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Law360 (September 18, 2020, 5:19 PM EDT) -- Kaplan Fox & Kilsheimer LLP will represent a proposed class of investors in a suit alleging hospital contractor SCWorx "overstated or entirely fabricated" its announcement in April that it would soon earn millions weekly by supplying COVID-19 rapid testing kits.
In an order Thursday, U.S. District Judge John G. Koeltl appointed Kaplan Fox client Vy Nguyen lead plaintiff in the case, making Nguyen's attorneys lead counsel in the matter at the same time. He also consolidated three cases making similar claims against SCWorx, which describes itself on its website as a company that helps hospitals streamline their supply data.
The Kaplan Fox bid to lead the suit faced opposition from three other legal teams that included counsel from securities class action-focused firms such as Glancy Prongay & Murray, Levi & Korsinsky, Pomerantz, the Schall Law Firm and Faruqi & Faruqi LLP, court records show.
Nguyen's alleged losses — which totaled $273,527 according to documents he filed with his lead plaintiff motion — appear to be the greatest sum claimed by a single individual SCWorx investor seeking to lead the proposed class.
In his order, Judge Koeltl gave Nguyen and his lawyers a Sept. 25 deadline to get the court a proposed schedule for filing a new version of the now-consolidated suit.
The suit, which was filed April 29 by individual investor Daniel Yannes, accused SCWorx of hurting investors when on April 13 it announced that it received a purchase order for 2 million coronavirus rapid test kits, "with provision for additional weekly orders of 2 million units for 23 weeks, valued at $35M per week."
Yannes claimed that announcement virtually quadrupled the company's trading price, giving SCWorx shares a $9.77 boost from its previous $2.25 trading price so that it closed out the day selling at $12.02 per share.
But four days later, Yannes said short-seller Hindenberg Research threw cold water on the SCWorx press release, publishing a report in which the SCWorx announcement was described as "completely bogus" and in which Hindenberg cast doubt on the legitimacy and capabilities of some of the parties allegedly involved in SCWorx's purchase order announcement.
Yannes claimed in his suit that over the next three trading days, the Hindenberg report pushed down the trading price by $1.19, or 17%, per share over the next three trading days, with SCWorx shares trading at $5.76 when markets closed on April 21.
And then on April 22, the U.S. Securities and Exchange Commission took the dramatic step of halting trading of SCWorx shares, Yannes said, citing "questions and concerns" about the "adequacy and accuracy of publicly available information" on the company's stock. Trading was still suspended when Yannes filed his suit, he said.
On Friday, counsel for the parties and representatives for SCWorx did not immediately respond to requests for comment.
Vy Nguyen is represented by Frederic S. Fox, Donald R. Hall, Pamela A. Mayer, Laurence D. King and Mario M. Choi of Kaplan Fox & Kilsheimer LLP.
SCWorx is represented by Carole Rose Bernstein of the Law Offices of Carole R. Bernstein.
The case is Yannes v. SCWorx Corp. et al, case number 1:20-cv-03349, in the U.S. District Court for the Southern District of New York.
--Additional reporting by Frank G. Runyeon. Editing by Amy Rowe.
For a reprint of this article, please contact reprints@law360.com.
