Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp., et al.
Memorandum of Opinion and Order For the reasons set forth herein, OPERS' Request For Sua Sponte Summary Judgment (ECF No. 485 ) is granted. Final judgment under 28 U.S.C. § 1291, resolving both liability and damages, will be entered in favor of Freddie Mac and four of its senior officers and against OPERS on the Third Amended Complaint (ECF No. 166 ). Judge Benita Y. Pearson on 9/17/2020. Related document(s) 166 , 372 , 478 , 485 , 490 , 496 . (JLG)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
OHIO PUBLIC EMPLOYEES
RETIREMENT SYSTEM, etc.,
FEDERAL HOME LOAN MORTGAGE
CORPORATION, etc., et al.,
CASE NO. 4:08CV0160
JUDGE BENITA Y. PEARSON
MEMORANDUM OF OPINION
[Resolving ECF No. 485]
Pending is Plaintiff Ohio Public Employees Retirement System’s (“OPERS”) Request
For Sua Sponte Summary Judgment (ECF No. 485). The Court has been advised, having
reviewed the record, the parties’ briefs,1 and the applicable law. For the reasons set forth below,
the request is granted.
The Court previously denied Lead Plaintiff OPERS’ Renewed Motion for Class
Certification (ECF No. 372) in this private securities fraud case brought against Freddie Mac and
four of its senior officers. Memorandum of Opinion and Order (ECF No. 478). The Court,
Defendants Richard F. Syron (ECF No. 494), Patricia L. Cook (ECF No. 493),
and Eugene M. McQuade (ECF No. 492) join in Defendant Federal Home Loan Mortgage
Corporation’s (“Freddie Mac”) arguments opposing OPERS’ request (ECF No. 490).
Defendant Anthony S. Piszel has indicated he would like the Court to consider a
summary judgment motion to be filed by him on the narrow issue of scienter without
awaiting the conclusion of discovery. ECF Nos. 489 and 491.
based on Defendants’ argument, has followed those cases that reject price maintenance as a
viable theory of price impact. ECF No. 478 at PageID #: 22769-70.
Thereafter, OPERS petitioned the United States Court of Appeals for the Sixth Circuit
under Fed. R. Civ. P. 23(f) for leave to appeal the district court’s interlocutory order. In re: Ohio
Public Employees Retirement System, No. 18-0310 (6th Cir. filed Aug. 28, 2018). OPERS
challenged the framework applied by the district court as it relates to the fraud-on-the-market
theory endorsed in Basic Inc. v. Levinson, 485 U.S. 224, 243 (1988), market efficiency, price
impact, and the legal standard for determining damages under Comcast Corp. v. Behrend, 569
U.S. 27, 34 (2013). Finding that an interlocutory appeal was not warranted, the Sixth Circuit
denied OPERS’ petition for permission to appeal the class certification decision. In re: Ohio
Public Employees Retirement System, No. 18-0310 (6th Cir. Jan. 23, 2019).
II. Law and Analysis
Over three months after the Sixth Circuit denied OPERS’ petition for permission to
appeal the class certification decision, OPERS filed the within request that either the Court grant
summary judgment immediately sua sponte, or do so after further briefing by the parties. ECF
No. 485 at PageID #: 22874. See, e.g., Eisenrich v. Minneapolis Retail Meat Cutters & Food
Handlers Pension Plan, 544 F. Supp.2d 848, 858 (D. Minn. 2008), aff’d in relevant part, 574
F.3d 644 (8th Cir. 2009) (affirming grant of request for sua sponte summary judgment); Big Boy
Restaurants v. Cadillac Coffee Co., 238 F. Supp.2d 866, 876 (E.D. Mich. 2002) (granting request
for sua sponte summary judgment). In response, counsel for Freddie Mac stated that defendants
did not intend to move immediately for summary judgment, but rather intended to wait until all
discovery was completed. Freddie Mac’s counsel subsequently sent a proposed schedule to
counsel for OPERS that included a proposed dispositive motion cutoff date of September 21,
2020. Declaration of W.B. Markovits (ECF No. 485-1) at PageID #: , ¶¶ 2-3.
Following the completion of discovery, Freddie Mac believes it will have grounds to file
a motion for summary judgment on several dispositive grounds (including materiality and
scienter). ECF No. 490 at PageID #: 22908. According to Freddie Mac, there are multiple issues
and defenses to be developed in completing discovery. Once fact and expert discovery close and
a complete record has been developed, Freddie Mac intends to move for summary judgment on
several issues, not just the sole issue of price impact OPERS has “cherry picked.” ECF No. 490
at PageID #: 22924.2 Freddie Mac’s Opposition (ECF No. 490), however, does not attempt to
explain how any further discovery, “new evidence,” or additional expert opinion could change
the Court’s determination of a lack of price impact.
OPERS only recently informed the Court that now, over 15 months after OPERS filed its
Request For Sua Sponte Summary Judgment (ECF No. 485), neither Freddie Mac nor any other
Defendant has sought any additional discovery. Counsel for OPERS had previously advised
counsel for Freddie Mac that, based upon ECF No. 478, it did not intend to take any further
discovery. ECF No. 497 at PageID #: 22978-79.
Freddie Mac argues that OPERS’ request that the Court enter summary judgment on the
merits of a federal securities law claim solely based on rulings that supported the denial of a
Dr. Mukesh Bajaj, the expert witness of Freddie Mac, testified during the April
13, 2018 oral hearing/argument that further discovery was not necessary to his
determination that there was no price impact from the alleged misrepresentations and
omissions on November 20, 2007, the date of the 29% stock price decline. Hearing
Transcript (ECF No. 468) at PageID #: 22570-72.
motion for class certification is contrary to express United States Supreme Court precedent
barring manufactured appeals of this sort, and it is otherwise contrary to law. ECF No. 490 at
PageID #: 22905, 22907. In Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Supreme
Court unequivocally held that a party may not manufacture a final decision (and thus appellate
jurisdiction) after the district court denies class certification and the circuit court denies a petition
for interlocutory appeal under Rule 23(f). The Supreme Court held that such “inventive litigation
ploys,” in which a plaintiff “persuades a district court to issue an order purporting to end the
litigation,” violate the scheme for appeal of class certification orders mandated by Congress in 28
U.S.C. §§ 1291 and 1292(b), and Rule 23(f). Microsoft, 137 S. Ct. at 1714, 1715. Freddie Mac
implores the Court, ECF No. 490 at PageID #: 22907, 22924, not to fall for OPERS’ “inventive
litigation ploy,” to manufacture an appeal that Microsoft rejected. Id. at 1714.
OPERS contends the within request does not fall within the prohibitions of Microsoft. It
contends there is no “dismissal tactic” as there was in Microsoft. 137 S. Ct. at 1715, n.11.
Rather, OPERS’ request falls squarely within the dictates of Raceway Props., Inc. v. Emprise
Corp., 613 F.2d 656 (6th Cir. 1980) (per curiam), which permits expedited review of an order
that effectively dismisses a party’s case. ECF No. 496 at PageID #: 22957. The Court agrees.
An appeal is permissible when “solicitation of the formal dismissal was designed only to
expedite review of an order which had in effect dismissed appellants’ complaint.” Id. at 657
(citing United States v. Procter & Gamble Co., 356 U.S. 677 (1958)). Microsoft, 137 S. Ct. at
1715, n.11, left intact the line of Supreme Court case law upon which Raceway is based—a line
of authority allowing plaintiffs to facilitate appellate review by arguing not that they “consent to
a judgment against them, but only that, if there was to be such a judgment, it should be final in
form instead of interlocutory, so that they might [appeal] without further delay.” Procter &
Gamble, 356 U.S. at 681 (quoting Thomsen v. Cayser, 243 U.S. 66, 83 (1917)).
In Innovation Ventures, LLC v. Custom Nutrition Labs, LLC, 912 F.3d 316 (6th Cir.
2018), the Sixth Circuit allowed jurisdiction pursuant to 28 U.S.C. §1291’s requirements to hear
an appeal from judgments that limited plaintiff to nominal damages going forward absent a
change in theory. The court set out the two important limits on Raceway. “First, parties may not
appeal claims that were dismissed without prejudice. . . . Second, if a party seeks to come within
the Raceway exception, she should make her intention known to the court and opposing parties.”
Id. at 329 (internal quotation marks and citations omitted). According to OPERS, “[b]oth of
those limits are met in this case: 1) the summary judgment would be a dismissal with prejudice;
and 2) OPERS has made its intention known that, while it does not agree with the substance of
the Court’s decision regarding price impact, it recognizes that it precludes OPERS from going
forward individually with its securities claims on the dispositive element of loss causation.”3
ECF No. 496 at PageID #: 22964. Absent “new evidence” or a change in law, the determination
of a lack of price impact stands. See, e.g., Bush v. Struthers Ohio Police Dept., No.
4:19-CV-768, 2020 WL 4926235, at *1 (N.D. Ohio Aug. 21, 2020) (Pearson, J.) (setting forth
major situations which justify a court reconsidering one of its orders). No additional discovery or
Price impact is the consideration of “whether the alleged misrepresentations
affected the market price in the first place.” Erica P. John Fund, Inc. v. Halliburton Co.,
563 U.S. 804, 814 (2011) (“Halliburton I”). Loss causation in turn is a showing that the
price impact was caused by “the correction to a prior misleading statement” and “that the
subsequent loss could not otherwise be explained by some additional factors revealed
then to the market.” Id. at 812.
expert report is likely to change the Court’s determination that OPERS’ price maintenance theory
of liability cannot be used to prove price impact.
In Innovation Ventures, the Court of Appeals held, “[i]t would be perverse indeed if we
required a plaintiff to pursue a theory that she did not consider meritorious simply to preserve her
right to appeal.” 912 F.3d at 330. That is precisely what OPERS would have to do to proceed
forward in this case. The only way for OPERS to move forward would be to abandon price
maintenance as its theory of price impact, and attempt to show price impact at the time of the
misrepresentations and omissions through stock price movement. OPERS, similar to the
Government in Raceway, is not prepared to and cannot proceed individually on this basis. ECF
No. 496 at PageID #: 22965.
OPERS’ Request For Sua Sponte Summary Judgment (ECF No. 485) is granted.
Final judgment under 28 U.S.C. § 1291, resolving both liability and damages, will be
entered in favor of Freddie Mac and four of its senior officers and against OPERS on the Third
Amended Complaint (ECF No. 166).
IT IS SO ORDERED.
September 17, 2020
/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge
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