In re Barrick Gold Securities Litigation
Filing
152
OPINION AND ORDER re: 107 MOTION to Certify Class , Appoint Class Representatives, And Appoint Class Counsel filed by Institutional Investor Group: For the following reasons, plaintiffs' motion for class certification, app roval of Class Representatives, and approval of Class Counsel is GRANTED. The following Class is certified pursuant to Rule 23(a) and (b)(3): All persons and entities who purchased Barrick publicly traded common stock listed on the New York Stock Exc hange from May 7, 2009 through and including November 1, 2013, excluding (a) defendants; (b) members of the immediate families of the Individual Defendants; (c) all subsidiaries and affiliates of defendants, including Barrick's employee retireme nt and benefit plans; (d) any person who was a Barrick Director or Officer during the Class Period, as well as their liability insurance carriers, assigns, or subsidiaries thereof; (e) any entity in which any defendant has a controlling interest; an d (e) the legal representatives, heirs, successors, or assigns of any excluded party. Lead plaintiffs Union and LRI are approved as Class Representatives, Motley Rice LLC is appointed as Class Counsel, and Labaton Sucharow LLP is appointed as Liaison Counsel. The Clerk of the Court is directed to close this motion (Dkt. No. 107). (Signed by Judge Shira A. Scheindlin on 3/23/2016) (tn)
Civil Procedure 12(b)(6) (the “April 1 Opinion”).2 Although that Opinion denied
defendants’ motion to dismiss all of plaintiffs’ Section 10(b) claims, it dismissed
one category of defendants’ alleged misstatements.3
The alleged misstatements remaining in the case relate to Barrick’s
now-halted development of Pascua-Lama, a large gold mine spanning the border
between Chile and Argentina (the “Project”).4 These misstatements fall into three
categories: (1) statements regarding compliance with environmental regulations;
(2) statements regarding internal controls and accounting for capital costs; and (3)
statements concerning accounting for the Project.5 Plaintiffs also allege eight dates
on which, following disclosures, Barrick’s share price fell.6
Plaintiffs now move for class certification under Rule 23(a) and (b)(3)
of the Federal Rules of Civil Procedure. The putative class consists of all persons
2
See In re Barrick Gold, No. 13 Civ. 3851, 2015 WL 1514597
(S.D.N.Y. Apr. 1, 2015).
3
See id. For purposes of this Opinion and Order, familiarity with the
April 1 Opinion — including the general background and facts alleged in the
Consolidated Amended Class Action Complaint (the “Complaint”) — is assumed.
4
See id.; Compl. ¶ 245.
5
See In re Barrick Gold, 2015 WL 1514597.
6
See Complaint (“Compl.”) ¶¶ 209-239. Several of the identified
disclosures relate, at least in part, to statements regarding cost and schedule
estimates that are no longer he basis of any claims in this case. See In re Barrick
Gold, 2015 WL 1514597, at *4, *10.
2
and entities who purchased Barrick publicly traded common stock listed on the
New York Stock Exchange (“NYSE”) from May 7, 2009 through and including
November 1, 2013 (the “Proposed Class Period”) and were allegedly damaged
thereby (the “Proposed Class”). Plaintiffs also seek approval of themselves as
Class Representatives, appointment of Motley Rice LLC as Class Counsel, and
appointment of Labaton Sucharow LLP as Liaison Counsel. For the following
reasons, plaintiffs’ motion is GRANTED.
II.
LEGAL STANDARD
District courts have broad discretion in deciding whether to certify a
proposed class under Rule 23.7 Nevertheless, “Rule 23 does not set forth a mere
pleading standard. A party seeking class certification must affirmatively
demonstrate [its] compliance with the Rule — that is, [it] must be prepared to
prove that there are in fact sufficiently numerous parties, common questions of law
or fact, etc.”8 Thus, a court may certify a class only after determining that
“whatever underlying facts are relevant to a particular Rule 23 requirement have
7
See Parker v. Time Warner Entm’t Co. L.P., 331 F.3d 13, 28 (2d Cir.
2003).
8
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011)
(emphasis in original).
3
been established.”9 This rigorous analysis requires examining the facts of the
dispute, not merely the pleadings, and will frequently “entail some overlap with the
merits of the plaintiff’s underlying claim.”10 However, “[a] motion for class
certification should not . . . become a mini-trial on the merits.’”11 Rather, at the
class certification stage, “a district judge should not assess any aspect of the merits
unrelated to a Rule 23 requirement.”12
The court’s “determination as to a Rule 23 requirement is made only
for purposes of class certification and is not binding on the trier of facts, even if
that trier is the class certification judge.”13 Moreover, “‘[e]ven after a certification
order is entered, the judge remains free to modify it in light of subsequent
9
In re IPO Secs. Litig., 471 F.3d 24, 41 (2d Cir. 2006).
10
Wal-Mart, 131 S. Ct. at 2551. “Nor is there anything unusual about
that consequence: The necessity of touching aspects of the merits in order to
resolve preliminary matters, e.g., jurisdiction and venue, is a familiar feature of
litigation.” Id. at 2552.
11
Flores v. Anjost Corp., 284 F.R.D. 112, 122 (S.D.N.Y. 2012).
12
Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d 234, 251 (2d
Cir. 2011) (quotation marks and citation omitted). Courts must ensure “that a class
certification motion does not become a pretext for a partial trial of the merits.” In
re IPO, 471 F.3d at 41.
13
In re IPO, 471 F.3d at 41.
4
developments in the litigation.’”14
A.
Federal Rule of Civil Procedure 23(a)
To be certified, a putative class must first meet all four prerequisites
set forth in Rule 23(a), generally referred to as numerosity, commonality,
typicality, and adequacy.15 The Second Circuit also recognizes an implied
requirement of ascertainability under Rule 23(a).16 Plaintiffs seeking class
certification bear the burden of demonstrating, by a preponderance of the evidence,
that the proposed class meets each of Rule 23(a)’s requirements.17 When assessing
whether plaintiffs have met this burden, courts must take into account “all of the
14
Easterling v. Connecticut Dep’t of Corr., 278 F.R.D. 41, 45 (D. Conn.
2011) (quoting General Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 (1982)).
15
See Sykes v. Mel. S. Harris & Assocs. LLC, 780 F.3d 70, 80 (2d Cir.
2015). In full, Rule 23(a) reads:
Prerequisites. One or more members of a class may sue or be sued
as representative parties on behalf of all members only if: (1) the
class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class; (3) the
claims or defenses of the representative parties are typical of the
claims or defenses of the class; and (4) the representative parties
will fairly and adequately protect the interests of the class.
16
See Brecher v. Republic of Argentina, 806 F.3d 22, 24 (2d Cir. 2015).
17
See New Jersey Carpenters Health Fund v. Rali Series 2006-Q01
Trust, 477 Fed. App’x 809, 812 (2d Cir. 2012).
5
relevant evidence admitted at the class certification stage.”18
1.
Numerosity
Rule 23(a)(1) requires that a class be “so numerous that joinder of all
members is impracticable.” In the Second Circuit, sufficient numerosity can be
presumed at a level of forty members or more.19 “The numerosity requirement in
Rule 23(a)(1) does not mandate that joinder of all parties be impossible — only
that the difficulty or inconvenience of joining all members of the class make use of
the class action appropriate.”20 Courts do not require evidence of exact class size
to satisfy the numerosity requirement.21 “In securities fraud class actions relating
to publicly owned and nationally listed corporations, the numerosity requirement
may be satisfied by a showing that a large number of shares were outstanding and
traded during the relevant period.”22
18
In re IPO, 471 F.3d at 42.
19
See Pennsylvania Pub. Sch. Emps. Ret. Sys. v. Morgan Stanley & Co.,
Inc., 772 F.3d 111, 116 (2d Cir. 2014) (citing Consolidated Rail Corp. v. Town of
Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995)).
20
Central States Se. & Sw. Areas Health & Welfare Fund v. MerckMedco Managed Care, LLC, 504 F.3d 229, 244-45 (2d Cir. 2007).
21
See Kaplan v. S.A.C. Capital Advisors, No. 13 Civ. 2459, 2015 WL
8593478, at *3 (S.D.N.Y. Dec. 2, 2015) (citing Robidoux v. Celani, 987 F.2d 931,
935 (2d Cir. 1993)).
22
McIntire v. China MediaExpress Holdings, Inc., 38 F. Supp. 3d 415,
423 (S.D.N.Y. 2014) (quotation marks and citation omitted).
6
2.
Commonality
Rule 23(a)(2) requires that there be “questions of law or fact common
to the class.” To prove commonality, plaintiffs must “demonstrate that the class
members ‘have suffered the same injury’” and that the claims asserted “depend
upon a common contention . . . 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.”23
3.
Typicality
Under Rule 23(a)(3), “[t]ypicality ‘requires that the claims of the class
representatives be typical of those of the class, and is satisfied when each class
member’s claim arises from the same course of events[] and each class member
makes similar legal arguments to prove the defendant’s liability.’”24 The purpose
of typicality is to ensure that class representatives “have the incentive to prove all
the elements of the cause of action which would be presented by the individual
members of the class were they initiating individualized actions.”25
23
Wal-Mart, 131 S. Ct. at 2551 (quoting General Tel. Co., 457 U.S. at
157).
24
Central States, 504 F.3d at 245 (quoting Robinson v. Metro-N.
Commuter R.R. Co., 267 F.3d 147, 155 (2d Cir. 2001)).
25
Vivaldo v. United Talmudical Acad. of Kiryas Joel, Inc., No. 14 Civ.
2636, 2015 WL 4922961, at *5 (S.D.N.Y. June 18, 2015) (quoting In re NASDAQ
7
4.
Adequacy
Adequacy under Rule 23(a)(4) “is twofold: the proposed class
representative must have an interest in vigorously pursuing the claims of the class,
and must have no interests antagonistic to the interests of other class members.”26
Thus, the adequacy requirement “entails inquiry as to whether: 1) plaintiffs’
interests are antagonistic to the interest of other members of the class and 2)
plaintiffs’ attorneys are qualified, experienced and able to conduct the litigation.”27
5.
Implied Requirement of Ascertainability
In addition to the express requirements of Rule 23(a), the Second
Circuit recognizes an “implied requirement of ascertainability.”28 “[T]he
touchstone of ascertainability is whether the class is ‘sufficiently definite so that it
is administratively feasible for the court to determine whether a particular
individual is a member.’”29 Accordingly, “[a] class is ascertainable when defined
Market-Makers Antitrust Litig., 169 F.R.D. 493, 510 (S.D.N.Y. 1996)).
26
Denney v. Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006).
27
In re Flag Telecom Holdings, Ltd. Secs. Litig., 574 F.3d 29, 35 (2d
Cir. 2009) (quoting Baffa v. Donaldson, Lufkin & Jenrette Secs. Corp., 222 F.3d
52, 60 (2d Cir. 2000)).
28
Brecher, 806 F.3d at 24 (citations omitted).
29
Id. (quoting 7A Charles Alan Wright, Arthur R. Miller, & Mary Kay
Kane, Federal Practice and Procedure § 1760 (3d ed. 1998)).
8
by objective criteria . . . and when identifying its members would not require a
mini-hearing on the merits of each case.”30
B.
Federal Rule of Civil Procedure 23(b)(3)
If the requirements of Rule 23(a) are met, the court “must next
determine whether the class can be maintained under any one of the three
subdivisions of Rule 23(b).”31 Under Rule 23(b)(3), certification is appropriate
where “questions of law or fact common to the members of the class predominate
over any questions affecting only individual members,” and class litigation “is
superior to other available methods for the fair and efficient adjudication of 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.32
The predominance inquiry focuses on whether “a proposed class is
30
Id. at 24-25 (quotation marks and citation omitted).
31
McLaughlin v. American Tobacco Co., 522 F.3d 215, 222 (2d Cir.
2008).
32
Fed. R. Civ. P. 23(b)(3)(A)-(D).
9
‘sufficiently cohesive to warrant adjudication by representation.’”33 It is akin to,
but ultimately “a more demanding criterion than,” the “commonality inquiry under
Rule 23(a).”34 Class-wide issues predominate “if resolution of some of the legal or
factual questions that qualify each class member’s case as a genuine controversy
can be achieved through generalized proof, and if these particular issues are more
substantial than the issues subject only to individualized proof.”35 The Second
Circuit has emphasized that “Rule 23(b)(3) requires that common questions
predominate, not that the action include only common questions.”36
In Comcast Corp. v. Behrend,37 the Supreme Court held, in the context
of an antitrust claim, that class certification is appropriate only when class-wide
damages may be measured based on the theory of injury asserted by the plaintiffs.38
The Second Circuit has rejected a broad reading of Comcast, explaining:
33
Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S. Ct. 1184,
1196 (2013) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997)).
34
In re Nassau County Strip Search Cases, 461 F.3d 219, 225 (2d Cir.
2006) (citing Amchem, 521 U.S. at 623-24).
35
Catholic Healthcare W. v. U.S. Foodservice Inc., 729 F.3d 108, 118
(2d Cir. 2013) (“In re U.S. Foodservice Inc. Pricing Litig.”) (internal citations
omitted).
36
Brown v. Kelly, 609 F.3d 467, 484 (2d Cir. 2010) (emphasis added).
37
133 S. Ct. 1426 (2013).
38
See id. at 1432.
10
Comcast . . . did not hold that a class cannot be certified under
Rule 23(b)(3) simply because damages cannot be measured on a
classwide basis. . . . Comcast’s holding was narrower. Comcast
held that a model for determining classwide damages relied upon
to certify a class actually measure damages that result from the
class’s asserted theory under Rule 23(b)(3) must actually measure
damages that result from the class’s theory of injury; but the Court
did not hold that proponents of class certification must rely upon
a classwide damages model to demonstrate predominance. . . . .
To be sure, Comcast reiterated that damages questions
should be considered at the certification stage when weighing
predominance issues, but this requirement is entirely consistent
with our prior holding that “the fact that damages may have to be
ascertained on an individual basis is . . . a factor that we must
consider in deciding whether issues susceptible to generalized
proof ‘outweigh’ individual issues.” McLaughlin [v. American
Tobacco Co.], 522 F.3d [215,] 231 [2d Cir. 2008]. The Supreme
Court did not foreclose the possibility of class certification under
Rule 23(b)(3) in cases involving individualized damages
calculations.39
39
Roach v. T.L. Cannon Corp., 778 F.3d 401, 407-08 (2d Cir. 2015)
(internal citations omitted) (citing In re Deepwater Horizon, 739 F.3d 790, 817
(5th Cir. 2014) (construing the “principal holding of Comcast [as being] that a
‘model purporting to serve as evidence of damages . . . must measure only those
damages attributable to th[e] theory’ of liability on which the class action is
premised” (ellipsis and second alteration in original) (quoting Comcast, 133 S. Ct.
at 1433)); Butler v. Sears, Roebuck & Co., 727 F.3d 796, 799 (7th Cir. 2013)
(construing Comcast as holding only “that a damages suit cannot be certified to
proceed as a class action unless the damages sought are the result of the class-wide
injury that the suit alleges” (emphasis in original)); Leyva v. Medline Indus. Inc.,
716 F.3d 510, 514 (9th Cir. 2013) (interpreting Comcast to hold that class action
plaintiffs “must be able to show that their damages stemmed from the defendant’s
actions that created the legal liability”); In re U.S. Foodservice Inc. Pricing Litig.,
729 F.3d at 123 n.8 (stating that “[p]laintiffs’ proposed measure for damages is
thus directly linked with their underlying theory of classwide liability . . . and is
therefore in accord with the Supreme Court’s recent decision in Comcast”).
11
Thus, the Second Circuit observed that even after Comcast, “[p]redominance is
satisfied if resolution of some of the legal or factual questions that qualify each
class member’s case as a genuine controversy can be achieved through generalized
proof, and if these particular issues are more substantial than the issues subject
only to individualized proof.”40
III.
APPLICABLE LAW
A.
Rule 23(b)(3) Predominance in Section 10(b) Cases
“Considering whether ‘questions of law or fact common to class
members predominate’ begins, of course, with the elements of the underlying
cause of action.”41 To sustain a claim for securities fraud under Section 10(b), “a
plaintiff must prove (1) a material misrepresentation or omission by the defendant;
(2) scienter; (3) a connection between the misrepresentation or omission and the
purchase or sale of a security; (4) reliance upon the misrepresentation or omission;
40
Roach, 778 F.3d at 405 (internal quotation marks omitted). Accord id.
at 408 (“Our reading of Comcast is consistent with the Supreme Court’s statement
in Comcast that its decision turned upon ‘the straightforward application of class
certification principles.’” (quoting Comcast, 133 S. Ct. at 1433)). Cf. In re
Facebook, Inc., IPO Secs. & Derivative Litig., No. 12 Civ. 2389, 2015 WL
9582429, at *13 (S.D.N.Y. Dec. 11, 2015) (noting that “courts generally focus on
the liability issue in deciding whether the predominance requirement is met, and if
the liability issue is common to the class, common questions are held to
predominate over individual questions”) (quotation marks and citations omitted)).
41
Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179, 2184
(2011) (“Halliburton I”).
12
(5) economic loss; and (6) loss causation.”42
1.
Reliance and the Basic Presumption
“Whether common questions of law or fact predominate in a securities
fraud action often turns on the element of reliance.”43 This element — sometimes
referred to as “transaction causation”44 — “addresses . . . whether an investor relied
on a misrepresentation, presumptively or otherwise, when buying or selling a
stock”45 and thus “ensures that there is a proper ‘connection between a defendant’s
representation and a plaintiff’s injury.’”46, 47
The Supreme Court has recognized that if proof of individual
shareholder reliance were required, predominance would be impossible to satisfy
42
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S.
148, 157 (2008).
43
Halliburton I, 131 S. Ct. at 2182.
44
Id.
45
Id.
46
Id. at 2185 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 241 (1988)).
47
As I have previously observed, “reliance is typically the only ground
on which to challenge predominance because section 10(b) claims will almost
always arise from a common nucleus of facts surrounding the fraudulent
misrepresentation of material facts and the causal relationship between the
correction of that misrepresentation and the price of the security.” Strougo v.
Barclays PLC, No. 14 Civ. 5797, 2016 WL 413108, at *2 n.17 (S.D.N.Y. Feb. 2,
2016).
13
for putative securities fraud classes.48 Thus, reliance is typically established by
invoking one of two presumptions that obviate the need to prove reliance on an
individual basis: the rebuttable “Basic presumption” of reliance in fraudulent
misrepresentation cases,49 and the “Affiliated Ute presumption” of reliance in
fraudulent omission cases.50
The Basic presumption rests “on what is known as the
‘fraud-on-the-market’ theory, which holds that ‘the market price of shares traded
on well-developed markets reflects all publicly available information, and, hence,
any material misrepresentations.’”51 Accordingly, plaintiffs can meet their burden
of proving predominance by establishing their entitlement to the Basic
presumption.52
48
See Halliburton I, 131 S. Ct. at 2185 (“Requiring proof of
individualized reliance from each member of the proposed plaintiff class
effectively would prevent such plaintiffs from proceeding with a class action, since
individual issues would overwhelm the common ones.” (quotation marks and
alterations omitted)).
49
See Basic, 485 U.S. at 241.
50
See Affiliated Ute Citizens of the State of Utah v. United States, 406
U.S. 128, 154 (1972)
51
Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2408
(2014) (“Halliburton II”) (quoting Basic, 485 U.S. at 246).
52
See id. at 2412. The Supreme Court has clarified that materiality need
not be proven at the class certification stage. See Amgen, 133 S. Ct. at 1196
(explaining that “there is no risk whatever that a failure of proof on the common
14
[A] plaintiff must make the following showings to demonstrate
that the [Basic] presumption of reliance applies in a given case:
(1) that the alleged misrepresentations were publicly known, (2)
that they were material, (3) that the stock traded in an efficient
market, and (4) that the plaintiff traded the stock between the time
the misrepresentations were made and when the truth was
revealed.53
As explained in Halliburton II, the first three showings (publicity,
materiality, and market efficiency) are directed at, and can serve as proxies for,
“price impact” — i.e., that “the alleged misrepresentation affected the market price
in the first place.”54, 55 “Price impact is . . . an essential precondition for any Rule
question of materiality will result in individual questions predominating” because
“the failure of proof on the element of materiality would end the case for one and
for all; no claim would remain in which individual reliance issues could potentially
predominate”).
53
Halliburton II, 134 S. Ct. at 2408 (citing Basic, 485 U.S. at 248 n.27)
(further citation omitted).
54
Id. at 2414 (quotation marks and citation omitted) (explaining that
plaintiffs need not establish price impact directly to invoke the Basic presumption,
but can instead do so through indirect proxies).
55
Cammer v. Bloom articulated five factors frequently used to evaluate
market efficiency: (1) the average weekly trading volume; (2) the number of
analysts who follow the stock; (3) the existence of market makers and arbitrageurs;
(4) the ability of the company to file Securities Exchange Commission Form S-3;
and (5) evidence of share price response to unexpected news. 711 F. Supp. 1264,
1286-287 (D.N.J. 1989). Krogman v. Sterritt identified other factors to be
considered: the level of market capitalization, the size of the bid-ask spread, and
the percentage of total shares available to the public. 202 F.R.D. 467, 478 (N.D.
Tex. 2001).
15
10b–5 class action.”56 “In the absence of price impact, Basic’s fraud-on-the-market
theory and presumption of reliance collapse”57 — “and without the presumption of
reliance, a Rule 10b–5 suit cannot proceed as a class action.”58 Accordingly,
Halliburton II also held that defendants may submit price impact evidence at the
class certification stage to rebut the Basic presumption, observing that “an indirect
proxy should not preclude direct evidence when such evidence is available.”59
2.
Loss Causation
a.
Not Required For Class Certification
In Halliburton I, the Supreme Court clarified that plaintiffs need not,
at the class certification stage, prove the separate Section 10(b) element of loss
causation — i.e., that plaintiffs’ damages were caused by the fraud and not other
market factors.60 In so holding, the Supreme Court explained the difference
between reliance (which must be established at class certification) and loss
causation (which need not be established at class certification) in the following
way:
56
Halliburton II, 134 S. Ct. at 2416.
57
Id. (quotation marks, citations, and alterations omitted).
58
Id.
59
Id. at 2415.
60
See Halliburton I, 131 S. Ct. at 2186.
16
[A]n investor presumptively relies on a defendant's
misrepresentation if that information is reflected in [the] market
price of the stock at the time of the relevant transaction. Loss
causation, by contrast, requires a plaintiff to show that a
misrepresentation that affected the integrity of the market price
also caused a subsequent economic loss.61
b.
Loss Causation Theories Generally
However, “[t]o plead loss causation, plaintiffs must allege ‘that the
subject of the fraudulent statement or omission was the cause of the actual loss
suffered.’”62 Loss causation may be established under two possible theories:
“either (a) ‘the existence of cause-in-fact on the ground that the market reacted
negatively to a corrective disclosure of the fraud;’ or (b) that . . . ‘the loss was
foreseeable and caused by the materialization of the risk concealed by the
fraudulent statement.’”63
“In order to plead corrective disclosure, plaintiffs must plausibly
allege a disclosure of the fraud by which ‘the available public information
61
Id. (quotation marks and citation omitted) (second alteration in
original).
62
Carpenters Pension Trust Fund of St. Louis v. Barclays PLC, 750
F.3d 227, 232 (2d Cir. 2014) (quoting Suez Equity Investors, L.P. v. TorontoDominion Bank 250 F.3d 87, 95 (2d Cir. 2001)).
63
Id. at 232-33 (emphasis omitted) (quoting In re Omnicom Grp., Inc.
Secs. Litig., 597 F.3d 501, 511 (2d Cir. 2010) (further quotation omitted).
17
regarding the company’s financial condition [was] corrected’”64 and “that the
market reacted negatively to the corrective disclosure.”65 “Under the second
theory, the ‘materialization of the risk’ theory, a misstatement or omission is ‘the
proximate cause of an investment loss if the risk that caused the loss was within the
zone of risk concealed by the misrepresentations.’”66
B.
Rule 23(b)(3) Superiority in Section 10(b) Cases
Superiority is generally satisfied in securities class actions because
[m]ost violations of the federal securities laws . . . inflict
economic injury on large numbers of geographically dispersed
persons such that the cost of pursuing individual litigation to seek
recovery is often not feasible. Multiple lawsuits would be costly
and inefficient, and the exclusion of class members who cannot
afford separate representation would neither be “fair” nor an
adjudication of their claims. Moreover, although a large number
of individuals may have been injured, no one person may have
been damaged to a degree which would induce him to institute
litigation solely on his own behalf.67
64
Id. at 233 (quoting Omnicom, 597 F.3d at 511).
65
Id. (citing Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 175 (2d
Cir. 2005)).
66
In re Sanofi Secs. Litig., No. 14 Civ. 9624, 2016 WL 93866, at *15
(S.D.N.Y. Jan. 6, 2016) (quoting Omnicom, 597 F.3d at 513).
67
Public Emps. Ret. Sys. of Miss. v. Merrill Lynch & Co., Inc., 277
F.R.D. 97, 120 (S.D.N.Y. 2011) (quotation marks and citations omitted). Accord
In re Facebook, 2015 WL 9582429, at *15 (“Superiority of managing this
litigation as a class action is readily apparent for both subclasses, as it is in most
securities suits.”).
18
C.
Damages in Section 10(b) Cases
“Traditionally, economic loss in Section 10(b) cases has been
determined by use of the ‘out-of-pocket’ measure for damages.”68 “Under that
measure, ‘a defrauded buyer of securities is entitled to recover only the excess of
what he paid over the value of what he got.’”69 “In other words, damages
‘consist[] of the difference between the price paid and the ‘value’ of the stock
when bought.’”70 “However, out-of-pocket damages are not the only permissible
measure of recovery.”71 “In order to accommodate the wide variety of factual
predicates to § 10(b) claims, courts have utilized their discretion to endorse several
different compensatory damages theories,” including consequential damages.72
IV.
DISCUSSION
68
Acticon AG v. China North East Petroleum Holdings Ltd., 692 F.3d
34, 39 (2d Cir. 2012).
69
Id. (quoting Levine v. Seilon, 439 F.2d 328, 334 (2d Cir. 1971)).
70
Id. (quoting Elkind v. Liggett & Myers, Inc., 635 F.2d 156, 168 (2d
Cir. 1980)).
71
Mazuma Holding Corp. v. Bethke, 21 F. Supp. 3d 221, 235 (E.D.N.Y.
2014) (quotation marks and citation omitted). Accord Francis C. Amendola, et al.,
69A Am. Jur. 2d Secs. Reg. § 1007 (2016) (“Recoverable consequential damages
for violation of federal securities laws may include out-of-pocket expenses that are
the proximate and natural consequence of the defendants’ allegedly fraudulent
acts.”).
72
Mazuma, 21 F. Supp. 3d at 221 (quotation marks and citation omitted)
(surveying Second, Fifth, and Tenth Circuit cases).
19
Although defendants oppose class certification primarily on Rule
23(b)(3) grounds, this Opinion addresses all relevant provisions of the class
certification standard.
A.
Rule 23(a)
There is no dispute that the Proposed Class satisfies Rule 23(a). The
numerosity requirement is readily satisfied as Barrick is a publicly traded company
that, as of December 31, 2013, had over one billion shares of common stock
outstanding and 17,284 holders of record.73
Commonality is also met as “plaintiffs allege that class members have
been injured by similar misrepresentations and omissions” by defendants,74 claims
which call for class-wide answers to common questions such as (1) whether
defendants violated securities laws; (2) whether defendants’ SEC filings and other
public statements contained misstatements or omissions; (3) the materiality of such
misstatements and omissions; and (4) whether Class members sustained damages
and, if so, the proper measure of such damages. Similarly, typicality is established
because all class members’ claims arise from the same course of events and
73
See Excerpts of Barrick Gold Corporation’s Annual Report (2013),
Ex. 1 to Declaration of Plaintiffs’ Counsel James M. Hughes in Support of
Plaintiffs’ Motion for Class Certification (“Hughes Decl.”), at 3.
74
McIntire, 38 F. Supp. 3d at 424.
20
involve similar arguments on liability.
The Proposed Class representatives and counsel also satisfy the
adequacy requirement. Lead plaintiffs are institutional shareholders whose
interests are aligned with those of the Class. Further, Lead Counsel and Liaison
Counsel — who have significant experience in bringing securities fraud suits —
are competent and qualified to prosecute this action.75
Lastly, the Proposed Class is sufficiently ascertainable as membership
is based on objective, definite criteria — namely the dates of shareholders’
acquisition of Barrick common stock.
B.
Rule 23(b)(3)
1.
Summary of Arguments
As the Supreme Court has observed, “[i]n securities class action cases,
the crucial requirement for class certification will usually be the predominance
requirement of Rule 23(b)(3).”76 This case is no exception: predominance is the
focus of defendants’ objection to class certification.77 According to defendants, the
75
I have also considered each of the factors set forth in Federal Rule of
Civil Procedure 23(g) and am satisfied that Lead Counsel and Liaison Counsel are
qualified to represent the Class as required by this provision.
76
Halliburton II, 134 S. Ct. at 2412.
77
Rule 23(b)(3)’s superiority requirement is clearly satisfied in this case
— a finding that defendants do not dispute. Like most securities class actions, the
21
Proposed Class fails to satisfy predominance because plaintiffs have not met their
burden with respect to damages under Comcast and reliance under Basic.
Although the parties largely talk past each other on these issues, it is useful to
begin by summarizing their respective positions.
In their Opening Brief, plaintiffs argue that they are entitled to the
Basic presumption and offer excerpts of reports prepared by expert Chad Coffman,
CFA and Professor Allen Ferrell. These reports evaluate the efficiency of the
market for Barrick common stock, a key factor in the Basic analysis.78 Defendants
do not contest plaintiffs’ evidence regarding the Basic factors (and do not proffer
any expert opinions or other evidence to rebut plaintiffs’ showing on reliance).
Instead, defendants concentrate on whether individual damages issues will
predominate, asserting: “[d]espite the fact that Plaintiffs bear the burden of
demonstrating that issues common to the putative class predominate over
potential recovery for individual shareholders is likely too low to make individual
suits viable. See Public Emps. Ret. Sys. of Miss., 277 F.R.D. at 120.
78
See Excerpts of the Expert Report of Chad Coffman, CFA (Sept. 15,
2015) (evaluating the efficiency of the market for Barrick common stock under,
inter alia, the factors articulated in Cammer, 711 F. Supp. 1264, and Krogman, 202
F.R.D. 467 — including an event study of share price reactions to Barrick-related
news), Ex. 6 to Hughes Decl.; Excerpts of the Report of Professor Allen Ferrell
(Nov. 13, 2015) (“I compared the results of my replication [of Coffman’s event
study] to Mr. Coffman’s results and found that they are substantially similar.”), Ex.
7 to Hughes Decl., at 6 n.4.
22
individualized damages and reliance issues, . . . Plaintiffs have made the strategic
decision to decline to offer any damages theory at all.”79
Pointing out that Coffman did not address the question of damages in
either his report or deposition, defendants speculate that plaintiffs have avoided
articulating a damages theory so as to preserve their ability to seek consequential
damages (a remedy that, according to defendants, necessitates individualized
calculations and destroys predominance). To explain this hypothesis, defendants
characterize plaintiffs’ Section 10(b) claims as relying on the materialization of the
risk theory, and observe that Coffman has testified — in other litigations — that
consequential damages are the appropriate measure of damages for materialization
of the risk claims.
As for their sole argument against the Basic presumption, defendants
again proceed on the assumption that plaintiffs seek consequential damages.
Defendants reason that the Basic presumption cannot, as a matter of logic, apply in
suits for consequential damages because “[u]nder th[e consequential damages]
theory, an investor claims that it was damaged not because it relied on the integrity
of the market price of the stock, but because it would not have purchased the stock
79
Defendants’ Memorandum of Law in Opposition to Plaintiffs’ Motion
for Class Certification, Appointment of Class Representatives, and Appointment of
Class Counsel (“Opp. Mem.”) at 1.
23
had it known the true risk.”80
In their Reply Brief, plaintiffs refute defendants’ assumptions
regarding damages and loss causation, explaining: “[n]ot only have Plaintiffs told
Defendants that they are seeking out-of-pocket damages here (as opposed to
consequential damages), but . . . Plaintiffs’ loss causation allegations are not
limited to materialization of the risk” and include corrective disclosure claims.81
Plaintiffs also argue that defendants have taken Coffman’s prior testimony out of
context,82 and reiterate that they have satisfied their burden on both reliance and
damages.
On Sur-Reply, defendants respond that “[e]ven if the Court were to
credit Plaintiffs’ belated assertion that they seek out-of-pocket damages and not
80
Id. at 18.
81
Plaintiffs’ Reply Memorandum of Law in Further Support of Motion
for Class Certification, Appointment of Class Representatives, and Appointment of
Class Counsel at 2. Accord id. at 6 n.3 (“While this Court mostly limited its
[motion to dismiss] discussion of loss causation to a theory of materialization of
the risk, it never rejected Plaintiffs’ allegations that its losses and damages
followed from corrective disclosures. In fact, the Court specifically found loss
causation for the decline in Barrick’s stock following the disclosure on July 26,
2012.” (citing In re Barrick Gold, 2015 WL 1514597, at *12-*15)).
82
Plaintiffs explain, inter alia, that “Coffman was simply testifying that
only allowing recovery of out-of-pocket damages . . . was inappropriate in that
[other] case, as it understated the amount of plaintiff’s actual damages.” Id. at 7
(emphasis in original).
24
consequential damages, it should still deny Plaintiffs’ motion for class certification
because Plaintiffs have made no showing that out-of-pocket damages can be
calculated consistent with a ‘materialization of the risk’ theory of liability.”83
Again, defendants cite Coffman’s testimony in other cases and contend that
“Coffman has repeatedly stated that a stock price decline following the
materialization of a concealed risk does not measure . . . out-of-pocket damages.”84
Defendants do not, however, address plaintiffs’ argument that their loss causation
allegations are not limited to materialization of the risk.
2.
Individualized Damages Issues Do Not Predominate
Defendants’ reasoning depends on two incorrect assumptions about
plaintiffs’ theories of damages and loss causation: (1) that plaintiffs seek
consequential damages and (2) that plaintiffs’ claims are limited to materialization
of the risk. As explained, plaintiffs disavow seeking consequential damages —
and I reject defendants’ invitation to disregard plaintiffs’ stipulation to this effect.
I also note that because out-of-pocket damages are the traditional form of Section
10(b) damages, plaintiffs may not have anticipated the need to explain that they
83
Defendants’ Sur-Reply Memorandum of Law in Opposition to
Plaintiffs’ Motion for Class Certification, Appointment of Class Representatives,
and Appointment of Class Counsel (“Sur-Reply Mem.”) at 2.
84
Id.
25
were not seeking consequential damages until challenged about this issue on class
certification.85 I also find nothing improper about plaintiffs’ decision not to proffer
expert damages analysis at this stage, given that plaintiffs are not required to
establish loss causation86 — let alone proffer a damages model87 — on class
certification.88
Moreover, as required by Comcast, plaintiffs’ actual theory of
damages (out-of-pocket damages) is entirely consistent with their theory of Section
10(b) liability and would be measurable on a class-wide basis.89 This is evidenced
by the fact that securities class actions routinely seek out-of-pocket damages for
fraudulent misrepresentations.90 This oft-used remedy, which is calculated based
on “the difference between the price paid and the [true] value of the stock when
85
See Acticon, 692 F.3d at 38 (“Traditionally, economic loss in Section
10(b) cases has been determined by use of the “out-of-pocket” measure for
damages.”).
86
See Halliburton I, 131 S. Ct. at 2186.
87
See Roach, 778 F.3d at 407. See also In re Scotts EZ Seed Litig., 304
F.R.D. 397, 414 (S.D.N.Y. 2015) (explaining that “nothing in Comcast requires an
expert to perform his analyses at the class certification stage”).
88
Defendants also concede that plaintiffs are not required to proffer a
damages model on class certification. See Sur-Reply Mem. at 1.
89
See Comcast, 133 S. Ct. 1426.
90
See Acticon, 692 F.3d at 38.
26
bought,”91 does not create individualized damages issues that defeat
predominance.92 Rather, the calculation of out-of-pocket damages calls for the
application of a damages model across the entire class.93 Defendants themselves
apparently concede that out-of-pocket damages would not raise predominance
concerns, explaining that “the Court’s statement in Carpenters . . . that damages
issues ‘have rarely been an obstacle to establishing predominance’ simply reflects
the fact that securities plaintiffs almost always seek traditional out-of-pocket
damages.”94
Even crediting defendants’ suggestion that out-of-pocket damages are
inappropriate for materialization of the risk claims, plaintiffs have never been
precluded from proceeding under the corrective disclosure theory for loss
91
Id. (quotation marks and citation omitted).
92
This is particularly true given that the Second Circuit has emphasized
that Comcast “did not foreclose the possibility of class certification under Rule
23(b)(3) in cases involving individualized damages calculations.” Roach, 778 F.3d
at 408.
93
See Wallace v. IntraLinks, 302 F.R.D. 310, 318 (S.D.N.Y. 2014)
(“While calculating the proper damages based on the date of purchase and sale may
be complicated, it does not demand excessive individual inquiry.”).
94
Opp. Mem. at 3 (quoting Carpenters Pension Fund of St. Louis v.
Barclays PLC, 310 F.R.D. 69, 74 (S.D.N.Y. 2015)).
27
causation.95 In holding that plaintiffs had plausibly alleged Section 10(b) claims,
the April 1 Opinion in no way limited plaintiffs’ claims to materialization of the
risk. Rather, the April 1 Opinion explicitly acknowledged that the Complaint had
alleged eight corrective disclosure dates,96 explicitly relying on at least one of these
dates in denying defendants’ motion to dismiss.97 As such, Comcast — which
rejected a damages model that “failed to measure damages from the particular
antitrust injury on which petitioners’ liability . . . [was] premised” — presents no
bar to predominance in this case.98
In sum, plaintiffs, whose theory of liability matches their theory of
damages, have met their burden under Rule 23(b)(3) and Comcast. The purpose of
the predominance requirement is, and always has been, to ensure that “resolution
of some of the legal or factual questions that qualify each class member’s case as a
genuine controversy can be achieved through genuine proof, and [that] these
particular issues are more substantial than the issues subject only to individualized
95
However, I decline to extrapolate that, based on Coffman’s testimony
in unrelated cases, out-of-pocket damages are never appropriate for materialization
of the risk claims.
96
See In re Barrick Gold, 2015 WL 1514597, at *4.
97
See id. at *14.
98
133 S. Ct. at 1433.
28
proof.”99 Although plaintiffs may face substantial hurdles in actually proving loss
causation and out-of-pocket damages, they are not required to make these
showings until the merits stage. The Court remains free, of course, to modify its
class certification rulings in light of subsequent developments in the litigation.100
3.
Plaintiffs Are Entitled to the Basic Presumption of Reliance
Defendants’ sole argument against the Basic presumption of reliance
is premised on their assumption that plaintiffs seek consequential damages — an
assumption that is rejected for the reasons I have already discussed. Moreover,
plaintiffs have met their evidentiary burden for invoking this presumption. In
particular, plaintiffs offer a report and testimony from an expert whose opinion is
based on an event study to analyze market efficiency. Plaintiffs also offer a report
from another scholar who has replicated that study and confirmed its results. I
have reviewed the materials carefully, and find that plaintiffs have provided ample
evidence to support their entitlement to the Basic presumption. Further, although
Halliburton II permits defendants to rebut the Basic presumption by, inter alia,
proving that the “asserted misrepresentation (or its correction) did not affect the
99
Roach, 778 F.3d at 405.
100
See Easterling, 278 F.R.D. at 45.
29
market price” of the security,101 defendants chose not to proffer any evidence on
this point — and in fact, do not challenge price impact at all. For these reasons, I
find that plaintiffs are entitled to the Basic presumption for the fraudulent
misrepresentations alleged, and have thus satisfied all requirements of Rule
23(b)(3).
C.
Class Period
Finally, defendants contend that, based on the rulings made in the
April 1 Opinion, the Proposed Class Period should be narrowed to begin no earlier
than October 28, 2010 and end no later than June 28, 2013. Specifically,
defendants argue that the earliest relevant misstatement occurred on October 28,
2010, and that the latest relevant loss causation event was a June 28, 2013
announcement made by Barrick.
It is inappropriate to narrow the Proposed Class Period for two
reasons. First, although the April 1 Opinion dismissed certain categories of
statements (namely cost and schedule estimates), the Complaint’s allegations
regarding the surviving claims nevertheless span the Proposed Class Period (May
7, 2009 through and including November 1, 2013).102 Second, defendants’
101
134 S. Ct. at 2414.
102
With respect to the proposed start date, the Complaint alleges that on
May 7, 2009, several Individual Defendants misrepresented the status of the
30
objections regarding the Proposed Class Period relate to the Section 10(b) elements
of loss causation and materiality — elements which need not be considered at the
class certification phase.103 Accordingly, “[w]hether claims falling outside some
narrower window within the class period are, in fact, groundless on the merits is a
question of fact for the jury” and cannot be decided at this stage.104
V.
CONCLUSION
For the following reasons, plaintiffs’ motion for class certification,
approval of Class Representatives, and approval of Class Counsel is GRANTED.
The following Class is certified pursuant to Rule 23(a) and (b)(3):
All persons and entities who purchased Barrick publicly traded
common stock listed on the New York Stock Exchange from May
7, 2009 through and including November 1, 2013, excluding (a)
defendants; (b) members of the immediate families of the
Individual Defendants; (c) all subsidiaries and affiliates of
defendants, including Barrick’s employee retirement and benefit
plans; (d) any person who was a Barrick Director or Officer
during the Class Period, as well as their liability insurance
Project’s environmental compliance. See Compl. ¶¶ 59, 245. With respect to the
proposed end date, the Complaint alleges a stock price decline on November 1,
2013 following the suspension of the Project. See Compl. ¶ 515(b). Whether this
alleged stock price decline is sufficiently connected to the fraud at issue is a
question of loss causation, a merits issue that plaintiffs’ expert has not yet
addressed.
103
See Halliburton I, 131 S. Ct. at 2186; Amgen, 133 S. Ct. at 1196.
104
In re Gaming Lottery Secs. Litig., 58 F. Supp. 2d 62, 77 (S.D.N.Y.
1999).
31
- Appearances For Plaintiffs:
Christopher F. Moriarty, Esq.
David P. Abel, Esq.
James M. Hughes, Esq.
Motley Rice LLC
28 Bridgeside Boulevard
Mt. Pleasant, SC 29464
(843) 216-9000
Serena P. Hallowell, Esq.
Labaton Sucharow LLC
140 Broadway
New York, NY 10005
(212) 907-0884
For Defendants:
Ada Fernandez Johnson, Esq.
Bruce E. Yannett, Esq.
Elliott Greenfield, Esq.
Debevoise and Plimpton LLP
919 Third Avenue, 31st Floor
New York, NY 10022
(212) 909-6000
33
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