Craig et al v. CenturyLink, Inc. et al

Filing 321

MEMORANDUM OF LAW & ORDER. IT IS HEREBY ORDERED: 1. Plaintiffs' Motion for Class Certification, Appointment of Class Representatives and Appointment of Class Counsel 188 is GRANTED. 2. The following class (the "Class") i s hereby certified pursuant to Federal Rule of Civil Procedure 23: All persons and entities that purchased or otherwise acquired publicly traded CenturyLink, Inc. ("CenturyLink") common stock or 7.60% Senior Notes due September 15 , 2039, during the period between March 1, 2013 to July 12, 2017, inclusive (the "Class Period"), and who were damaged thereby (the "Class"). Excluded from the Class are Defendants, CenturyLink's affiliates and subsidiaries, the officers and directors of CenturyLink and its subsidiaries and affiliates at all relevant times, members of the immediate family of any excluded person, heirs, successors, and assigns of any excluded person or entity, and any entity in which any excluded person has or had a controlling interest. 3. Lead Plaintiff the State of Oregon by and through the Oregon State Treasurer and the Oregon Public Employee Retirement Board, on behalf of the Oregon Public Employee Retirement Fund (" Oregon") and Plaintiff Fernando Alberto Vildosola, as trustee for the AUFV Trust U/A/D 02/19/2009, are appointed as Class Representatives. 4. Bernstein Litowitz Berger & Grossmann LLP and Stoll Stoll Berne Lokting & Shlachter P.C. are appointed as Class Counsel. (Written Opinion) Signed by Judge Michael J. Davis on 9/14/2020. Associated Cases: 0:17-md-02795-MJD-KMM, 0:18-cv-00296-MJD-KMM(GRR)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

IN RE: CENTURYLINK SALES
PRACTICES AND SECURITIES
LITIGATION

MDL No. 17-2795 (MJD/KMM)

This Document Relates to
Civil File No. 18-296 (MJD/KMM)

MEMORANDUM OF LAW & ORDER

Patrick E. Gibbs, Douglas P. Lobel, David A. Vogel, Sarah M. Lightdale, Ryan
Blair, and Dana A. Moss, Cooley LLP; William A. McNab, Thomas H. Boyd, and
David M. Aafedt, Winthrop & Weinstine, P.A.; and Jerry W. Blackwell, Blackwell
Burke P.A.; Counsel for Defendants CenturyLink, Inc., Glen F. Post, III, R.
Stewart Ewing, Jr., David D. Cole, Karen Puckett, Dean J. Douglas, and G. Clay
Bailey.
Michael D. Blatchley, John C. Browne, Michael Mathai, Amanda Boitano, and
Richard D. Gluck, Bernstein Litowitz Berger & Grossmann LLP; Keith S.
Dubanevich, Timothy S. DeJong, Keil M. Mueller, and Lydi Anderson-Dana,
Stoll Stoll Berne Lokting & Shlachter P.C.; Special Assistant Attorneys General
and Counsel for Lead Plaintiff the State of Oregon by and through the Oregon
State Treasurer and the Oregon Public Employee Retirement Board, on behalf of
the Oregon Public Employee Retirement Fund, Counsel for Plaintiff Fernando
Vildosola, and Lead Counsel for the Class; and Richard A. Lockridge, Gregg M.
Fishbein, and Kate M. Baxter-Kauf, Lockridge Grindal Nauen P.L.L.P., Liaison
Counsel for Lead Plaintiff the State of Oregon by and through the Oregon State
Treasurer and the Oregon Public Employee Retirement Board, on behalf of the
Oregon Public Employee Retirement Fund and Plaintiff Fernando Vildosola.

I.

INTRODUCTION

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This matter is before the Court on Plaintiffs’ Motion for Class Certification,
Appointment of Class Representatives and Appointment of Class Counsel.
[Docket No. 188] Lead Plaintiff the State of Oregon by and through the Oregon
State Treasurer and the Oregon Public Employee Retirement Board, on behalf of
the Oregon Public Employee Retirement Fund (“Oregon”) and named Plaintiff
Fernando Alberto Vildosola, as trustee for the AUFV Trust U/A/D 02/19/2009
(“Vildosola,” and collectively with Lead Plaintiff, “Plaintiffs”), move under
Federal Rules of Civil Procedure 23(a) and 23(b)(3) to certify this action as a class
action and to appoint Plaintiffs as Class Representatives, and, pursuant to
Federal Rule of Civil Procedure 23(g), to appoint Bernstein Litowitz Berger &
Grossmann LLP (“Bernstein Litowitz”) and Stoll Stoll Berne Lokting & Shlachter
P.C. (“Stoll Berne”) as Class Counsel. The Court heard oral argument on July 29,
2020.
II.

BACKGROUND
A.

Factual Background
1.

The Parties

Defendant CenturyLink, Inc. (“CenturyLink”) is the country’s third-largest
telecommunications company with millions of customers. ([Docket No. 143]
Consolidated Securities Class Action Complaint (“Compl.”) ¶¶ 28, 37.) Glen F.
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Post, III; R. Stewart Ewing, Jr.; David D. Cole; Karen Puckett; Dean J. Douglas;
and G. Clay Bailey (collectively, the “Executive Defendants”) held senior
positions at CenturyLink during the relevant time. (Id. ¶¶ 29-34.)
Oregon operates and oversees public funds for the benefit of retired public
employees. (Compl. ¶ 26.) The Oregon Public Employee Retirement Fund is a
state pension fund for retired public employees. (Id.) It had $77 billion in assets
under management as of April 30, 2018. (Id.) Oregon purchased CenturyLink
securities during the Class Period. (Id.)
Vildosola is trustee for the AUFV Trust U/A/D 02/19/2009. (Id. ¶ 27.)
AUFV Trust U/A/D 02/19/2009 purchased CenturyLink’s 7.60% Senior Notes due
September 15, 2039 (“7.60% Senior Notes”) during the Class Period. (Id.)
2.

Allegations in Plaintiffs’ Complaint

According to Plaintiffs, for a number of years, CenturyLink engaged in
systemic “cramming” of customer accounts, by adding services to customers’
accounts without authorization, deceiving customers about the prices they
would be charged, and misquoting prices by failing to disclose that “bundles”
included fees for optional services that the customers did not need or authorize.
(Compl. ¶¶ 44, 64.) CenturyLink potentially overbilled 3.5 million customers,
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representing over half of its broadband subscribers and one-third of its 12 million
wireline subscribers. (Id. ¶¶ 65, 178.)
During the Class Period, Defendants told investors that CenturyLink’s
sales practices were aboveboard and represented that it would never “plac[e] or
record[] an order for our products and services for a customer without that
customer’s authorization.” (Compl. ¶ 151.) Defendants represented that
CenturyLink’s revenue growth in its consumer and small business segments was
due to its focus on customer needs through its call centers, bundling service
packages, and other strategies. (Id. ¶¶ 58-61.) These representations were
important to investors because investors were concerned with CenturyLink’s
ability to generate dependable cash flows in the face of customers abandoning
traditional wireline telephone services that were the historical core of
CenturyLink’s business. (Id. ¶¶ 55-56.) The representations were false because,
in fact, CenturyLink’s revenues were materially increased by cramming. (Id. ¶¶
93, 192.)
In May 2016, the Minnesota Attorney General issued a civil investigative
demand to CenturyLink after receiving many consumer complaints of deceptive
practices. (Compl. ¶ 141.) In October 2016, CenturyLink employee Heidi Heiser,

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who had repeatedly raised concerns about CenturyLink’s fraudulent business
practices to her supervisors, asked Post, through an online message board, “why
customers were being given multiple accounts and being billed for things they
did not ask for.” (Id. ¶ 146.) Two days later, Heiser was suspended and then
fired for blowing the whistle. (Id. ¶ 147.)
On Friday, June 16, 2017, Bloomberg reported on Heiser’s whistleblower
lawsuit against CenturyLink, that she was fired after raising concerns about
cramming with Post, and that she alleged that CenturyLink had charged many
millions of dollars in unauthorized fees. (Compl. ¶¶ 152-53.) On Monday, June
19, 2017, Bloomberg reported on a consumer class action lawsuit on behalf of
“potentially millions” of CenturyLink customers alleging billing misconduct that
had been filed the day before. (Id. ¶¶ 158, 160.) On July 12, 2017, news reports
disclosed that the Minnesota Attorney General had filed a fraudulent billing
lawsuit against CenturyLink based on a year-long investigation that provided
detail concerning CenturyLink’s sales and billing practices and their financial
impact. (Id. ¶¶ 163-68.)
Overall, Plaintiffs allege that Defendants made false and misleading
statements on dozens of different dates during the Class Period and that 3

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corrective disclosures were made, on June 16, 2017; June 19, 2017; and July 12,
2017. (Id. ¶¶ 190–263 & App. A.)
B.

Procedural History

On June 25, 2018, Lead Plaintiff Oregon and Plaintiff Vildosola filed a
Consolidated Securities Class Action Complaint against Defendants CenturyLink
and the Executive Defendants. [Docket No. 143] The Complaint alleges: Count
1: Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Promulgated
Thereunder (against Defendants CenturyLink, Post, Ewing, Cole, Puckett and
Douglas); and Count 2: Violations of Section 20(a) of the Exchange Act (against
Defendants Post, Ewing, Cole, Puckett, Douglas and Bailey).
On July 30, 2019, the Court denied Defendants’ Motion to Dismiss in its
entirety. [Docket No. 180] In re CenturyLink Sales Practices & Sec. Litig., 403 F.
Supp. 3d 712 (D. Minn. 2019).
Plaintiffs now seek to certify a class pursuant to Federal Rules of Civil
Procedure 23(a) and 23(b)(3), consisting of:
all persons and entities that purchased or otherwise acquired
publicly traded CenturyLink common stock or 7.60% Senior Notes
due September 15, 2039, during the period between March 1, 2013 to
July 12, 2017, inclusive (the “Class Period”), and who were damaged
thereby (the “Class”).

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The proposed Class excludes (i) Defendants; (ii) CenturyLink’s affiliates
and subsidiaries; (iii) the officers and directors of CenturyLink and its
subsidiaries and affiliates at all relevant times; (iv) members of the immediate
family of any excluded person; (v) heirs, successors, and assigns of any excluded
person or entity; and (vi) any entity in which any excluded person has or had a
controlling interest.
Plaintiffs also request that the Court appoint Bernstein Litowitz and Stoll
Berne as Class Counsel.
III.

DISCUSSION
A.

Standard for Class Certification

The class action serves to conserve the resources of the Court and the
parties by permitting an issue that may affect every class member to be litigated
in an economical fashion. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 155
(1979). Whether an action should be certified as a class action is governed by
Rule 23 of the Federal Rules of Civil Procedure.
To be certified as a class, plaintiffs must meet all of the
requirements of Rule 23(a) and must satisfy one of the three
subsections of Rule 23(b). The Rule 23(a) requirements for class
certification are: (1) the putative class is so numerous that it makes
joinder of all members impractical; (2) questions of law or fact are
common to the class; (3) the class representatives’ claims or defenses
are typical of the claims or defenses of the class; and (4) the
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representative parties will fairly and adequately protect the interests
of the class.
In re St. Jude Med., Inc., 425 F.3d 1116, 1119 (8th Cir. 2005) (citing Fed. R. Civ. P.
23(a)) (footnote and other citations omitted).
Plaintiffs seek certification of a class under Rule 23(b)(3). Rule 23(b)(3)
allows a class action when “the court finds that the 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.”
The matters pertinent to these findings include:
(A) the class members’ interests in individually controlling the
prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of
the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3).
Rule 23 does not set forth a mere pleading standard. A party
seeking class certification must affirmatively demonstrate his
compliance with the Rule—that is, he must be prepared to prove

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that there are in fact sufficiently numerous parties, common
questions of law or fact, etc.
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). At this stage, “[m]erits
questions may be considered to the extent – but only to the extent – that they are
relevant to determining whether the Rule 23 prerequisites for class certification
are satisfied.” Amgen Inc. v. Conn. Ret. Plans and Trust Funds, 568 U.S. 455, 466
(2013) (citations omitted).
B.

Numerosity (Rule 23(a)(1))

Numerosity is met when the proposed class is “so numerous that joinder
of all members is impracticable.” Fed. R. Civ. P. 23(a)(1).
Numerosity has been met because CenturyLink had approximately 567
million shares of common stock issued and outstanding on average during the
Class Period, and they were actively traded on the New York Stock Exchange
(“NYSE”) at a weekly average of over 27.8 million shares, with an average
weekly turnover of 4.9%. The 7.60% Senior Notes were actively traded on open,
well-developed and efficient markets, had an amount outstanding of $800
million at the end of the Class Period, and were held by at least 120 institutional
investors. (Blatchley Decl., Ex. C, Hartzmark Report ¶¶ 25, 99, 105, 128;

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Hartzmark Report, Exs. I, XI.) Defendants do not dispute that numerosity has
been met.
C.

Commonality (Rule 23(a)(2))

Federal Rule of Civil Procedure 23(a)(2) requires that there are “questions
of law or fact common to the class.”
Commonality requires the plaintiff to demonstrate that the class
members have suffered the same injury. . . . Their claims must
depend upon a common contention . . . . That common contention,
moreover, must be of such a nature that it is capable of classwide
resolution—which means that determination of its truth or falsity
will resolve an issue that is central to the validity of each one of the
claims in one stroke.
Wal-Mart Stores, Inc., 564 U.S. at 349–50 (citation omitted). “In securities fraud
class actions, questions of misrepresentation, materiality and scienter are the
paradigmatic common question[s] of law or fact.” In re DaimlerChrysler AG Sec.
Litig., 216 F.R.D. 291, 296 (D. Del. 2003) (citation omitted).
Commonality has been met because Class members share a common legal
theory – securities law violations – and are part of a common group – purchasers
of CenturyLink shares or Notes. Common questions include whether
Defendants’ public representations and omissions violated federal securities law
and whether these misrepresentations and omissions caused Class members to

10

suffer a compensable loss. (See, e.g., Compl. ¶ 271.) Defendants do not dispute
that commonality has been met.
D.

Typicality (Rule 23(a)(3))

Typicality requires that “the claims or defenses of the representative
parties are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3).
“The burden is fairly easily met so long as other class members have claims
similar to the named plaintiff. Factual variations in the individual claims will not
normally preclude class certification if the claim arises from the same event or
course of conduct as the class claims, and gives rise to the same legal or remedial
theory.” Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1540 (8th Cir. 1996)
(citations omitted).
Typicality has been met because Plaintiffs and Class members share
common claims against Defendants. Plaintiffs, like Class members, purchased
CenturyLink’s publicly traded securities during the Class Period at prices
allegedly artificially inflated by Defendants’ misrepresentations and omissions.
(Compl. ¶¶ 26-27, 270.) Plaintiffs further assert that, like Class members, they
were then damaged when the price of those publicly traded securities declined
after public disclosure of Defendants’ fraud. (Id.) Plaintiffs have claims that are
typical of the claims of the Class, bring claims under the same federal securities
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law, and seek the same relief as other Class members; thus, the typicality
requirement is satisfied.
The Court rejects CenturyLink’s arguments that Oregon is atypical because
it is subject to unique defenses:
1.

Investigation of CenturyLink’s Billing Practices

Defendants assert that, while Plaintiff Oregon was purchasing
CenturyLink securities, the Oregon Attorney General and Oregon Department of
Justice were conducting a law enforcement investigation of the alleged sales and
billing practices that it now claims CenturyLink concealed. Thus, Defendants
reason, throughout the Class Period, Oregon had unique access to information
and an opportunity to uncover the alleged fraud.
There is no evidence that Plaintiff Oregon relied on nonpublic information
in making its investment decisions with regard to CenturyLink. First, case law
establishes that the Oregon DOJ is treated as a separate entity from the Oregon
Public Employee Retirement Fund as well as the Oregon State Treasurer and the
Oregon Public Employee Retirement Board. See Brown v. State of Or., Dep’t of
Corr., 173 F.R.D. 265, 268 (D. Or. 1997) (“Agencies of the State of Oregon are
treated as separate entities [and] . . . knowledge of one agency is not imputed to
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another agency.”). See also Wyler v. Korean Air Lines Co., Ltd., 928 F.2d 1167,
1171 (D.C. Cir. 1991) (holding it improper to charge one federal agency with
knowledge of another federal agency “simply because both are components of
the same . . . government”) (citations omitted). (See also Blatchley Decl., Ex. I,
Viteri 30(b)(6) Dep. 24-25 (testifying that the Oregon Public Employee Retirement
System Fund is its own legal entity).) Absent some evidence to the contrary, the
knowledge of one entity is not imputed to another. Here, the only evidence in
the record is that Plaintiff Oregon had no knowledge of the Oregon DOJ’s
investigation. (See Blatchley Decl., Ex. I, Viteri 30(b)(6) Dep. 208-11; Blatchley
Reply Decl. ¶¶ 2-5; Blatchley Decl., Ex. K, Shull Decl. ¶¶ 2-3.)
Second, Plaintiff Oregon made no trades in CenturyLink stock after the
Oregon DOJ served the Civil Investigative Demand on CenturyLink and before
the end of the Class Period. Thus, even if Oregon DOJ received pertinent, nonpublic information from CenturyLink and even if knowledge of that information
were imputed to Plaintiff Oregon, it would be irrelevant for purposes of this
lawsuit. (See Blair Decl., Ex. 5, June 21, 2017, Oregon Dept. of Justice Civil
Investigative Demand to CenturyLink; Blair Decl., Ex. 7.)

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2.

Information Available to Oregon’s External Investment
Managers

Defendants also assert that Oregon relied on nonpublic information to
make its trades because, during the Class Period, Oregon relied on external
investment managers to actively manage Oregon’s assets who, in turn, relied on
“unique data sources or research that potentially adds value.” (Blair Decl., Ex. 6,
Viteri 30(b)(6) Dep. 129.) Defendants note that Oregon’s investment strategy
relied on selecting “active managers” who “implement[] market strategies that
exploit dislocation.” (Id. 149-50.)
The Court finds no merit in Defendants’ argument. In context, Oregon’s
30(b)(6) deponent testified that Oregon’s investment managers used “public
information” and that the “unique data sources or research” he mentioned were
“publicly available” sources such as “lesser known trade publications.”
(Blatchley Decl., Ex. I, Viteri 30(b)(6) Dep. 129-30.) There is no evidence that
Oregon had access to nonpublic information relevant to its purchases of
CenturyLink shares.
3.

Oregon’s Purchases after June 16, 2017

The Court rejects Defendants’ claim that Oregon’s purchases after the June
16, 2017 partial disclosure make it subject to unique non-reliance defenses, which
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will prevent it from serving as an effective class representative. Oregon
purchased very few shares of CenturyLink after the disclosures, relative to the
amount of shares it purchased before the disclosures. (See Blair Decl., Ex. 7.) In
any case, the great weight of the authority provides that purchasing shares after
a disclosure does not destroy typicality, because, in an efficient market, the
investor still relies on the fact that the disclosure information will be absorbed by
the market and reflected in the new share price. See Weiner v. Tivity Health,
Inc., 334 F.R.D. 123, 130 (M.D. Tenn. 2020). “This later purchase does not
undercut or diminish the argument that the same investor may have purchased
the security pre-disclosure relying on the fact that all information available at the
time was reflected in the then current price.” Id. (citation omitted). “Courts
routinely certify a class with representatives who purchased stock during and
after a class period.” In re Select Comfort Corp. Sec. Litig., 202 F.R.D. 598, 607
n.12 (D. Minn. 2001).
4.

Oregon’s Awareness of Defendants’ Statements

The fact that Oregon did not personally read CenturyLink’s SEC filings
but, instead, relied on outside investment managers and on the market price (see
Blair Decl., Ex. 6, Viteri 30(b)(6) Dep. 215-16) does not make Oregon atypical
15

when the Class theory is fraud-on-the-market. Plaintiffs rely on a theory of
liability and damages that depends on an efficient market that absorbs all of the
information in CenturyLink’s SEC filings into the market price. The premise of
the Basic presumption, which applies in an efficient market, is that direct reliance
is not required. Oregon’s failure to personally read CenturyLink’s filings is
irrelevant and does not make Oregon different from a typical Class member.
E.

Adequacy (Rule 23(a)(4))

Named Plaintiffs are adequate representatives if they “have common
interests with the members of the class, and . . . will vigorously prosecute the
interests of the class through qualified counsel.” Paxton v. Union Nat. Bank, 688
F.2d 552, 562–63 (8th Cir. 1982).
1.

Adequacy of Plaintiffs

Plaintiffs have established adequacy. Defendants’ argument against
adequacy is a reiteration of their typicality argument, which the Court has
already rejected. Plaintiffs’ declarations demonstrate that they have diligently
pursued this litigation and will continue to do so. (See Blatchley Decl., Ex. D, De
Haan Decl. ¶¶ 4-10; Blatchley Decl., Ex. E, Vildosola Decl. ¶¶ 4-10.)

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Plaintiffs also have common interests with the proposed Class. Oregon
purchased CenturyLink securities during the Class Period at prices that were
allegedly artificially inflated by Defendants’ misrepresentations and omissions.
It then suffered significant damages when the price of CenturyLink’s publicly
traded securities declined when the truth was disclosed. Vildosola purchased
CenturyLink’s 7.60% Notes during the Class Period that were allegedly
artificially inflated by Defendants’ misrepresentations and omissions and was
damaged when the price of those securities fell in response to corrective
disclosures.
2.

Class Counsel

In appointing class counsel, the Court must consider “(i) the work counsel
has done in identifying or investigating potential claims in the action; (ii)
counsel’s experience in handling class actions, other complex litigation, and the
types of claims asserted in the action; (iii) counsel’s knowledge of the applicable
law; and (iv) the resources that counsel will commit to representing the class.”
Fed. R. Civ. P. 23(g)(1)(A).
The Court appoints Bernstein Litowitz and Stoll Berne as Class Counsel.
Both firms are highly qualified and have extensive experience in securities class
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action litigation. As demonstrated by the law firms’ submissions, Stoll Berne and
Bernstein Litowitz are experienced in leading large securities class actions in
both trials and settlements and have obtained substantial recoveries for plaintiffs
in such lawsuits. Both firms have demonstrated diligence and expertise in their
work in this case. Defendants do not dispute that Bernstein Litowitz and Stoll
Berne are qualified to represent the class.
F.

Predominance (Rule 23(b)(3))

“At the core of Rule 23(b)(3)’s predominance requirement is the issue of
whether the defendant’s liability to all plaintiffs may be established with
common evidence.” Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1029 (8th Cir.
2010).
If, to make a prima facie showing on a given question, the members
of a proposed class will need to present evidence that varies from
member to member, then it is an individual question. If the same
evidence will suffice for each member to make a prima facie
showing, then it becomes a common question.
Id. (citations omitted).
Rule 23(b)(3), however, does not require a plaintiff seeking class
certification to prove that each elemen[t] of [her] claim [is]
susceptible to classwide proof. What the rule does require is that
common questions predominate over any questions affecting only
individual [class] members.

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Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455, 469 (2013) (citations
omitted).
Plaintiffs note that “[p]redominance is a test readily met in certain cases
alleging . . . securities fraud.” Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 625
(1997). The predominance inquiry looks to the elements of the underlying causes
of action. Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809-10 (2011)
(“Halliburton I”).
Because the Supreme Court has held that falsity, materiality, and loss
causation are common issues to a class, Amgen, 568 U.S. at 474-75, predominance
in a securities fraud action often turns on the reliance element. Halliburton I, 563
U.S. at 810.
1.

Class-wide Reliance with the Basic Presumption

Plaintiffs have shown that they are entitled to a presumption of classwide
reliance under the fraud-on-the-market theory established in Basic, Inc. v.
Levinson, 485 U.S. 224, 247 (1988), and reaffirmed in Halliburton Co. v. Erica P.
John Fund, Inc., 573 U.S. 258, 283-84 (2014) (“Halliburton II”). Plaintiffs may
satisfy Section 10(b)’s reliance element by “invoking a presumption that a public,
material misrepresentation will distort the price of stock traded in an efficient
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market, and that anyone who purchases the stock at the market price may be
considered to have done so in reliance on the misrepresentation.” Halliburton II,
573 U.S. at 283-84. However, “defendants must be afforded an opportunity
before class certification to defeat the presumption through evidence that an
alleged misrepresentation did not actually affect the market price of the stock.”
Id.
To invoke the Basic presumption, Plaintiff must establish that (1) the
alleged misrepresentations were public; (2) the stock traded in an efficient
market; and (3) the relevant transaction took place between the time the
misrepresentations were made and the time the truth was revealed. Halliburton
I, 563 U.S. at 811. The Basic presumption substitutes for individualized proof of
each buyer’s reliance on the alleged misrepresentations. Basic, 485 U.S. at 242.
The fraud-on-the-market presumption is based on the “fairly modest
premise that market professionals generally consider most publicly announced
material statements about companies;” therefore, “the market price of shares
traded on well-developed markets reflects all publicly available information,
and, hence, any material misrepresentations.” Halliburton II, 573 U.S. at 268, 272

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(citation omitted). Thus, “a buyer of the security may be presumed to have
relied on that information in purchasing the security.” Amgen, 568 U.S. at 458.
“Basic [] establishes that a plaintiff satisfies that burden [of showing
predominance] by proving the prerequisites for invoking the presumption—
namely, publicity, materiality, market efficiency, and market timing.”
Halliburton II, 573 U.S. at 276. “Basic does afford defendants an opportunity to
rebut the presumption of reliance with respect to an individual plaintiff by
showing that he did not rely on the integrity of the market price in trading
stock.” Id. “That the defendant might attempt to pick off the occasional class
member here or there through individualized rebuttal does not cause individual
questions to predominate.” Id.
Plaintiffs present evidence to show that the prerequisites for the Basic
presumption – publicity, timing, and market efficiency – have been met.
CenturyLink is a giant entity with millions of shares, closely followed by many
analysts and traded on the NYSE. There is no plausible argument that
CenturyLink’s statements were not publicly made, that Plaintiffs and Class
members did not make trades after the statements were made but before the
disclosures, or that CenturyLink stock was not traded in an efficient market.

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a)

Publicity

Plaintiffs meet the publicity prong because they allege that Defendants
made material misrepresentations and omissions in their public statements to
investors that artificially inflated or maintained the market price of
CenturyLink’s securities. (Compl. ¶¶ 276-77.)
b)

Timing

Plaintiffs meet the market timing prong because they allege that they
purchased CenturyLink securities during the Class Period and suffered losses
when the artificial inflation came out of the price of those securities when the
truth was disclosed. (Compl. ¶¶ 266-77.)
c)

Market Efficiency

The markets for CenturyLink common stock and the 7.60% Senior Notes
were efficient during the Class Period.
Courts analyze the efficiency of the market under the factors outlined in
Cammer v. Bloom, 711 F. Supp. 1264, 1286 (D.N.J. 1989), and Krogman v. Sterritt,
202 F.R.D. 467, 478 (N.D. Tex. 2001). The Cammer factors address: “(1) a stock’s
average weekly trading volume; (2) the number of security analysts following
and reporting on the stock; (3) the extent to which market makers and
22

arbitrageurs trade in the stock; (4) whether the company is eligible to file an SEC
Form S-3; and (5) empirical facts showing a cause and effect relationship between
unexpected corporate events or financial releases and an immediate response in
the stock price.” Första AP-Fonden v. St. Jude Med., Inc., 312 F.R.D. 511, 518 (D.
Minn. 2015) (citing Cammer, 711 F. Supp. at 1286-87). The Krogman factors are:
“(6) the company’s market capitalization, (7) the bid-ask spread for stock sales,
and (8) float (the percentage of shares held by the public, as opposed to
insiders).” Första AP-Fonden, 312 F.R.D. at 518 (citing Krogman, 202 F.R.D. at
478). Courts also examine factors such as whether a stock shows
“autocorrelation,” which measures “how predictable a stock’s pricing is based on
historical data,” and whether a stock is traded on a major stock exchange. Id.
Here, throughout the Class Period, CenturyLink’s common stock was
traded on the NYSE, a highly efficient securities market. (Blatchley Decl., Ex. C,
Hartzmark Report ¶¶ 23, 37-38.)
The average weekly trading volume of the CenturyLink common stock
was 4.9% of outstanding shares. (Hartzmark Report ¶ 25; id., Ex. I.) An
“[a]verage weekly trading volume of 2% or more of outstanding securities
justifies a ‘strong presumption’ of an efficient market for that security.” In re

23

Winstar Commc’ns Sec. Litig., 290 F.R.D. 437, 447 (S.D.N.Y. 2013) (citing
Cammer, 711 F. Supp. at 1286). The 7.60% Senior Notes had an average weekly
turnover rate of 2.5%, with a median of 1.8%, and traded on all possible trading
days from the time it was issued during the Class Period. (Hartzmark Report ¶¶
116-19; id., Exs. XI, XII.) Courts have held that bond turnover over 2% justifies a
“strong presumption” of an efficient market. Winstar, 290 F.R.D. at 447.
Heavy coverage of CenturyLink by analysts and the media weighs in favor
of market efficiency. During the Class Period, analysts hosted 38 investor
conferences at which CenturyLink participated, and CenturyLink was discussed
in approximately 11,500 published articles. (Hartzmark Report ¶¶ 29, 32; Ex. IIIC; Appendix C.) During the Class Period, an average of 19 analysts covered
CenturyLink per week. (Hartzmark Report ¶¶ 28, 31; Ex. II.) The number of
analysts following CenturyLink was greater than at least 80% of the common
stocks on the NYSE and NASDAQ. (Hartzmark Report ¶ 31.) Analysts closely
watched CenturyLink, publishing over 1,000 reports and actively participating
on 17 conference calls during the Class Period. (Hartzmark Report ¶¶ 28-29; Exs.
III-A, III-B.) Analysts also issued numerous reports addressing CenturyLink’s
debt securities. (Hartzmark Report ¶¶ 122, 124.)

24

“The existence of market makers and arbitrageurs” is persuasive evidence
of market efficiency because it “would ensure completion of the market
mechanism; these individuals would react swiftly to company news and
reported financial results by buying or selling stock and driving it to a changed
price level.” Cammer, 711 F. Supp. at 1286-87. CenturyLink’s common stock
was actively traded on the NYSE by at least 1,668 institutional investors during
the Class Period. (Hartzmark Report ¶¶ 39-40; id., Exs. IV, V.) There were
opportunities for arbitrage throughout the Class Period, because the amount of
short interest in CenturyLink common stock ranged from 24.1 million shares to
114.9 million shares, with an average of 47.3 million shares. (Hartzmark Report
¶¶ 41-42; id., Ex. VI.) There were at least 343 separate market makers for the
7.60% Senior Notes during the Class Period. (Hartzmark Report ¶¶ 115, 126; id.,
Ex. XV.) More than 120 institutional investors held at least 21-33% of the 7.60%
Senior Notes at year-end from 2013 to 2016. (Hartzmark Report ¶ 128; id., Ex.
XVI.)
Eligibility to file an abbreviated SEC Form S-3 is probative of efficiency. 17
C.F.R. § 239.13; see Cammer, 711 F. Supp. at 1287. CenturyLink filed at least
three Forms S-3 during the Class Period. (Hartzmark Report ¶¶ 43-45; 130-32.)

25

“Market capitalization, calculated as the number of shares multiplied by
the prevailing share price, may be an indicator of market efficiency because there
is a greater incentive for stock purchasers to invest in more highly capitalized
corporations.” Krogman, 202 F.R.D. at 478. Throughout the Class Period,
CenturyLink’s market capitalization averaged approximately $17.9 billion, with a
high of $23.9 billion, meaning that CenturyLink’s market capitalization was
generally greater than 89-95% of common stocks on the NYSE and NASDAQ.
(Hartzmark Report ¶¶ 47-50; Ex. VII.) The 7.60% Senior Notes also had a high
market value ranging from $587 million to $844 million during the class period.
(Hartzmark Report ¶ 134; id., Exs. XIV, XVII.)
“In determining efficiency, courts also consider the percentage of shares
held by the public, rather than insiders.” Krogman, 202 F.R.D. at 478. During
the Class Period, the public float represented approximately 99.6% of
CenturyLink’s common stock, on average. (Hartzmark Report ¶ 52.) There is no
evidence that any insiders held any positions in the 7.60% Senior Notes.
(Hartzmark Report ¶ 138.)
“The bid-ask spread is the difference between the price at which investors
are willing to buy the stock and the price at which current stockholders are

26

willing to sell their shares. A large bid-ask spread is indicative of an inefficient
market, because it suggests that the stock is too expensive to trade.” Krogman,
202 F.R.D. at 478 (citations omitted). During the Class Period, the average bidask spread for companies on the NYSE and NASDAQ (0.70%) was 17 times
larger than the bid-ask spread for CenturyLink common stock (0.04%).
(Hartzmark Report ¶¶ 53-57.) There are no reported bid-ask spreads for
corporate bond markets, so Plaintiff’s expert, Michael Hartzmark analyzed
customer trades with reporting dealers and determined that the average bid-ask
spread for the 7.60% Senior Notes was 2.48%, and the median bid-ask spread was
2.55%. (Hartzmark Report ¶¶ 140-41; id., Ex. XVIII.) He also analyzed potential
market-making trades between dealers and determined that the average bid-ask
spread for such trades was 1.09%, with a median bid-ask spread of 0.93%.
(Hartzmark Report ¶ 143; id., Ex. XVII.)
Plaintiffs have “allege[d] empirical facts showing a cause and effect
relationship between unexpected corporate events or financial releases and an
immediate response in the stock price.” Cammer, 711 F. Supp at 1287.
Hartzmark conducted an event study. (Hartzmark Report ¶¶ 61-65; Apps. C, D.)
“Event studies are ‘regression analyses that seek to show that the market price of

27

the defendant’s stock tends to respond to pertinent publicly reported events.’”
Första AP-Fonden, 312 F.R.D. at 520 n.4 (quoting Halliburton II, 573 U.S. 280).
Event studies are “considered prima facie evidence of the existence of this causal
relationship.” Winstar, 290 F.R.D. at 448.
Hartzmark found that CenturyLink’s common stock price exhibited
significant price movements nine times as frequently on “news” days than on
“no-news” days. (Hartzmark Report ¶ 73.) He found that there was no
statistically significant autocorrelation of CenturyLink’s common stock abnormal
returns, which is consistent with the conclusion that CenturyLink common stock
reacts quickly to unexpected events. (Hartzmark Report ¶¶ 79-84.) He also
found statistically significant price movements in response to each corrective
disclosure, which is consistent with a security that trades in an efficient market.
(Hartzmark Report ¶¶ 80-84.) Hartzmark also concluded that new CenturyLinkspecific information and large price movements of the 7.60% Senior Notes were
related and could not be attributed to outside influences. Hartzmark Report ¶¶
153-83.) The 7.60% Senior Notes responded to information about CenturyLink’s
credit rating in a manner consistent with a finding of an efficient market.
(Hartzmark Report ¶¶ 157-66.) The relationship between 7.60% Note price

28

volatility and common stock volume (a proxy for CenturyLink-specific
information) was positive and highly statistically significant, which also supports
a finding of market efficiency. (Hartzmark Report ¶¶ 167-70.) The 7.60% Note
did not exhibit economically meaningful autocorrelation. (Hartzmark Report ¶¶
171-77.) Each corrective disclosure was associated with significant price
movement in the price of the Senior 7.60% Notes, another finding consistent with
market efficiency. (Hartzmark Report ¶¶ 178-81; Ex. XXI.) Together, these
analyses support a finding of market efficiency for CenturyLink’s common stock
and the 7.60% Notes during the Class Period. (Hartzmark Report ¶¶ 85-87, 182.)
d)

Standard for Rebuttal of the Basic Presumption

The Basic presumption can be rebutted with evidence that the alleged
misrepresentation did not affect the stock’s market price. Halliburton II, 573 U.S.
at 279, 284. See also IBEW Local 98 Pension Fund v. Best Buy Co., Inc., 818 F.3d
775, 780 (8th Cir. 2016) (noting that “there is an additional question at the class
certification stage — whether the Rule 10b–5 defendant can rebut the Basic
presumption with evidence showing an absence of price impact”). “[T]he Basic
presumption . . . c[an] be rebutted by appropriate evidence, including evidence
that the asserted misrepresentation (or its correction) did not affect the market
29

price of the defendant’s stock.” Halliburton II, 573 U.S. at 279–280. To prevail on
their argument of lack of price impact, Defendants must show that they have
“sever[ed] the link” between the alleged misrepresentations and any impact on
CenturyLink’s stock price. Basic Inc., 485 U.S. at 248; Halliburton II, 573 U.S. at
281-82 (holding that defendant must “show[] that the alleged
misrepresentation[s] did not actually affect the stock’s market price”).
In Best Buy, the Eighth Circuit reversed class certification because the
defendants presented “overwhelming evidence of no ‘front-end’ price impact”
“by submitting direct evidence (the opinions of both parties’ experts) that
severed any link between the alleged conference call misrepresentations and the
stock price at which plaintiffs purchased.” Best Buy Co., 818 F.3d at 782-83. In
its opinion, the Best Buy court stated: “We agree with the district court that,
when plaintiffs presented a prima facie case that the Basic presumption applies
to their claims, defendants had the burden to come forward with evidence
showing a lack of price impact.” Id. at 782 (citing Fed. R. Evid. 301). However,
“[t]he Eighth Circuit’s statement appears to be dictum because the extent of the
burden was not at issue. The Eighth Circuit ultimately concluded that the
‘overwhelming evidence’ in the case demonstrated that there had been no price

30

impact and that the Basic presumption had therefore been rebutted. Thus, the
Eighth Circuit’s ruling did not depend on the standard of proof.” Waggoner v.
Barclays PLC, 875 F.3d 79, 103 n.36 (2d Cir. 2017). In any event, even if the
standard were a mere burden of production, in this case, Defendants have failed
to meet that burden because they have failed to produce evidence to sever the
link between the alleged misrepresentations and any impact on CenturyLink’s
stock price.
Because price impact can be observed on the “front-end” (i.e.,
misstatements causing or maintaining inflation) or on the “back-end” (i.e., a
decline in price caused by the corrective disclosures), Defendants must
affirmatively disprove both to satisfy their burden. See Ark. Teacher Ret. Sys. v.
Goldman Sachs Grp., Inc., 955 F.3d 254, 265–66, 271 (2d Cir. 2020) (rejecting
argument that absence of price movement on misstatement days rebutted price
impact because “inflation was demonstrated on the [corrective-disclosure]
dates”); In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 260 (2d Cir. 2016) (rejecting
notion that price impact requirement means a “misstatement must be associated
with an increase in inflation to have any effect on a company’s stock price”).
e)

Evidence of Front-End Price Impact
31

Defendants’ expert, Bruce Deal, opined that, on 48 out of the 52 days for
which Plaintiffs allege CenturyLink’s misrepresentations affected the price of
CenturyLink securities, there was no statistically significant positive price
movement in CenturyLink stock. (Blair Decl., Ex. 1, Deal Report ¶ 72.) He
further opined that there was a statistically significant price increase on 4 dates
and a statistically significant negative price movement on 8 of the 52 dates. (Id. ¶
77.) He opined that, on 3 of the 4 dates showing a statistically significant
increase, CenturyLink disclosed revenue and earnings-per-share figures that
were more positive than the market expected. (Id. ¶¶ 73-76.)
Defendants argue that, although Hartzmark opines that four abnormal
positive returns are “four times as many as would be expected by chance,”
(Blatchley Reply Decl., Ex. F, Hartzmark Reply Report ¶ 115), he also opines that
“unanticipated material information is more frequently and more systematically
disclosed” on earnings disclosure “news days,” leading to higher rates of
abnormal returns, in the case of CenturyLink, 59% of the time (Blatchley Decl.,
Ex. C, Hartzmark Report ¶ 68; Hartzmark Report, Ex. IX). Defendants conclude
that, because 17 of the purported inflationary dates are “news days,” the average

32

distribution by chance would likely include more positive abnormal returns that
those among Hartzmark’s purported inflationary dates.
The Court concludes that the fact that CenturyLink shares did not show a
statistically significant increase on the majority of the dates of the alleged
misstatements or omissions does not rebut the Basic presumption at this stage,
where Plaintiffs are relying on a price maintenance theory.
First, Plaintiffs have provided evidence of back-end price impact. As the
Seventh Circuit has noted, “the movement of a stock price immediately after a
false statement often tells us very little about how much inflation the false
statement caused.” Glickenhaus & Co. v. Household Int’l, Inc., 787 F.3d 408, 415
(7th Cir. 2015). Instead, “[t]he best way to determine the impact of a false
statement is to observe what happens when the truth is finally disclosed and use
that to work backward, on the assumption that the lie’s positive effect on the
share price is equal to the additive inverse of the truth’s negative effect.” Id.
Here, as discussed in the next section, Plaintiffs have provided, and Defendants
have failed to rebut, evidence of back-end price impact.
Second, Plaintiffs are proceeding under a price maintenance theory. As
Defendants’ expert admitted, misstatements or omissions can maintain artificial

33

inflation in a stock regardless of whether a stock’s price increases significantly,
decreases significantly, or does neither. (Blatchley Decl., Ex. H, Deal Dep. 12335.) “The lack of statistically significant proof that a statement affected the stock
price is not statistically significant proof of the opposite, i.e., that it did not
actually affect the stock price.” Di Donato v. Insys Therapeutics, Inc., 333 F.R.D.
427, 444 (D. Ariz. 2019). “[A] stock can be inflated even if the price remains the
same or declines after a false statement because the price might have fallen even
more.” Glickenhaus & Co., 787 F.3d at 415. While the Eighth Circuit has not
explicitly endorsed the price maintenance theory, it has not rejected the theory.
The underlying theory in Haliburton II was price maintenance, and the Supreme
Court cited, with approval, Schleicher v. Wendt, which endorsed price
maintenance. 618 F.3d 679, 684 (7th Cir. 2010), quoted in Halliburton II, 573 U.S.
at 272. After Halliburton II, 70% of securities plaintiffs in federal district court
cases involving a defendant’s attempt to rebut the Basic presumption proceeded
on a price maintenance theory, and in every one of those cases, the district courts
held that the defendants failed to rebut the presumption. Goldman Sachs Group,
Inc., 955 F.3d at 266 n.9.

34

Here, Plaintiffs allege that Defendants engaged in cramming in order “to
meet the financial projections Defendants provided to Wall Street.” (Compl. ¶¶
2, 67.) Fees and charges were added to customer bills, including as “gap
closure[s]” and to meet analyst estimates. (Blatchley Decl., Sealed Ex. U; Second
Blatchley Decl. ¶¶ 6-7.) Additionally, the Complaint alleges that Defendants
omitted negative material facts (see, e.g., Compl. ¶¶ 200, 203), which Deal agreed
would not result in price increases. (Blatchley Decl., Ex. H, Deal Dep. 135;
Blatchley Decl., Sealed Ex. F, Hartzmark Rebuttal Report ¶¶ 101-03.)
Third, Defendants bear the burden of producing evidence capable of
rebutting the Basic presumption, yet their own expert testified that he did not
opine that the alleged misstatements did not have a price impact. (See Blatchley
Sur-sur-reply Decl., Ex. X, Deal Dep. 65.) Thus, Defendants did not produce
evidence of a lack price impact. See, e.g., Vizirgianakis v. Aeterna Zentaris, Inc.,
775 F. App’x 51, 53 (3d Cir. 2019) (noting that “plaintiffs do not have the burden
to prove price impact (or lack thereof), so it was not surprising that their expert’s
report did no such thing”).
f)

Evidence of Back-End Price Impact

35

Defendants have failed to rebut the Basic presumption because they are
unable to rebut evidence of back-end price impact.
First, Defendants’ expert admits that there were statistically significant
price drops following two of the three disclosure dates. This is sufficient to
prevent Defendants from “sever[ing] the link” between the alleged
misrepresentations and any impact on CenturyLink’s stock price. See, e.g.,
Monroe County Employees’ Ret. Sys. v. S. Co., 332 F.R.D. 370, 395 (N.D. Ga.
2019) (“This concession [that Defendants cannot rule out price impact because
the stock price decline following at least one Class Period corrective disclosure
was statistically significant] dooms Defendants’ attempt to rebut the
presumption of reliance because the inquiry is whether Defendants have proven
a complete lack of price impact during the Class Period, not whether the stock
price decline following individual corrective disclosures was caused by the
alleged misrepresentations, which is a loss causation analysis not appropriate at
this stage.”). Deal admits that the price declines on June 16, 2017, and July 12,
2017, were statistically significant and that there was a negative abnormal decline
on the third date, June 19, 2017. (Deal Report ¶¶ 141-45; Blatchley Decl., Ex. F,
Hartzmark Rebuttal Report ¶¶ 21-22; Blatchley Decl., Ex. H, Deal Dep. 90-91

36

(“[B]oth Dr. Hartzmark and I find statistically significant negative abnormal
returns on June 16th and July 12th.”).) Deal did not identify any confounding
information disclosed on the corrective disclosure dates and did not analyze
whether any of the price decline on those days was unrelated to the fraud.
(Blatchley Decl., Ex. F., Hartzmark Rebuttal Report ¶¶ 11-12, 46-68; Blatchley
Decl., Ex. H, Deal Dep 164-65.) Yet, under Basic, Defendants bear the burden of
presenting evidence to show “that the entire price decline on the correctivedisclosure dates was due to something other than the corrective disclosures.”
Ark. Teacher Ret. Sys. v. Goldman Sachs Grp., Inc., 955 F.3d 254, 271 (2d Cir.
2020). Even under a lesser burden of production, not persuasion, Defendants fail
to rebut the Basic presumption. See, e.g., KBC Asset Mgmt. NV v. 3D Sys. Corp.,
No. CV 0:15-2393-MGL, 2017 WL 4297450, at *8 (D.S.C. Sept. 28, 2017) (“On the
record before it, the Court is unable to say Defendants have presented evidence
sufficient to convince it there was no price impact associated with the May 6,
2015 disclosure. In fact, 3D Systems’s stock price decreased by over five percent
on May 6, 2015. Whether the stock price was caused by alleged
misrepresentations or some other factor is for now an open question.”) (applying
Fed. R. Evid. 301 burden of production standard); Marcus v. J.C. Penney Co.,

37

CIVIL ACTION NO. 6:13-cv-736-MHS-KNM, 2016 WL 8604331, at *7-8 (E.D. Tex.
Aug. 29, 2016) (concluding that the defendants failed to meet a “burden of
production to rebut the presumption of reliance,” even though there were no
front-end price increases on misstatement dates, because the stock declined
following corrective disclosures, thereby showing price impact, so it was “not
necessary to reach the question of whether [defendants] also bear the burden of
persuasion”), adopted, 2017 WL 907996 (E.D. Tex. Mar. 8, 2017).
Second, Defendants’ expert admits that there was a negative abnormal
decline on June 19, 2017, but merely disagrees with Plaintiffs’ expert regarding
whether it is statistically significant, which depends on whether 94% confidence
is considered sufficient and whether a one or two-day window is used.
(Hartzmark Rebuttal Report ¶¶ 69-73.) Plaintiffs’ expert provides reasonable
arguments regarding why a two-day window is appropriate for the June 19
disclosure, including that the disclosure was late in the day and made by a third
party. (See Hartzmark Rebuttal Report ¶¶ 74-94; Blatchley Decl., Ex. H, Deal
Dep. 190-212.)
Third, the Court has already rejected Defendants’ argument that, as a
matter of law, the three disclosures were not actually disclosures. See In re

38

CenturyLink Sales Practices & Sec. Litig., 403 F. Supp. 3d 712, 735-36 (D. Minn.
July 30, 2019) (“Plaintiffs have adequately pled loss causation” in alleging the
truth was revealed “through news reports on the lawsuits alleging systemic
cramming at CenturyLink.”). Moreover, arguments about whether particular
statements were actually disclosures, like arguments about loss causation and
that the market already was aware of cramming allegations, are common
questions that can be adjudicated on a class-wide basis at summary judgment or
trial. See, e.g., Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455,
475 (2013). Similarly, at the class certification stage, a truth-on-the-market
defense raises common class-wide issues. See id. at 482.
Fourth, claims that other factors also contributed in part to the price drops
are insufficient to rebut the Basic presumption. “[M]erely suggesting that
another factor also contributed to an impact on a security’s price does not
establish that the fraudulent conduct complained of did not also impact the price
of the security.” Waggoner v. Barclays PLC, 875 F.3d 79, 105 (2d Cir. 2017). And,
here, Deal does not opine that fear, uncertainty, and doubt caused all of the
declines. (Blatchley Decl., Ex. H, Deal Dep. 84-86, 162-65.) He did not attempt to
quantify the amount of the price drop that was caused by other factors.

39

2.

Affiliated Ute Presumption

Because the Court concludes that the Basic fraud-on-the-market
presumption applies, it need not reach Plaintiffs’ alternative argument under
Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 15354(1972).
3.

Whether Common Issues of Damages Predominate

The Court concludes that common issues of damages predominate. To
establish predominance, Plaintiffs must show that “damages are susceptible of
measurement across the entire class.” Comcast Corp. v. Behrend, 569 U.S. 27, 35
(2013). Plaintiffs must put forward a damages model that is “consistent with
[their] liability case.” Id. (citations omitted). “If the model does not even attempt
to do that, it cannot possibly establish that damages are susceptible of
measurement across the entire class for purposes of Rule 23(b)(3).” Id.
Here, Plaintiffs propose a commonly accepted damages model for
securities fraud that is consistent with their theory of liability and calculates
damages on a classwide basis. Plaintiffs rely on Hartzmark’s out-of-pocket or
event study damages model, which “is the standard measurement of damages in
Section 10(b) securities cases.” City of Miami Gen. Employees’ & Sanitation
Employees’ Ret. Tr. v. RH, Inc., No. 17-CV-00554-YGR, 2018 WL 4931543, at *3

40

(N.D. Cal. Oct. 11, 2018) (gathering cases). Hartzmark’s report “satisfies what
Comcast demands, that a viable calculation of damages can be made in this
case.” Beaver County Employees’ Ret. Fund v. Tile Shop Holdings, Inc., No. 14786 (ADM/TNL), 2016 WL 4098741, at *11 (D. Minn. July 28, 2016) (footnote
omitted). “It is sufficient for class certification that [Hartzmark] has specified a
damages model that can be used to establish damages using a common
methodology for all class members, even though certain of the inputs to that
model are not yet ascertainable.” Monroe County Employees' Ret. Sys. v. S. Co.,
332 F.R.D. 370, 399 (N.D. Ga. 2019).
Hartzmark proposes an event study to create an inflation ribbon that
would measure the amount of fraud-related inflation in the price of
CenturyLink’s securities on each day of the Class Period; this daily inflation
amount would provide the inputs for the out-of-pocket formula. (Hartzmark
Report ¶¶ 188-89.) Hartzmark admits that at this stage, he has not “pars[ed] and
scal[ed] the abnormal returns” in order to “[c]alculat[e] actual inputs into the”
out-of-pocket method, because determining loss causation is not necessary at the
class certification stage and “no matter which technique might be chosen at the
merits stage of this litigation to construct the inflation ribbon, the techniques

41

used to estimate the true price (and thus calculate artificial inflation) will be
common to all putative class members and will be applied on a class-wide basis.”
(Id. ¶ 190 (footnote omitted).)
Defendants’ criticisms of the specifics of which techniques will be used to
construct the inflation ribbon and actually calculate losses with Hartzmark’s
damages model are premature. At the class certification stage, Plaintiffs need
merely show, as Hartzmark has done, that “the techniques used to estimate the
true price (and thus calculate artificial inflation) will be common to all putative
class members and will be applied on a class-wide basis.” (Hartzmark Report ¶
190 (footnote omitted). See also Blair Decl., Ex. 2, Hartzmark Dep. 147 (“I can say
whatever the inputs are, they would be applied classwide, and you would look
at the inflation at the time of the purchase and the time of sale. It’s very
straightforward.”).) As another district court explained:
[D]efendants’ argument that the plaintiffs’ proposed method fails
“to demonstrate how one would measure inflation using any
‘standard tools of valuation’ if it cannot be measured using an event
study” is essentially an assertion that plaintiffs’ method will result in
incorrect calculations. However, this criticism prematurely
addresses the quantification and allocation of damages, which
courts consistently find are not appropriately raised at the class
certification stage.
RH, Inc., 2018 WL 4931543, at *4.
42

Defendants’ concerns that Hartzmark has not yet calculated an inflation
ribbon or adequately addressed disaggregation are loss causation disputes that
are not appropriate for resolution at class certification. See, e.g., Amgen, 568 U.S.
at 475.
Calculating the actual inputs into the out-of-pocket method by
parsing and scaling the abnormal returns requires an analysis of loss
causation. For present purposes, one need only realize that the
inflation-ribbon inputs will be common and applied classwide.
Thus, the out-of-pocket method does not involve any individualized
issues.
SEB Inv. Mgmt. AB v. Symantec Corp., No. C 18-02902 WHA, 2020 WL 2306490,
at *10 (N.D. Cal. May 8, 2020).
Defendants protest that it will be difficult and complex to calculate
damages because there are many dates with various alleged misrepresentations,
there was other information provided by CenturyLink that could have
influenced securities’ prices, the alleged fraud increased and decreased as the
scheme changed over time, the telecommunications industry underwent changes
during this time that influenced the prices of securities, there was general fear
based on the Wells Fargo fraud, and the securities’ prices changed over time. All
of these criticisms go to the accuracy of the damages model and loss causation,
but do not prevent class certification because all of these alleged obstacles for
43

accurate calculation of the damages are the same if there is one plaintiff or one
million plaintiffs. Defendants can argue the merits of Plaintiffs’ proposed
damages model at summary judgment or trial, but whether the Court certifies a
class or not has no impact on those arguments. There is nothing about there
being more plaintiffs that makes the damages model more or less accurate,
because there is no argument here that damages would be individualized. See,
e.g., Menaldi v. Och-Ziff Cap. Mgmt. Grp., LLC, 328 F.R.D. 86, 98-99 (S.D.N.Y.
2018) (disaggregation “goes beyond the Rule 23 inquiry” because “[t]he answer
for the class will be the same as the answer for the hypothetical lone plaintiff”).
G.

Superiority (Rule 23(b)(3))

A class action is the superior method to fairly and efficiently adjudicate
this controversy. In general, “securities cases easily satisfy the superiority
requirement of Rule 23.” In re NYSE Specialists Sec. Litig., 260 F.R.D. 55, 80
(S.D.N.Y. 2009) (citation omitted).
Rule 23(b)(3) requires the Court to consider four factors when determining
superiority: “(A) the class members’ interests in individually controlling the
prosecution or defense of separate actions; (B) the extent and nature of any
litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims
44

in the particular forum; and (D) the likely difficulties in managing a class action.”
Fed. R. Civ. P. 23(b)(3).
This action meets all four factors. First, Plaintiffs seek to represent a class
of thousands of CenturyLink securities purchasers whose individual damages
might be too small to make the expense of litigation worthwhile. Second, there is
no evidence of any other litigation concerning this controversy already begun by
or against Class members. (Blatchley Decl. ¶ 3.) Third, concentrating the
litigation in this forum will promote judicial efficiency by resolving the claims of
thousands of shareholders in one case. Fourth, there are no manageability
concerns.
H.

Definition of the Class Period

The Court denies Defendants’ request to shorten the Class Period by
ending it on June 16, 2017, rather than on July 12, 2017. Defendants point to
some evidence to support their claim that the thrust of the alleged fraud was
revealed in the June 16 Bloomberg article. (See Blair Decl., Ex. 6, Viteri 30(b)(6)
Dep. 204 (testifying that June 16, 2017, was the day that “the dam broke” and that
the revelations “basically broke the trust of the investment community” in
CenturyLink); id. 220 (testifying that, on June 16, “the market understands, as a
whole, what was occurring at that point in time”).) However, at the class
45

certification stage, the Court will not shorten the Class Period. First, after the
June 16, 2017, disclosure, Defendants denied the allegations and continued the
alleged misrepresentations. See In re Snap Inc. Sec. Litig., 334 F.R.D. 209, 225
(C.D. Cal. 2019) (refusing to shorten class period to end on date that lawsuit was
revealed because, after that date, it was alleged that defendant “continued to
make misrepresentations regarding the lawsuit;” thus, the court determined that
“any inquiry as to precisely when the truth was fully disclosed to the market is
best reserved for resolution on the merits”).
Second, both Defendants’ and Plaintiffs’ expert found a statistically
significant drop in share price after the July 12, 2017 disclosure date. See Monroe
County Employees’ Ret. Sys. v. S. Co., 332 F.R.D. 370, 395–96 (N.D. Ga. 2019)
(“[N]umerous courts addressing class certification have refused to shorten class
periods by dismissing subsequent corrective disclosures where some but not all
of the stock price declines following the alleged corrective disclosures were
statistically significant. Instead, these courts found that the question of what
caused the stock price to decline is an ultimate merits question for which
plaintiffs bear the burden at trial, not at class certification.”). “[D]efendants’
arguments present loss causation issues that need not be decided at the class

46

certification stage as the issues would be common to the putative class.” SEB
Inv. Mgmt. AB v. Symantec Corp., No. C 18-02902 WHA, 2020 WL 2306490, at *9
(N.D. Cal. May 8, 2020). As in SEB Investment Management, Defendants’ own
expert admits that “the [July 12] disclosure[] w[as] followed by [a] statistically
significant price decline[], indicating that the price had been inflated during the
time period prior to [July 12].” Id. (See Blatchley Sur-sur-reply Decl., Ex. X, Deal
Dep. 190 (testifying that the corrective disclosures showed they “do seem to
have . . . had some impact on the stock price” and that “we can’t rule out
these”).)
Third, the July 12 disclosure revealed new information such as the
Minnesota Attorney General’s allegations that “maybe 1 out of 5” customers
were quoted correctly, a revelation that prompted analysts to downgrade their
ratings. (Compl. ¶¶ 163-71; Blatchley Decl., Ex. F, Hartzmark Rebuttal Report ¶¶
40-43.) Thus, the Minnesota Attorney General’s lawsuit revealed more about the
scope of CenturyLink’s billing fraud. Defendant’s expert admitted that investors
did not know these facts before the July 12 disclosure. (See Blatchley Sur-surreply Decl., Ex. X, Deal Dep. 87-89.)

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Overall, the Court concludes that shortening the Class Period would be
inappropriate at this time and notes that “arguments regarding the impact or
lack of impact of different disclosures on the market are generally reserved for
the merits stage, rather than class certification,” In re Snap Inc. Sec. Litig., 334
F.R.D. at 225 (citing Amgen Inc., 568 U.S. at 470, 482), particularly when “when a
securities class action defendant has [not] unequivocally disclaimed the prior
assertion” id.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1.

Plaintiffs’ Motion for Class Certification, Appointment of
Class Representatives and Appointment of Class Counsel
[Docket No. 188] is GRANTED.

2.

The following class (the “Class”) is hereby certified pursuant
to Federal Rule of Civil Procedure 23:
All persons and entities that purchased or otherwise acquired
publicly traded CenturyLink, Inc. (“CenturyLink”) common
stock or 7.60% Senior Notes due September 15, 2039, during
the period between March 1, 2013 to July 12, 2017, inclusive
(the “Class Period”), and who were damaged thereby (the
“Class”). Excluded from the Class are Defendants,
CenturyLink’s affiliates and subsidiaries, the officers and
directors of CenturyLink and its subsidiaries and affiliates at
all relevant times, members of the immediate family of any
excluded person, heirs, successors, and assigns of any

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excluded person or entity, and any entity in which any
excluded person has or had a controlling interest.
3.

Lead Plaintiff the State of Oregon by and through the Oregon
State Treasurer and the Oregon Public Employee Retirement
Board, on behalf of the Oregon Public Employee Retirement
Fund (“Oregon”) and Plaintiff Fernando Alberto Vildosola, as
trustee for the AUFV Trust U/A/D 02/19/2009, are appointed
as Class Representatives.

4.

Bernstein Litowitz Berger & Grossmann LLP and Stoll Stoll
Berne Lokting & Shlachter P.C. are appointed as Class
Counsel.

Dated: September 14, 2020

s/ Michael J. Davis
Michael J. Davis
United States District Court

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