By Rachel O'Brien

Law360 (November 9, 2020, 7:42 PM EST) -- Investors vying for the lead role in a proposed class action alleging San Francisco-headquartered biotechnology company Vaxart Inc. lied about its COVID-19 vaccine candidate traded jabs on Friday in competing responses to each other's pleas to lead the proposed class.

Six groups of investors filed motions to consolidate their suit on Oct. 23 with another and appoint themselves lead plaintiff and their counsel as lead counsel in the case, which accuses the company of lying about its participation in the federal Operation Warp Speed initiative to develop a coronavirus vaccine.

Two groups have since withdrawn their motions, leaving four groups of investors vying for lead plaintiff status, two of which filed oppositions to the competing motions Friday.

Vaxart shareholder Kirk Himmelberg filed the suit in August, alleging the company "exaggerated the prospects of its COVID-19 vaccine candidate, including its purported role or involvement in OWS."

Vaxart was working on a COVID-19 vaccine but wasn't selected to participate in the U.S. Department of Health and Human Services' Operation Warp Speed to receive funding to develop a vaccine.

That program to produce at least three million doses of a COVID-19 vaccine by January 2021 was funded with almost $10 billion from Congress for companies working on a vaccine.

"Vaxart's COVID-19 vaccine candidate had no reasonable prospect for mass production and marketing and was not among the companies selected to receive significant financial support from OWS to produce hundreds of millions of vaccine doses," Himmelberg said in the lawsuit.

His proposed class action seeks to represent people who bought the company's stock between June 25, when Vaxart announced plans for the vaccine production, and July 25, when the media reported the company publicly misled investors about Operation Warp Speed, according to the suit.

In addition to Vaxart, the suit names CEO Cezar Andrei Floroiu and Dr. Wouter W. Latour, former president and CEO and current chairman of the board of directors.

The suit also names hedge fund Armistice Capital LLC and two of its managers, Steven J. Boyd and Keith Maher.

The competing motions for lead plaintiff and lead counsel asked to combine with a similar proposed class action in the district filed by investor Ani Hovhannisyan against Vaxart and its executives.

On Friday, investors Langdon Elliott and Wei Huang filed the first of the two oppositions to the other three motions from investors Pierce Parker, Trudy York and Jiri Kubanek, Zayn Lim, Najaf Zaidi and Syed Nabi.

Elliott and Huang, with their attorneys at Hagens Berman Sobol Shapiro LLP seeking lead counsel status, called Kubanek, Lim, Zaidi and Nabi "an unwieldy group of internationally-dispersed investors that have not demonstrated that they are able to effectively work together to adequately oversee this litigation and monitor counsel."

Referred to as "an improper amalgamation of investors," that group shouldn't be allowed to combine its losses to form a greater loss of $626,573.52, Elliott and Huang argued, instead assessing group losses on an individual basis.

The four members of that group live in Singapore, Pennsylvania, Georgia and the Czech Republic, and aren't considered a "cohesive, functioning group" that the Private Securities Litigation Reform Act calls for, Elliott and Huang argued.

"Given their respective locations, it is difficult to imagine how these four widely dispersed individuals will be able to effectively manage and collectively oversee the efforts of counsel – as opposed to counsel overseeing them," Elliott and Huang said.

The two investors from California and Texas, the self-proclaimed Vaxart Investor Group, argue they have the largest loss at $455,378.

York claims a loss of $177,920, and Parker, whose counsel at The Rosen Law Firm PA is seeking lead counsel status, claims a loss of $54,285.

Elliott and Huang say they made a prima facie showing of its typicality and adequacy and are the most adequate plaintiff.

"Vaxart Investor Group's interests are perfectly aligned with those of other class members and are not antagonistic in any way," the filing said.

York's and Parker's losses are substantially less than Elliott and Huang's, they argued, "and neither have rebutted the presumption that Vaxart Investor Group is the most adequate plaintiff. Therefore, Vaxart Investor Group remains the presumptive lead plaintiff," the filing said.

York filed the second opposition, arguing she is the only proposed lead plaintiffs with the greatest financial loss that satisfies all of the PSLRA's requirements.

She argued both the Kubanek, Lim, Zaidi and Nabi group, whose lawyers at Scott+Scott Attorneys at Law LLP are seeking lead counsel status, and the Huang and Elliott pairing "are both inadequate and fail to satisfy Federal Rule of Civil Procedure 23(a) because they are composed of unrelated investors with no workable decision-making structure and no connection other than counsel."

She has the next highest loss and should be named the lead plaintiff and her counsel at Johnson Fistel LLP named lead counsel, she argued.

Both the Kubanek, Lim, Zaidi and Nabi group and the Huang and Elliott pairing are "lawyer-driven combinations of unrelated individuals joined for the purpose of aggregating their claims to obtain presumptive lead plaintiff status over other putative class members," she argued.

That makes them inadequate representatives to protect the interests of the class, she said.

A joint declaration from Kubanek, Lim, Zaidi and Nabi group says the group doesn't have any preexisting relationships, instead they were introduced by their lawyers and had a single conference call together before they filed their motion for appointment.

Zaidi's status as a day trader can be "fatal" as this investor "would not be typical of the class because the class's damages stem from reliance upon the company's financial statements, not upon daily market volatility" and thus "may be subject to a unique defense regarding its reliance upon publicly available information," York said.

She argued that Huang and Elliott also don't make "the required showing that the group is adequate and not lawyer driven," also with no preexisting relationship.

"Ms. York has a significant stake in the outcome of the instant action such that the court can be confident she will vigorously prosecute the claims," according to the filing.

Counsel for Kubanek, Lim, Zaidi and Nabi, Thomas L. Laughlin of Scott and Scott Attorneys at Law LLP,  told Law360 Monday his clients are "seeking appointment to the class. We believe we will have the largest loss of any active movant."

Counsel for the other parties didn't immediately respond to requests for comment Monday.

Elliott and Huang are represented by Reed R. Kathrein, Lucas E. Gilmore, Danielle Smith and Steve W. Berman of Hagens Berman Sobol Shapiro LLP.

Kubanek, Lim, Zaidi and Nabi are represented by John T. Jasnoch, Thomas L. Laughlin IV and Rhiana L. Swartz of Scott + Scott Attorneys at Law LLP.

York is represented by Frank J. Johnson, Brett M. Middleton and Reed F. Baker of Johnson Fistel LLP.

Parker is represented by Laurence M. Rosen of The Rosen Law Firm PA.

Vaxart, Floroiu, Wouter W. Latour are represented by Daniel P. Martin and Jonathan Acker Shapiro of Baker Botts LLP, and Menachem M. Piekarski, Renee M. Zaytsev and Riccardo M. DeBari of Thompson Hine LLP.

Armistice Capital LLC, Keith Maher and Steven J. Boyd are represented by Neal R. Marder, Ali R. Rabbani and Josh A. Rubin of Akin Gump Strauss Hauer & Feld LLP.

The case is Kirk Himmelberg, et al., v. Vaxart Inc., et al., case number 3:20-cv-05949, in U.S. District Court for the Northern District of California.

--Additional reporting by Mike LaSusa. Editing by Amy Rowe.

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