United States District Court, D. Massachusetts
WANG YAN, individually and on behalf of all other similarly situated parties, Plaintiff,
REWALK ROBOTICS LTD., LARRY JASINSKI, AMI KRAFT, AMIT GOFFER, JEFF DYKAN, HADAR RON, ASAF SHINAR, WAYNE B. WEISMAN, YASUSHI ICHIKI, ARYEH DAN, GLENN MUIR, BARCLAYS CAPITAL INC., JEFFERIES LLC, and CANACCORD GENUITY INC., Defendants.
MEMORANDUM AND ORDER ON LEAD PLAINTIFF'S REQUEST
TO ADD JOANNE GELLER AS NAMED PLAINTIFF
Dennis Saylor IV United States District Judge
a putative class action alleging violations of Sections 11
and 15 of the Securities Act of 1933 and Sections 10(b) and
20(a) of the Exchange Act of 1934. The plaintiff class
purchased common stock of ReWalk Robotics, Ltd. between
September 12, 2014 (the date of its initial public offering
(“IPO”)) and February 29, 2016. The consolidated
amended complaint alleges that ReWalk, its officers and
directors, and the IPO underwriters concealed material
information in its IPO registration statement about
ReWalk's failure to comply with FDA regulations in
violation of the Securities Act. It also alleges that after
the IPO, ReWalk and certain officers continued to make
material false statements after the initial offering in
violation of the Exchange Act. It relies in part on
statements by three former ReWalk employees acting as
moved to dismiss the complaint for failure to state a claim
pursuant to Fed.R.Civ.P. 12(b)(6) and the Private Securities
Litigation Reform Act of 1995 (“PSLRA”), 15
U.S.C. §§ 78u-4, 78u-5. On August 23, 2018, the
Court dismissed the Securities Act claim on the ground that
the complaint failed to identify a false or misleading
statement in the registration statement. As to the claims
under the Exchange Act, however, the Court denied the motion
to dismiss without prejudice. It noted that the lead
plaintiff, Wang Yan, purchased shares only in September 2014,
at the time of the initial public offering, and could
therefore assert claims personally only under the Securities
Act. And it provided plaintiff an opportunity to seek the
appointment of a substitute or supplemental lead plaintiff or
to take other steps to establish standing.
elected to seek to amend the complaint to add Joanne Geller
as a named plaintiff as to the Exchange Act class. For the
following reasons, the motion will be denied.
allegations in the consolidated amended complaint are set out
in the Court's Memorandum and Order dated August 23,
2018. Familiarity with that opinion is assumed. The factual
background relevant to the motion to amend is set forth
ReWalk Robotics, Ltd., formerly known as Argo Medical
Technologies, Inc., is a medical device company. It designs
and develops exoskeletons, which are devices that help
persons with spinal-cord injuries walk. (CAC ¶ 2). The
company is incorporated in Israel and has its United States
headquarters in Marlborough, Massachusetts. (Id.
currently sells two distinct products: ReWalk Personal, which
is designed for everyday use, and ReWalk Rehabilitation,
which is designed for clinical rehabilitation centers.
(Id. ¶ 46). Both devices are regulated in
various jurisdictions by the FDA, the European Union, or
other governmental agencies. (Id. ¶ 94). This
proceeding concerns only the ReWalk Personal device, which
the Court will refer to as the “device.” In 2014,
ReWalk submitted the device to the FDA for “de
novo” classification. (Id. ¶ 47).
“De novo” classification allows manufacturers to
market devices that are low-to-moderate risk and not
substantially similar to devices that are already being
26, 2014, the FDA approved the ReWalk device for marketing.
It designated the ReWalk device “Class II, ”
requiring special controls. (Id. ¶¶
48-49). The FDA also ordered the company to
conduct a “post-market surveillance” study to
determine the product's risks, as required by Section 522
of the Food, Drug, and Cosmetic Act. (Id.
¶¶ 4, 48-49; 21 U.S.C. § 360L(a)(1)(A)). FDA
regulations require manufacturers to report results of such
studies, including important attributes such as the type of
test subjects, methodology, data-collection plan, and patient
follow-up. 21 C.F.R. 822.10. The FDA required the study due
to concerns that a malfunction could result in serious injury
or death to a patient. (CAC ¶¶ 4, 49).
complaint alleges that defendants failed to disclose that
ReWalk was either unprepared or unable to comply with the
FDA's June 2014 directive that it perform post-market
surveillance. (Id. ¶¶ 16, 68).
to the IPO, ReWalk filed a registration statement with the
SEC stating that it had developed a “breakthrough
product” that would “deliver a natural gait and
functional walking speed.” (Id. ¶ 90).
The complaint alleges that the registration statement failed
to disclose that the reason the FDA ordered the company to
conduct a post-market surveillance study was that the ReWalk
device posed a threat of serious injury or death.
(Id. ¶¶ 85-95).
initial public offering of ReWalk occurred on September 12,
2014. (Id. ¶ 5). Lead plaintiff Wang Yan
purchased 3, 600 shares of ReWalk in September 2014, shortly
after the IPO. (Docket No. 7, Ex. C).
weeks after the IPO, on September 29, 2014, the FDA contacted
ReWalk to inform the company that its proposed post-market
surveillance study was deficient. (CAC ¶ 7). Notably,
the FDA letter stated that although the plan was deficient,
because less than six months had elapsed since the issuance
of the Section 522 order, the study status would be marked as
“Plan Pending” on the FDA's website. (Feldman
Decl. Ex. F at 3). The FDA granted ReWalk 30 days to file a
response. (CAC ¶ 7).
failed to do so in a timely fashion. (Id. ¶ 8).
It eventually filed a response on November 6, 2014.
(Id.). On February 13, 2015, the FDA found that the
November 6 submission was also deficient. (Id.). The
FDA granted ReWalk another 30 days to file a further
response, and the company responded (late) on May 22, 2015.
(Id. ¶¶ 8-10). ReWalk stated that it
wanted to discuss an issue with the FDA before submitting a
formal reply to the February 13 letter. (Id. ¶
to the complaint, during that time, ReWalk officials held
quarterly earnings calls during which they failed to disclose
the company's failure to comply with the FDA's
requirement. Specifically, those calls were made on February
12, 2015 (Q4 2014), May 7, 2015 (Q1 2015), August 6, 2015 (Q2
2015), November 11, 2015 (Q3 2015), and February 25, 2016 (Q4
2015). (Id. ¶¶ 99-110).
September 5, 2015, the FDA cautioned ReWalk that it still had
not submitted a revised study plan addressing the
deficiencies previously identified by the agency.
(Id. ¶ 13). Having received no response, on
September 30, 2015, the FDA issued a warning letter outlining
the company's substantial failure to comply with the
post-market surveillance requirement. (Id. ¶
14). Specifically, the letter stated that under the Section
522 order, ReWalk was required to begin its surveillance
study “not later than 15 months after the day on which
[a Section 522 order] is issued.” (Pl. Ex. C at 2). The
15-month time frame had closed on September 28, 2015.
(Id.). The letter went on to state that ReWalk had
“committed a prohibited act under section 301(q)(1)(C)
of the [Food, Drug, and Cosmetic Act]” and that the
ReWalk device was “currently misbranded.”
(Id.). The letter was eventually disclosed to the
public by the FDA on March 1, 2016. (CAC ¶ 18).
meantime, on December 21, 2015, proposed plaintiff Joanne
Geller purchased 1, 000 shares of ReWalk common stock at
$14.80 per share. (Jafri Decl. Ex. A).
closing stock price on February 29, 2016, the day before the
FDA released the letter, was $10.48. (CAC ¶ 19). The
closing price the following day, on March 1, 2016, was $9.07,
reflecting a 13% decline in value. (Id.). The stock
price steadily declined thereafter, and ReWalk shares were
trading in August 2018 at around $0.75 to
end of March 2016, the FDA exercised its enforcement
discretion and allowed ReWalk to continue to market its
device, provided that it would initiate the post-market
surveillance study by June 1, 2016. (Id. ¶
114). The FDA approved ReWalk's proposed protocol for the
study on May 5, 2016. (Id. ¶ 115). However,
ReWalk did not file timely monthly reports to the FDA in June
and July 2016. (Id. ¶ 116). Although the
approved protocol required 60 subjects from twelve United
States clinical areas, according to CW-3, ReWalk had only
recruited eight subjects from three areas by June 2017.
(Id. ¶ 117-18).
in this action initially filed suit in California state court
on September 20, 2016. (Docket No. 37, Ex. 4 at 2). The
California action was dismissed for lack of personal
jurisdiction over the defendants.
October 31, 2016, plaintiff Shane Vesey filed suit against
defendants in the Massachusetts Superior Court. (Id.
Ex. 1). On November 30, 2016, plaintiff Phanindra
Chittavajhula also filed suit against defendants in the
Superior Court. (Id. Ex. 2). Both cases were
putative class actions alleging violations of the federal
Securities Act relating to omissions in ReWalk's
registration statement and final prospectus. The state court