A struggling Tustin-based pharmaceuticals company got more bad news this week when a federal judge in Orange County granted class action status to a pending securities fraud lawsuit.
In an 18-page ruling issued this week, U.S. District Court Judge David O. Carter agreed that the plaintiffs, who claim they were defrauded investors in Radient Pharmaceuticals, are entitled to class action status.
A Coral Gables, Florida lawyer representing the company and Douglas C. MacLellan, it's top official, had argued that class action status wasn't necessary to resolve the dispute.
But Carter determined in this case that class action is "the superior way to litigate" because "concentrating litigation in one forum is desirable where a company was listed on a national exchange and no one has identified a meaningful difficulty in managing" the complaints of "all persons and entities who purchased the common stock of Radient from Jan. 18, 2011, through March 4, 2011."
At the time of the alleged offense, Radient's main business was the research, development, manufacturing and sale of Onko-Sure, a government approved In-Vitro cancer test. The company's competition was the more established, more successful Carcinoembryonic Antigen marker test.
In 2010, Radient reported revenue of $232,000, operating expenses of more than $14 million and a net loss of $86 million.
According to plaintiffs (including Dat T. Tran, Reydel Quintana, Vinh Nguyen and Agnes Cho), the company was desperate for a cash infusion when executives issued a Jan. 18, 2011 press release that claimed they had entered a clinical trials agreement with the prestigious Mayo Clinic.
The assertion allegedly helped raise private placements of $8.4 million for Radient.
But the lawsuit claims that the press release was false and misleading because Radient had no meaningful partnership agreement with the Mayo Clinic and no joint studies were planned.
A March 2011 news report in TheStreet.com by reporter Adam Feuerstein outlined problems with the press release and, according to the lawsuit, Radient's stock "dramatically dropped" 21 percent.
Carter observed in his ruling that "the extent of any collaboration between Radient and [the Mayo Clinic] is sharply disputed, but is properly [a matter for trial]."
The case against the Tustin-based company will be handled inside the Ronald Reagan Federal Courthouse in Santa Ana.
Laurence M. Rosen, a Los Angeles lawyer who specializes in class actions and derivative litigation at the Rosen Law Firm, represents the plaintiffs.