–18.) When pressed by the Court on the company’s financial health, counsel

responded: “I think it’s very challenged.” (Hr’g Tr. 11:24.) Counsel’s statement that

this settlement “hit the sweet spot” given Inovio’s financial position is certainly

credible. (Hr’g Tr. 12:17–20.) Inovio’s likely inability to pay a significantly greater

judgment than the settlement amount favors the deal.

7

The eighth and ninth Girsh factors help determine whether the settlement is

reasonable in light of the best possible recovery and the risk of further litigation. They

“evaluate whether the settlement represents a good value for a weak case or a poor

value for a strong case.” In re Warfarin, 391 F.3d at 538. Courts are instructed to

compare the damages plaintiffs would likely recover if successful—discounted for the

risk of not prevailing—with the amount of the settlement agreement. In re Prudential,

148 F.3d at 322. The inability to determine the precise amount of damages Plaintiffs

would likely recover if successful at trial does not render the Court unable to conduct

this analysis. See In re N.J. Tax Sales Certificates Antitrust Litig., No. 12-1893, 2016

WL 5844319, at *8 (D.N.J. Oct. 3, 2016). Inovio’s financial straits makes at least $44

million a good value for class members given the risk of continued litigation.

Considering Defendants’ continued challenges to each element of Plaintiffs case, and

taking “seriously the litigation risks inherent in pressing forward with the case,” this

settlement is reasonable. In re Nat’l Football League, 821 F.3d at 440.

The settlement is fair, reasonable and adequate.

VI

A class action’s distribution plan must be fair, reasonable and adequate as

well. In re Ikon Off. Sols., Inc., Sec. Litig., 194 F.R.D. 166, 184 (E.D. Pa. 2000) (citing

In re Computron Software, Inc., 6 F. Supp. 2d 313, 321 (D.N.J. 1998)). Courts

“generally consider plans of allocation that reimburse class members based on the type

and extent of their injuries to be reasonable.” Sullivan, 667 F.3d at 328 (quoting In re

Corel Corp. Inc., Sec. Litig., 293 F.Supp.2d 484, 493 (E.D. Pa. 2003)).

Here, the net settlement fund will be distributed on a pro rata basis.

(Stipulation of Settlement 21, ECF 149-1.) The plan is fair, reasonable, and adequate

because each class member’s claim is based on his or her individual “Recognized Loss

Amount” as determined by when each member purchased and sold his or her stocks.

(Notice of Pendency and Proposed Settlement of Class Action ¶ 34, ECF 156-8.) The

net settlement fund will be distributed to each authorized claimant entitled to at least

$10. See Sullivan, 667 F.3d at 328 (holding that the district court did not abuse its

discretion in approving a minimum claim payment threshold of $10). Any funds

remaining following the initial distribution will be further distributed among the

authorized claimants to the extent economically feasible. (Mem. L. Supp. Mot. Final

Approval 18, ECF 156-1.) Re-distribution of the remaining funds will continue until it

becomes economically unfeasible. At that point, any remining funds will be donated to

the Community Legal Services of Philadelphia. (Id.) This is fair and reasonable. See

In re Innocoll, 2022 WL 16533571, at *8 (finding the plan of allocation fair, reasonable,

and adequate where the claim for each “class member’s recognized loss is based on

when the securities were purchased and sold” and where the “Settlement fund is then

allocated pro rata based on the adjusted recognized loss.”).

VII

There was only one objection out of the 576,695 notices the claims administrator

sent out. Objector Justin P. Green, a lawyer in Corpus Christi, Texas, raised three

issues with the Notice Form and Plan of Allocation. First, Green claimed that certain

class members with a zero-dollar recognized loss amount would be releasing their

claims for no consideration. Second, Green argued the notice was not fair and adequate

because it did not explicitly inform class members that should they succeed at trial,

they could potentially recover more than they would in the settlement. And finally, he

claimed that the objection procedures were unnecessarily burdensome. See (Green Obj.

to Proposed Class Action Settlement 1, ECF 157).

First, Green objects to the fact that certain class members—those who bought

and sold Inovio stock during certain time periods that resulted in no loss amount—

receive no compensation under the Plan. He thus claims the Plan does not treat all

class members equitably because some members receive nothing. (Id. at 3.) Rule 23(e)

states that the settlement must treat “class members equitably relative to each other.”

Rule 23(e)(2)(D). Relative to each other, this settlement does just that. A class member

must have suffered an actual economic loss to be eligible for recovery. See Dura

Pharms., Inc. v. Broudo, 544 U.S. 336, 342 (2005) (If “the purchaser sells the shares

quickly before the relevant truth begins to leak out, the misrepresentation will not have

led to any loss.”). A class member would have to show such a loss to be eligible to

receive any share of the damages that would be awarded after a trial, and they must

demonstrate a loss for settlement purposes as well.

The settlement allows class members to recover in a manner proportional to the

losses each member actually incurred. Allowing recovery for those who suffered no

losses—or perhaps profited—during the class period would be inequitable relative to

those class members who suffered actual losses due to fraud. Because the Plan of

Allocation allows recovery for those members who suffered a loss during the class

period in relation to his or her actual loss relative to the other class members, the Plan

is fair, reasonable, and adequate, and Green’s first objection is meritless.

Second, Green argues that the notice only advised members of two possible

outcomes at trial: recovering nothing or an amount less than what they will receive

under the settlement. (Green Obj. to Proposed Class Action Settlement 4–5, ECF 157.)

Green claims that the Notice Form should have stated that a victory at trial could have

resulted in a judgment larger than the settlement. (Id. at 5.) Green claims that

“[w]ithout this critical information, class members cannot make an informed decision

about the benefits and risks of accepting the proposed settlement.” (Id.)

Neither Rule 23 nor the PSLRA requires this disclosure. In compliance with the

PSLRA, the notice informed the class that “the parties do not agree on the amount of

recoverable damages if Plaintiffs were to prevail on each of the claims. (Notice of

Pendency and Proposed Settlement of Class Action ¶ 4, ECF 156-8); see 15 U.S.C § 78u–

4(a)(7)(B)(ii).

Third, Green claims that the objection procedures were overly burdensome,

violating class members’ due process rights. He contends the Court may not set

objection procedures beyond what is specified in Rule 23; he complains that objectors

were required to mail their objections and could not use the PACER electronic filing

system; he protests the fact that objectors must have submitted proof of claim

documents prior to the claim submission deadline; and he complains that objectors

must provide a history of all prior objections made in class action lawsuits. See (Green

Obj. to Proposed Class Action Settlement 6–10, ECF 157). Each of these objections is

frivolous.

First, Green states that the objection procedures outlined in the Court’s Order

preliminarily approving the settlement agreement (ECF 150) were overly burdensome.

But this is belied by Green’s ability to successfully lodge an objection. Furthermore, no

other would-be objectors contacted the Court claiming the process was too burdensome.

As counsel stated at the hearing, these procedures are “consistent among these types of

settlements” and easily accessible to “a fairly sophisticated, knowledgeable group of

class members.” (Hr’g Tr. 24:19–25:3.) Additionally, Green cites no legal support for

his claim that the Court lacks the authority to implement procedures for objectors to

follow, and nothing in Rule 23 limits the Court’s ability to do so.

As a specific example of an overly burdensome procedure, Green cites the

requirement that objectors must mail their objections instead of using PACER. See

(Green Obj. to Proposed Class Action Settlement 7–9, ECF 157). Using the postal

system does not burden potential objectors. Moreover, the use of PACER—to which

very few class members likely have access—would not provide a less burdensome

method of objecting.

Nor is the requirement that objectors file a Proof of Claim form and supporting

documentation with his or her objection overly burdensome. Similar documentation is

required for any class member to receive their pro rata share of the Net Settlement

Fund. Furthermore, there must be some documentation provided to prove an objector

is a member of the class, and the documentation required here is entirely appropriate.

Green argues objectors were somehow punished because they were required to

submit their required documentation by November 23, 2022, whereas class members

had until December 19 to file their Proof of Claim form. Because the final hearing on

the approval of the settlement was held on December 15, 2020, all objections and each

objector’s documentation necessarily must have been received prior to that date. This

was not unnecessarily burdensome.

Finally, Green argues the requirements are too burdensome because objectors

were required to submit a list of previous class action settlements to which they

objected. See (Green Obj. to Proposed Class Action Settlement 9–10, ECF 157). Green

thinks this deters good-faith objectors. To the contrary, this requirement discourages

bad-faith objectors, while neither discouraging nor burdening those with bone fide

objections.

VIII

Plaintiffs seek an attorneys’ fee award of 27.5 percent of the settlement amount

and litigation expenses of $814,374.95, plus interest earned on those amounts at the

same rate and for the same period earned by the settlement fund. “In a certified class

action, the court may award reasonable attorney[s’] fees . . . that are authorized by law

or by the parties’ agreement.” Fed. R. Civ. P. 23(h). Two calculation methods may be

used to determine whether a requested fee award is reasonable: the lodestar and the

percentage-of-recovery methods. See In re Gen. Motors, 55 F.3d at 820-21. The lodestar

method “uses the number of hours reasonably expended” to determine “an adequate fee

irrespective of the monetary value of the final relief achieved for the class.” Id. at 821.

The percentage of recovery method “calculates the percentage of the total recovery that

the proposal would allocate to attorneys’ fees by dividing the amount of the requested

fee by the total amount paid out by the defendant[.]” In re Cendant, 264 F.3d at 256.

The percentage-of-recovery method is appropriate where, as here, the value of the

settlement to the class can be readily calculated. See, e.g., In re Rite Aid Corp. Sec.

Litig., 396 F.3d 294, 300 (3d Cir. 2005). Furthermore, the percentage-of-recovery

method is generally favored in cases with a common fund because courts can award fees

from the fund in a way that “rewards counsel for success and penalizes it for failure.”

In re Prudential, 148 F.3d at 333 (internal quotations omitted.)

A

In the Third Circuit, “thorough judicial review of fee applications is required in

all class action settlements.” In re Gen. Motors, 55 F.3d at 819. Courts apply

the Gunter factors to determine if the fee produced is reasonable. See Gunter v.

Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000). Those factors include:

(1) the amount of the value created and the number of persons

benefitted; (2) the presence or absence of substantial objections by

members of the class to the settlement terms and/or fees requested

by counsel; (3) the skill and efficiency of the attorneys involved; (4)

the complexity and duration of the litigation; (5) the risk of

nonpayment; (6) the amount of time devoted to the case by

plaintiff's counsel; (7) the awards in similar cases[.]

In re Diet Drugs Prod. Liab. Litig., 582 F.3d 524, 541 (3d Cir. 2009). These factors

“need not be applied in a formulaic way . . . and in certain cases, one factor may

outweigh the rest.” Id.

First, the amount of value created and number of persons benefitted favors

approval of this award. The settlement is for at least $44 million dollars, of which

counsel requests an award of 27.5 percent. There is substantial value in this

settlement considering the risk of further litigation, Inovio’s likely inability to pay a

greater amount, and the certainty that class members will receive a considerable

payout. After all expenses are deducted from the fund, the average payout will be

$1,700 per class member. See (Hr’g Tr. 23:18–21).

Second, the amount of fees sought was clearly outlined in the Notice for any class

member to object and there were no objections to the requested fee award. This favors

approval.

Third, the skill and efficiency of class counsel warrants approval of the award.

As discussed above, Plaintiffs’ counsel competently litigated this case for roughly three

years. Additionally, Robbins, Geller, Rudman & Dowd LLP’s skill and experience in

securities class actions has been well noted (ECF 149-3) and favors approval of the

requested award.

Fourth, the case’s complexity and duration supports approval of the award. The

initial Complaint was filed on March 12, 2020. (ECF 1.) Since then, Plaintiffs’ counsel

filed a Consolidated Complaint (ECF 60), a First Amended Complaint (ECF 68), a

Second Amended Complaint (ECF 129), defended against Defendants’ motion to dismiss

(ECF 72), completed fact discovery, conducted depositions, filed a motion for class

certification (ECF 99), and negotiated the settlement, including through two

mediations. With efforts spanning almost three years, Counsel’s requested fees are

justified.

Fifth, counsel litigated this case on a contingency fee basis, risking nonpayment

absent a settlement or favorable judgment at trial. See O’Keefe v. Mercedes-Benz USA,

LLC, 214 F.R.D. 266, 309 (E.D. Pa. 2003) (“Any contingency fee [arrangement] includes

a risk of no payment.”). Success was not guaranteed in this case, and the risk

undertaken by Counsel merits approval of the requested fees.

Sixth, counsel spent more than 7,000 hours on this case, conducting all the work

outlined above and incurring litigation expenses of $814,374.95. (Mem. L. Supp. Mot.

Final Approval 9, ECF 156-1.) The amount of time worked favors approval.

Seventh, counsel’s request is well within the norm for awards in common fund

cases. “In common fund cases, fee awards generally range from 19% to 45% of the

settlement fund.” See In re Cendant, 243 F.3d at 736 (citation omitted); see also Galt v.

Eagleville Hosp., 310 F. Supp. 3d 483, 498 (E.D. Pa. 2018) (“fee awards ranging from

30% to 43% have been awarded in cases with funds ranging from $400,000 to $6.5

million”).

B

The Third Circuit has “suggested that district courts cross-check the percentage

award at which they arrive against the ‘lodestar’ award method.” Gunter, 223 F.3d at

195 n.1. But a lodestar cross-check is “not necessarily determinative.” In re Baby

Prods. Antitrust Litig., 708 F.3d 163, 179-80 (3d Cir. 2013); see also Moore v. GMAC

Mortg., No. 07-4296, 2014 WL 12538188, at *2 (E.D. Pa. Sept. 19, 2014) (“The lodestar

cross-check is ‘suggested,’ but not mandatory.”).

Courts calculate the lodestar award “by multiplying the number of hours

reasonably worked on a client’s case by a reasonable hourly billing rate for such

services based on the given geographical area, the nature of the services provided, and

the experience of the attorneys.” Chakejian v. Equifax Info. Servs., LLC, 275 F.R.D.

201, 216 (E.D. Pa. 2011) (internal quotation marks omitted). “The lodestar cross-check

calculation need entail neither mathematical precision nor bean-counting. The district

courts may rely on summaries submitted by the attorneys and need not review actual

billing records.” In re Rite Aid, 396 F.3d at 306-07 (footnote omitted) (citing In re

Prudential, 148 F.3d at 342).

Here, lead counsel spent 7,042.10 hours on this matter, totaling a lodestar

amount of $4,490,113.50. (Mem. L. Supp. Mot. Final Approval 28, ECF 156-1; Decl. of

Tor Gronborg Supp. Application for Award of Attorneys’ Fees and Expenses, Ex. A, ECF

156-13.) This results in a lodestar multiplier of 2.69, well within the range of

reasonableness recognized by courts. See (id.) The Third Circuit has recognized that

multipliers “ranging from one to four are frequently awarded in common fund cases

when the lodestar method is applied.” In re Prudential, 148 F.3d at 341. Given the

facts of this case and the absence of objections to the requested fees, a lodestar

multiplier of 2.69 is acceptable and does not require the Court to reduce the requested

fees.

Reimbursement from the fund for counsel’s $814,374.95 in litigation expenses is

appropriate. See Lachance v. Harrington, 965 F. Supp. 630, 651 (E.D. Pa. 1997) (“[A]n

attorney who has created a common fund for the benefit of the class is entitled to

reimbursement of his reasonable litigation expenses from that fund.”). Counsel has

submitted a Declaration outlining the firm’s expenses incurred during this litigation.

(Decl. of Tor Gronborg Supp. Application for Award of Attorneys’ Fees and Expenses,

ECF 156-12.) The expenses incurred were necessary for the effective handling of this

matter, and counsel is entitled to their attorneys’ fees and expenses, plus interest at the

same rate and for the same period as earned by the Settlement Fund.

IX

Lead Plaintiff Williams and Representative Plaintiff Zenoff seek awards of

$77,450.00 and $75,712.50, respectively. Courts regularly “approve incentive awards to

compensate named plaintiffs for the services they provided and the risks they incurred

during the course of the class action litigation.” McDonough v. Toys R Us, Inc., 80 F.

Supp. 3d 626, 665 (E.D. Pa. 2015) (citations and internal quotations omitted). Courts

need not employ factors to determine the amount of the class representative awards, as

it does when awarding attorneys’ fees. See In re Innocoll, 2022 WL 16533571, at *12.

Williams and Zenoff were “highly active” and “highly engaged” throughout this

litigation. (Hr’g Tr. 34:6–7.) Counsel told the Court that both individuals did a

significant amount of work responding to discovery requests, and both prepared

extensively for their depositions. (Hr’g Tr. 34:1–10.) Both submitted detailed time

sheets. (Decl. of Andrew Zenoff, ECF 156-5, 156-6; Decl. of Manuel Williams, ECF 156-

3, 156-5.) Zenoff spent 168.25 hours working on the case, while Williams logged 221.2

hours. Plaintiffs’ requests are reasonable given the time spent on this case and success

obtaining a substantial class settlement.

An appropriate Order follows.

BY THE COURT:

/s/ Gerald J. Pappert

GERALD J. PAPPERT, J.