Klein v. TD Ameritrade Holding Corporation, et al

Filing 177

ORDER - IT IS ORDERED: The lead plaintiff's objection (Filing No. 164 ) to the order of the magistrate judge (Filing No. 163 ) is overruled. The order of the magistrate judge (Filing No. 163 ) is affirmed in all respects. The defendant s' motion to consider the affidavit of Ovidio Montemayor, (Filing No. 174 ) is granted. The stay of entry of an amended progression order (Filing No. 168 ) is lifted. Within ten days of the date of this order, the parties shall confer and submit to the assigned magistrate judge a proposed amended progression order to resolve the class certification dispute and shall contact the magistrate judges chambers to schedule a planning conference. Ordered by Senior Judge Joseph F. Bataillon. (TCL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
Gerald J. KLEIN, Individually and on Behalf
of All Others Similarly Situated;
8:14CV396
Plaintiff,
v.

ORDER

TD AMERITRADE HOLDING
CORPORATION, TD AMERITRADE INC.,
and FREDERIC TOMCZYK,
Defendants.

This matter is before the court on the lead plaintiff Roderick Ford’s objection,
Filing No. 164, to the order of the magistrate judge, Filing No. 163, granting TD
Ameritrade’s motion for protective order, Filing No. 141, and denying lead plaintiff’s
motion to compel responsive discovery, Filing No. 149.1
I.

BACKGROUND
These are purported class actions alleging wrongdoing in connection with stock

trades. In this action, the lead plaintiff2 alleges that TD Ameritrade did not route its
clients’ equity orders for execution in a manner that seeks “best execution,” and claims
that, as a consequence, TD Ameritrade violated Section 10(b) of the Securities
Exchange Act of 1934.
The lead plaintiff challenges the magistrate judge’s denial of his discovery
request for classwide trading data consisting of hundreds of millions of orders to prove
economic loss in support of a motion for class certification. The magistrate judge found
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Also pending is defendant’s motion to consider the affidavit of Ovidio Montemayor, Filing No.
174. The court has considered the affidavit and the motion will accordingly be granted.
2

Roderick Ford was appointed lead plaintiff. Filing No. 27.

that the lead plaintiff’s discovery requests were overbroad and not relevant, as beyond
the scope of the class certification issues. The magistrate judge also found that TD
Ameritrade has provided extensive discovery on the lead plaintiffs’ equity orders and
concedes, for purposes of the class certification process, many of the plaintiff’s
elements of proof for class certification. The denial, however, was without prejudice “to
allow Ford an opportunity to narrow the requests and provide detailed justification
correlating specific discovery sought to class certification issues based on the
proportional needs of the case.” Filing No. 163, Order at 4. Lead plaintiff declined to do
so and instead filed this objection to the magistrate judge’s findings.
The lead plaintiff asserts the magistrate judge erred in failing to substantiate its
conclusions and failing to address relevant precedent discussed at length in the parties’
briefing.

He argues the affidavit of his expert demonstrated that the requested

discovery was necessary to establish classwide harm. See Filing No. 151-3, Affidavit of
Haim Bodek (“Bodek Aff.”)
II.

LAW
A magistrate judge’s authority over nondispositive pretrial matters is governed by

28 U.S.C. § 636(b)(1)(A). Gomez v. United States, 490 U.S. 858, 873-74 (1989); see
also Fed. R. Civ. P. 72(a).

On review of a decision of the magistrate judge on a

nondispositive matter, the district court may set aside any part of the magistrate judge's
order that it finds is clearly erroneous or contrary to law. 28 U.S.C. § 636 (b)(1)(A); Fed.
R. Civ. P. 72(a); see Ferguson v. United States, 484 F.3d 1068, 1076 (8th Cir. 2007).
(“A district court may reconsider a magistrate judge's ruling on nondispositive pretrial

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matters where it has been shown that the ruling is clearly erroneous or contrary to
law.”).
A decision is “‘clearly erroneous’ when, although there is evidence to support it,
the reviewing court on the entire evidence is left with the definite and firm conviction that
a mistake has been committed.” Chakales v. Commissioner of Internal Revenue, 79
F.3d 726, 728 (8th Cir. 1996); see Ferguson v. United States, 484 F.3d 1068, 1076 (8th
Cir. 2007). A decision is "contrary to the law" when it "fails to apply or misapplies
relevant statutes, case law or rules of procedure." Knutson v. Blue Cross & Blue Shield
of Minn., 254 F.R.D. 553, 556 (D. Minn. 2008) (quoting Transamerica Life Ins. Co. v.
Lincoln Nat’l Life Ins. Co., 592 F. Supp. 2d 1087, 1093 (N.D. Iowa 2008)). A magistrate
judge is afforded broad discretion in the resolution of nondispositive discovery disputes.
Bialas v. Greyhound Lines, Inc., 59 F.3d 759, 764 (8th Cir. 1995).
III.

DISCUSSION
The defendants have shown that they undertook substantial efforts to collect and

produce detailed information on the putative representative plaintiffs’ 11,491 equity
orders during the three year putative class period. This included 41 different categories
of data, encompassing more than 470,000 pieces of information, as well as multiple
alternative variations of requested data.

They contend the question of whether

economic loss can be assessed on a common basis for the entire class can be resolved
by consideration of the representative plaintiffs’ equity order data.
The court finds the lead plaintiff has not refuted that contention. He relies on the
affidavit of an expert for the proposition that in order to make a best-execution analysis,
“no sample could precisely demonstrate economic loss on a class-wide basis, which
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would require the entire dataset of orders.” Filing No. 151-3, Bodek Aff. at 2. The
expert conceded, however, that he could make approximate assessments of execution
quality for orders placed by all TD Ameritrade clients if limited to the transaction data of
just a few sufficiently active individual traders, but that the assessments would be
susceptible to criticism that the orders were not representative. Id. at 2. The court finds
the lead plaintiff has not shown that the voluminous records it seeks are necessary at
the class certification stage. Nor has he demonstrated that he will be unable to make a
showing of economic loss from a representative sample.
The court agrees with the magistrate judge’s findings. The court finds the order
of the magistrate judge is not clearly erroneous or contrary to law. Accordingly, the lead
plaintiff’s objection to the order of the magistrate judge will be overruled.
IT IS ORDERED:
1.

The lead plaintiff's objection (Filing No. 164) to the order of the magistrate

judge (Filing No. 163) is overruled.
2.

The order of the magistrate judge (Filing No. 163) is affirmed in all

respects.
3.

The defendants’ motion to consider the affidavit of Ovidio Montemayor,

(Filing No. 174) is granted.
4.

The stay of entry of an amended progression order (Filing No. 168) is

5.

Within ten days of the date of this order, the parties shall confer and

lifted.

submit to the assigned magistrate judge a proposed amended progression order to

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resolve the class certification dispute and shall contact the magistrate judge’s chambers
to schedule a planning conference.
Dated this 7th day of April, 2017.
BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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