Iron Workers District Council of New England Pension Fund et al v. NII Holdings, Inc. et al

Filing 227

MEMORANDUM OPINION re: Lead Pltfs Motion for Class Certification and Appointment of Class Representatives and Class Counsel. Signed by District Judge Leonie M. Brinkema on 11/17/15. (pmil, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division

IN RE Nil HOLDINGS, INC. SECURITIES
LITIGATION

1:14-CV-227(LMB/JFA)

MEMORANDUM OPINION

Lead Plaintiffs seek to certify a nationwide class pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3)

composed of"[a]ll persons and entities that, during the period from February 25, 2010 through
February 27, 2014, inclusive, purchased orotherwise acquired the publicly traded securities ofNil

Holdings, Inc. ("Nil Holdings") and/or Nil Capital Corp. ("Nil Capital", [sic] together with Nil

Holdings, "Nil" or the "Company") and who were damaged thereby." Pis.' Mem. in Supp. ofLead

Pis.' Mot. for Class Cert, and Appoint, ofClass Reps, and Class Counsel at 1[Dkt. No. 200], Sept.
11, 2015 ("Pis.' Mem."). Lead Plaintiffs request that this class include all persons and entities that

transacted in Nil common stock and three different Nil bonds, a 10% Note, an 8.875% Note, and a
7.625% Note. Id Lead Plaintiffs also seek the appointment of Lead Plaintiffs as Class

representatives. Id. Finally, Lead Plaintiffs seek the appointment of Labaton Sucharow LLP

("Labaton") and Kessler Topaz Meltzer &Check, LLP ("Kessler Topaz") as Co-Class Counsel
and Susan R. Podolsky as Class Liaison Counsel. Id For the reasons that follow, this motion will
be granted.
I. BACKGROUND

This action arises out ofa strategic business shift undertaken by Nil Holdings, Inc., which

is a telecommunications company headquartered in Virginia. Nil offered wireless voice and data
services through its Nextel-branded subsidiaries in Brazil, Mexico, Argentina, Chile, and Peru.

Defs.' Mem. in Opp'n to Lead Pis.' Mot. for Class Cert, and Appoint, of Class Reps, and Counsel
at 3 [Dkt. No. 210], Oct. 2, 2015 ("Defs.' Opp'n"). Beginning in 2009, Nil started to transition its

cellular networks in the above-mentioned countries from second-generation ("2G") technology to
third-generation ("3G") technology. Pis.' Mem. at 3.

Lead Plaintiffs, all of which are large pension funds, brought this action against Nil and
three current and former Nil officers—Steven Dussek, who was Chief Executive Officer until

December 2012; Steven Shindler, who was Chief Executive Officer after December 2012; and

Gokul Hemmady, who was Chief Financial Officer until October 2012 and Chief Operating
Officer after June 2012, continuing in that position until the end of the class period. Id. On

September 15,2014, Nil filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court
for the Southern District of New York and received court approval of its bankruptcy plan in June
2015. Pis.' Mem. at 2 n.3. Due to the bankruptcy, all claims against Nil have been extinguished,
leaving only the individual Nil officers as defendants in this civil action which charges them in
two counts with violations of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and

with "control person" liability under § 20(a) of the Securities Exchange Act of 1934. Id These
counts are premised on allegations that defendants "engaged in a pattern of lies and half-truths

concerning the progress and efficacy of Nil's 3G transition, the quality of its customer base, and
the company's ability to generate and maintain positive subscriber growth metrics." Pis.' Mem. at
3-4.

II. DISCUSSION
A. STANDARD OF REVIEW

It is axiomatic that plaintiffs, as the parties seeking class certification, have the burden of
proving that all class certification requirements are met. Wal-Mart Stores. Inc. v. Dukes. 131 S.Ct.

2541,2551 (2011); see also Amchem Prods.. Inc. v. Windsor. 521 U.S. 591, 614 (1997). In the
Fourth Circuit, plaintiffs must "establish by a preponderance of the evidence that the action

complies with each part of Rule 23." Brown v. Nucor Corp.. 785 F.3d 895, 931 (4th Cir. 2015).
Lead Plaintiffs therefore bear the burden ofdemonstrating (1) that the class is so numerous that the

joinder of all members would be impracticable; (2) that questions of law or feet are common to the

class; (3) that their claims or defenses are typical of those of the class; and (4) that they will fairly

and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). Apart from these Rule 23(a)
requirements, plaintiffs must also demonstrate that the requirements of Rule 23(b)(3) are
met—namely, that"questions of lawor factcommon to the members of the class predominate over
any questions affecting only individual members, and that a class action is superior to other
available methods for the fair and efficient adjudication of the controversy."

Importantly, as the Supreme Court recently reiterated, the Court must perform a "rigorous
analysis" to determine whether the party seeking class certification has borne the burden of

establishing that it satisfies the certification requirements. Comcast Corp. v. Behrend. 133 S.Ct.

1426,1432 (2013) (quoting Wal-Mart. 131 S. Ct. at 2551). The Supreme Court has further advised

that "sometimes it may be necessary for [lower courts] to probe behind the pleadings before
coming to rest on the certification question" because "class determination generally involves
considerations that are enmeshed in the factual and legal issues comprising the plaintiffs cause of
action." Id. (quoting Wal-Mart, 131 S. Ct. at 2551 (internal quotation marks omitted)). Such an
analysis is appropriate to ensure thatclass actions remain "an exception to the usual rule that

litigation is conducted by and on behalf of the individual named parties only." Califano v.

Yamasaki, 442 U.S. 682, 700-01 (1979).
B. RULE 23(A)

"In determining the propriety of a class action, the question is not whether the plaintiff or
plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the

requirements of Rule 23 are met." Eisen v. Carlisle & Jacquelin.417 U.S. 156, 178 (1974).
Defendants do not dispute that Lead Plaintiffs have satisfied the requirements of Fed. R. Civ. P.

23(a); instead, their challenge to certification principally centers on Lead Plaintiffs' showing of
market efficiency as it relates to the finding of predominance required by Fed. R. Civ. P. 23(b)(3).

Nevertheless, this Court must still undertake a "rigorous analysis" to ensure that plaintiffs have
carried their burden of satisfying both Fed. R. Civ. P. 23(a) and (b) by a preponderance of the
evidence. See Comcast. 133 S.Ct. at 1432.
1.

Numerosity

Lead Plaintiffs must show that the proposed class "is so numerous that joinder of all
members is impracticable." Fed. R. Civ. P. 23(a)(1). Although neither the Federal Rules nor the

federal courts have identified a particular threshold, classes assmall as"twenty-five ormore" have
been certified. See, e.g.. Talbott v. GC Servs.. 191 F.R.D. 99, 102 (W.D. Va. 2000); see also
Holsev v. Armour & Co.. 743 F.2d 199, 217 (4th Cir. 1984) (finding between 46and 60 members
sufficient). As Lead Plaintiffs point out, numerosity is rarely disputed in securities fraud class

actions, and this class action is no different. Pis.' Mem. at 5-6. During the class period, between
166 million and 173 million shares of Nil stock were outstanding and more than $2 billion in Nil
Bonds were outstanding as of February 21, 2014. Id at 6. On average, 42.4% of the bonds were

held by non-institutional investors. ]d These statistics give rise to a strong inference that class
membership is so numerous that joinder would be impracticable. Accordingly, this element is

easily satisfied.
2.

Commonality

Lead Plaintiffs must next show that "there are questions of law or fact common to the

[proposed] class." Fed. R. Civ. P. 23(a)(2). Commonality focuses on the relationship class

members have to each other qualitatively, not quantitatively. Although commonality requires only
the presence of a single common question, notjust any common question will do. Instead, a
plaintiff must "demonstrate that the class members have suffered the same injuryf,]" Wal-Mart.

131 S. Ct. at 2551 (internal quotation marks and citation omitted), which is a shared injurydependent upon a "common contention." Id "Thatcommon 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 issuethat is central to the validity of each one of the claims in one stroke."

Id In other words, a plaintiff must demonstrate that a classwide proceeding has the capacity "to
generate common answers apt to drive the resolution of the litigation." Id To this end, the
commonality inquiry tends to merge into the typicality inquiry.
Lead Plaintiffs provide a non-exhaustive list of five questions of fact and lawcommon to
all members of the proposed class.

• whether defendants' alleged acts and omissions violated the federal securities laws;
• whether defendants disseminated any public statements during the class period that
contained material misrepresentations or omitted material facts;

• whether defendants acted knowingly, orwith reckless disregard, in misrepresenting
or omitting those material facts;

• whether the market prices of Nil Stock and Nil Bonds were artificially inflated
during the class period as a result of the misrepresentations or omitted material
facts; and

• whether Lead Plaintiffs and other members of the class suffered damages, as well
as the appropriate measure thereof.

Pis.' Mem. at 7. As was the case in In re NeuStar. Inc. Securities Litigation. No. 1:14-CV-885.
2015 WL 5674798, at *6 (E.D.Va. Sept. 23, 2015), "the questions of whether Defendants'

statements or omissions were material, whether they were made in connection with the purchase or
sale of securities, and whether they were made with scienter, are necessarily common to each class
member given that Defendants' conduct alone is relevant to their proof." Id (internal quotation
marks omitted). Accordingly, this requirement is also satisfied.
3. Typicality
A plaintiff must also show that its "claims or defenses ... are typical of the claims or
defenses of the class." Fed. R. Civ. P. 23(a)(3). The typicality requirement is designed to ensure
that the class representative's interests are sufficiently aligned with those of the other class
members, and it is therefore "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." Robinson v. Metro-North Commuter R.R. Co.. 267 F.3d 147, 155 (2d Cir. 2001); see
also Beck v. Maximus. Inc., 457 F.3d 291, 295-96 (3d Cir. 2006); James v. City of Dallas. Tex..

254 F.3d 551, 571 (5th Cir. 2001). "Typicality requires that the claims of the named class

representatives be typical of those of the class; 'a class representative must be part of the class and
possess the same interest and suffer the same injury as the class members."' Lienhart v. Drvvit
Systems. Inc., 255 F.3d 138,146 (4th Cir. 2001) (quoting General Tel. Co. of Southwest v. Falcon.
457 U.S. 147,156 (1982)). Put simply, a Lead Plaintiff must demonstrate that it has claims that are

of the same sort as other members of the proposed class.
Lead Plaintiffs contend that they satisfy the typicality requirement because like other
members of the proposed Class, they seek to recover damages for losses caused by the same
materially false and misleading statements and omissions allegedly disseminated by defendants.
Pis.' Mem. at 8. They aver that collectively Lead Plaintiffs incurred losses of more than $15

million with respect to their Nil securities holdings. Id at 9. As Lead Plaintiffs point out, the

named plaintiffs are typical of the class because they too seek to recover damages for losses caused
by the same allegedly materially false and misleading statements and omissions. Id. at 8. As a

result,as LeadPlaintiffs correctlyargue,"as goes the claim of the named plaintiff, so go the claims
of the class." Id. at 9. (quoting Broussard v. Meineke Discount Muffler Shops. Inc.. 155 F.3d331,
340 (4th Cir. 1998) (internal quotation marks omitted)). As such, Lead Plaintiffs have satisfied the
typicality requirement.
4. Adequacy of Representation

Lastly, a plaintiff must show that it "will fairly and adequately protect the interests of the

class." Fed. R. Civ. P. 23(a)(4). "[A] class representative must be part of the class and possess the
same interest and suffer the same injury as the class members." Gen. Tel. Co. of Sw. v. Falcon. 457

U.S. 147, 156 (1982) (internal quotation marks omitted). The adequacy requirement is designed to
detect and avoid potential conflicts between the class representative and other class members. See

Amchem, 521 U.S. at 625-26. Potential conflicts between the class representative and class

members include "differences in the type of relief sought, especially retrospective versus
prospective relief." Id. In other words, the class representative's interest in prosecuting its own
case must simultaneously tend to advance the interests of the other class members. Id at 626 n.20.

Notably, this Court has already determined that under the Private Securities Litigation Reform Act
("PLSRA"), 15 U.S.C. § 78u-4, Lead Plaintiffs, Co-Class Counsel, and Class Liaison Counsel

were adequate. See Order for Appointment of Lead Plaintiffand Approval of Selection of Counsel
[Dkt. No. 101], Jun. 10,2014.

As Lead Plaintiffs demonstrate, their interests are aligned with the interests of absent class

members, thereby suggesting their adequacy as class representatives. Pis.' Mem. at 10. The Lead

Plaintiffs are all sizeable pension funds that have a strong incentive to seek the largest possible

recovery on behalf of their beneficiaries. Id at 10-11. Although defendants half-heartedly dispute
Lead Plaintiffs' adequacy in the Statement of Facts portion of their Opposition—describing Lead
Plaintiffs as "differently situated with respect to each of the alleged materialized risk events and
corrective disclosures," Deft.' Opp'n. at 4—that argument does not rebut the strong evidence

demonstrating that Lead Plaintiffs' interests are aligned with those of the putative class in terms of
establishing defendants' liability and obtaining the maximum possible recovery. Pis.' Mem. at 10.
Lead Plaintiffs have also put forth evidence that these pension funds are committed to working

cohesively as a group to prosecute theaction, and all ofthe Lead Plaintiffs have filed certifications
attesting that they would competently fulfill their role as Class Representatives. Id. Taken as a
whole, Lead Plaintiffs have demonstrated by a preponderance of the evidence that they would
satisfy the requirement of adequate representation.
In terms of the adequacy of proposed class counsel, Rule 23(g)(1)(A) dictates that a court

must consider "(i) the work counsel has done in identifying or investigating potential claims in the
action; (ii) counsel's work 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).

Defendants do not dispute that proposed Co-Class Counsel and Class Liaison Counsel are highly-

experienced in litigating these types of actions and have a proven track record in prosecuting
complex securities actions. Pis.' Mem. at 12. Moreover, proposed Co-Class Counsel and Class
Liaison Counsel have already undertaken substantial work in identifying, investigating, and
initiating this action, which further suggests their adequacy. Id. Accordingly, Lead Plaintiffs,
Co-Class Counsel, and Class Liaison Counsel have made the requisite showing that they would
adequately represent the interests of absent class members.

C. RULE 23(B)(3)

In addition to satisfying the prerequisites of Rule 23(a), the representative of a proposed

class also bears the burden of satisfying the requirements of one of the three Rule 23(b) categories.
In this case, Lead Plaintiffs have requested "opt-out class" certification under Rule 23(b)(3), which
requires the Court to find (1) that "questions of law or fact common to the members of the class

predominate over any questions affecting only individual members" and (2) that "a class action is

superior to other available methods for the fair and efficient adjudication of the controversy." Fed.
R. Civ. P. 23(b)(3).
1.

Predominance

Rule 23(b)(3)'s predominance requirement is similar in focus albeit "far more demanding"

than Rule 23(a)'s commonality requirement. Amchem, 521 U.S. at 624. The purpose of the
heightened standard is to test whether the proposed class "is sufficiently cohesive to warrant
adjudication by representation." Id. at 623-24. For this reason, courts must concentrate on the issue

of liability rather than damages, "and if the liability issue is common to the class, common
questions are held to predominate over individual ones," In re BearingPoint. Inc. Sec. Litisz.. 232

F.R.D. 534, 542 (E.D. Va. 2006); however, if resolution of the liability issue "turns on a
consideration of the individual circumstances of each class member," certification under Rule

23(b)(3) is inappropriate. Thorn v. Jefferson-Pilot Life Ins. Co.. 445 F.3d 311, 319 (4th Cir. 2006).
In addition, fraud cases like this one are particularly appropriate candidates for treatment under

Rule 23(b)(3) given that the elements of the cause of action generally relate to the acts or

omissions ofthe defendants and because individual damages might be too paltry tojustify bringing
individual cases. Amchem, 521 U.S. at 591.

A standard element of all fraud claims is that a plaintiffreasonably relied on the alleged

misrepresentation or omission. Requiring an individualized showing of the reliance element in a

securities fraud class action would nearly always cause individualized issues to predominate over
issues common to the class, thereby defeating any chance for class action. To avoid this result in
such fraud cases, the Supreme Court has explicitly allowed a class to be certified based on a

reasonable presumption of reliance. See Basic v. Levinson. 485 U.S. 224 (1988) (adopting
fraud-on-the-market theory) (hereinafter "Basic presumption"). The Basic presumption is
premised upon the fraud-on-the-market theory, which holds that "a public, material

misrepresentation will distort the price ofstock traded in an efficient 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 Co. v. Erica P. John Fund. Inc.. 134 S. Ct. 2398, 2417 (2014)
("Halliburton II"). Accordingly, "[t]o prove such indirect reliance [to receive the benefit of the

Basic presumption], a plaintiff must show (1) that the alleged misrepresentations were publicly
known, (2) that they were material, (3) that the stock traded inan efficient market, and (4) that the
plaintifftraded the stock between the time the misrepresentations were made and when the truth

was revealed. At the class certification stage, however, no proofofmateriality isrequired." Brown.

785 F.3d at931 (citing Halliburton II. 134 S. Ct. at 2408 (internal quotation marks omitted)).
Similarly, no proof of loss causation is required. Amgen Inc. v. Connecticut Ret. Plans & Trust

Funds, 133 S. Ct. 1184, 1192 (2013) (internal citation omitted). Accordingly, at this stage, a
plaintiff need only demonstrate by a preponderance ofthe evidence that the alleged
misrepresentations were publicly known and that the stock traded in an efficient market.

Defendants do not dispute that the alleged false statements were clearly in the public arena
because the majority ofthese statements appeared in Nil's SEC filings, in conference calls with

analysts and investors, and in press releases. Pis.' Mem. at 16 (citing Compl. f| 53, 54, 56, 60,

10

65-67, 76, 77, 82, 83, 87-89, 92, 97, 99-101, 104, 105, 111-319). Accordingly, for LeadPlaintiffs

to receive the benefit of the Basic presumption, all that remains for them to show at this stage is
that the securities at issue traded in an efficient market.

In the Fourth Circuit, the standard for determining whether a security trades in an efficient

market is determined by considering: "factors such as, among others, whether the security is
actively traded, the volume of trades, and the extent to which it is followed by market

professionals. See, e.g., Cammer v. Bloom. 711 F.Supp. 1264, 1285-87 (D.N.J. 1989) (examining
(1) average trading volume, (2) number of securities analysts following the stock, (3) number of
market makers, (4) whether the company was entitled to file an S-3 Registration Statement, if

relevant, and (5) evidence of a cause and effect relationship between unexpected news and

stock-price changes)." Gariety v. Grant Thornton. LLP. 368 F.3d 356, 368 (4th Cir. 2004). The
Cammer factors cited by the Gariety opinion are merely instructive in this inquiry. Carpenters
Pension Trust Fund of St. Louis v. Barclays PLC. No. 12-CV-5329 SAS, 2015 WL 5000849, at *9
(S.D.N. Y. Aug. 20, 2015) (explaining that "the vast majority of courts have used the Cammer

factors asan analytical tool rather than as a checklist" (internal quotation marks omitted)). Despite

defendants' arguments to the contrary, in the Fourth Circuit, no one factor is more important than
another when a court undertakes the holistic and fact-intensive inquiry of determining whether a
market is efficient. Contra Defs.' Opp'n at 10 (citing Teamsters Local 445 Freight Div. Pension

Fund v. Bombardier Inc.. 546 F.3d 196, 207 (2d Cir. 2008)).

Although the showings to establish market efficiency for bond markets differs from the

showing for stock exchanges, courts tend to employ the Cammer factors as an analytical tool when

determining whether bonds traded inan efficient market. See Bombardier Inc.. 546 F.3d at210; ]n
re DVI Inc. Sec. Litis.. 249 F.R.D. 196, 214 (E.D. Pa. 2008) affd sub nom. In re DVI. Inc. Sec.

11

Litig., 639 F.3d 623 (3d Cir. 2011) (explaining that "the Court will take the same general approach

for determining the market-efficiency of DVI's Senior Notes as with DVI common stock, bearing
in mind [the] structural differences [between debt and equity securities markets]"); In re
Safetv-Kleen Corp. Bondholders Litis.. No. 3:00-1145-17, 2004 WL 3115870, at *4 (D.S.C. Nov.

1, 2004). Because the Fourth Circuit has not offered a standard for determining market efficiency
for bonds, Lead Plaintiffs also offered evidence on four additional factors to which the Fifth

Circuit looks in this context; specifically. Lead Plaintiffs provided proofabout Nil's market

capitalization; the bid-ask spread; the float, or issue amount outstanding excluding insider-owned
securities; and the percentage of institutional ownership. In re FlealthSouth Corp. Sec. Litis.. 261
F.R.D. 616, 632 (N.D. Ala. 2009).

The Basic presumption is rebuttable at both the certification and merits stages. In

Halliburton II, the Supreme Court held that adefendant could rebut a showing ofmarket efficiency
at the class certification stage by putting forth "any showing thatsevers the link between the

alleged misrepresentation and either the price received (orpaid) by the plaintiff, or his decision to

trade at a fair market price, will be sufficient to rebut the presumption ofreliance. So for example,

ifadefendant could show that the alleged misrepresentation did not, for whatever reason, actually
affect the market price, or that a plaintiff would have bought or sold the stock even had he been

aware that the stock's price was tainted by fraud, then the presumption of reliance would not

apply." Halliburton II. 134 S. Ct. at 2408 (internal citations and quotation marks omitted).
Relying on a report by their expert, Chad Coffman, who is an economist and Chartered

Financial Analyst, Pis. Mem., Ex. II at5 (hereinafter "Coffman Report"), Lead Plaintiffs base their

showing ofmarket efficiency for both the stocks and bonds on the Cammer factors, along with

three additional factors suggested in Krosman v. Sterritt. 202 F.R.D. 467 (N.D. Tex. 2001) (the

12

company's market capitalization; the bid-ask-spread; and the "float," or the percentage of

securities not held by company insiders when engaging in a determination ofmarket efficiency).
The first Cammer factor is average trading volume. Lead Plaintiffs point to Nil common

stock being listed and traded onNASDAQ throughout the class period, which weighs in favor ofa

finding ofmarket efficiency. As Lead Plaintiffs argue, "most courts agree that [a] listing [on the
NYSE or NASDAQ] is a good indicator of efficiency." Carpenters Pension. No. 2015 WL

5000849, at *7, *7 n.80 (collecting cases); Pis.' Mem. at 17. Defendants rightly point out that

although this factor is probative ofmarket efficiency, it is not dispositive. Defs.' Opp'n at 9 n.7
(collecting cases). Nevertheless, the volume of trading activity for both Nil's stocks and bonds isa

significant factor supporting a finding ofan efficient market. During the class period, Nil stocks
averaged a daily trading volume ofover 3.5 million shares, representing an average weekly
turnover of 10.07%. Pis.' Mem. at 19. Similarly, the average weekly trading volume ofNil bonds

hovered around 2.94%. Id These average weekly turnover percentages surpass the benchmark set
down by Cammer of 2%for a "strong presumption" thatthe market was efficient. Cammer. 711 F.

Supp. at 1286. Moreover, both types ofsecurities were traded on a majority ofpossible trading
days during the class period, which is probative of high trading frequency and investor interest.

Pis.' Mem. at 19 (citing Coffman Report 1105). Accordingly, although the showing on this factor
alone does not carry the day, it is strongly suggestive that Nil stocks and bonds traded in an
efficient market.

The second Cammer factor is the number ofsecurities analysts following the security
because that fact "permits an inference that financial statements relating to a security are closely
watched by investment professionals, who in turn inject their views on the company and the
security into the market." In re Winstar Comme'ns Sec. Litis.. 290 F.R.D. 437, 446 (S.D.N.Y.

13

2013). Lead Plaintiffs point to the existence ofat least 528 reports about Nil during the class

period, which were published by 18 firms, including major banks like Credit Suisse, J.P. Morgan,
and Morgan Stanley. Pis.' Mem. at 20. As Lead Plaintiffs correctly argue, this showing
demonstrates that there was "an active market for information regarding the company and its

securities, and that [such] information was widely distributed." ]d. (citing Coffman Report ffij
34-39, Ex. H). As such, this factor weighs in favor ofa finding ofmarket efficiency with regard to
both Nil common stock and bonds.

The third Cammer factor is the extent to which market makers and arbitrageurs trade inthe

stock. As the Southern District ofNew York explains, "market makers promote efficiency by
reacting quickly to new information by buying or selling securities in order to drive their price to
the market-clearing level." Winstar. 290 F.R.D. at446. Under SEC regulations, a market maker is
[A] dealer who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized interdealer quotation system; or (ii)
furnishes bona fide competitive bid and offer quotations on request; and, (iii) is ready,
willing and able to effect transactions in reasonable quantities at his quoted prices with
other brokers or dealers.

17 C.F.R. §240.15c3-1(c)(8). Essentially, the existence ofmarket makers indicates that asecurity

is liquid and that relevant information is disseminated and appropriately assimilated into the price,
particularly when analyzing securities traded in over-the-counter markets. See Cammer, 711 F.

Supp. at 1283. Given that Nil common stocks were traded on NASDAQ, amarket with continuous

public price and volume reporting. Pis.' Mem. at 20-21, and Nil's listing ofthose stocks remained
in good standing throughout the class period with regard to reporting requirements, this factor
further supports a showing of market efficiency for Nil common stock because the Nil's stock

were continuously listed on NASDAQ throughout the class period. This listing alleviates any
concern thatmarket makers might otherwise remediate for securities listed on over-the-counter

markets with regard to their liquidity and information dissemination. In terms ofthe Nil bonds,
14

Lead Plaintiffs have demonstrated market efficiency by pointing to over 100 separately

identifiable market participants who traded in Nil bonds during the class period. Id. at 21 (citing

Coffman Report fill). Accordingly, this factor contributes to a finding ofmarket efficiency for
Nil common stock as well as for Nil bonds.

The fourth Cammer factor requires a relatively straight-forward determination—whether
the company was eligible to file an SEC Form S-3 registration statement. As the First Circuit

summarized, "[companies permitted by the SEC to file an S-3 Registration Statement, an
abbreviated prospectus requiring fewer disclosures than Forms S-l or S-2, are those which meet

the $75 million market capitalization requirement and have filed reports with the SEC for twelve

consecutive months." In re Xcelera.com Sec. Litis.. 430 F.3d 503, 517 n.9 (1st Cir. 2005)
(summarizing the core requirements setdown in 17 C.F.R. §239.13 (2003)). This status isrelevant

to the inquiry because "Form S-3 is reserved for companies whose stock is actively traded and

widely followed." Unger v. Amedisvs Inc.. 401 F.3d 316, 326 n.5 (5th Cir. 2005). In other words,

when an issuer ofsecurities meets Form S-3's requirements, the market for its securities is likely
one thatquickly assimilates material public information into the price because the market is well

developed and trading is robust. There is no dispute that Nil was S-3 eligible and filed Forms S-

3during and surrounding the class period. Pis.' Mem. at 22 (citing Compl. f 353; Answer f 353).
This Cammer factor accordingly weighs in favor of a finding that the market for Nil common
stock was efficient.

The fifth and final Cammer factor focuses on empirical evidence that demonstrates "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 1286-87. This is the Cammer

factor that defendants vigorously dispute. Lead Plaintiffs attempt to satisfy this factor with an

15

event study conducted by their expert, Coffman, in which he applied regression analyses to
determine the relationship between the price of the relevant security and broader market factors.

Specifically, he compared the price fluctuation of Nil common stock and bonds ondays with
earnings announcements with their price movement on days with minimal or no news related to

NIL Pis.' Mem. at 22. The analyses, which Coffman ran for each event day, controlled for several
variables such as the S&P 500 Total Return Index, the BNY Mellon LatinAmerica ADR Index,
and a weighted index of peer firms that could otherwise explain price fluctuations. Coffman

Report f 51. These analyses indicated a positive correlation between changes in Nil stock prices
and control variables. Id. f 58.

After adjusting for the price impact borne out by the regression, Coffman found that

quarterly earnings announcements resulted in statistically significant price movements at the 95%

confidence level for 12 ofthe 18 event days he analyzed. Id f 62. Incontrast, for 162 days with no
earnings announcements, Coffman found 14 statistically significant price movements. Id. A

finding supporting a price reaction on 66.7% ofearnings announcement days is greater than
several findings deemed sufficient by other district courts. See Petrie v. Elec. Game Card. Inc.. 308

F.R.D. 336, 354 (CD. Cal. 2015) (certifying class because of strong showing on other Cammer

factors, even though expert only found statistically significant price movement on 8of50 days);
Carpenters Pension. 2015 WL 5000849, at *17 (finding market efficiency based on an event study
demonstrating price reaction on 5 out of 15 event days, but noting that the court would have found
efficiency regardless of the fifth Cammer factor showing).
For Nil bonds, Coffman found that bonds reacted to bond-value-relevant news. Pis.' Mem.

at24 (citing Coffman Report f 122). Specifically, the 10% Notes displayed a statistically
significant reaction for 7 of 16 earning announcement days (43.75%), whereas there was

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statistically significant movement on 8.97% of non-news days. Id (citing Coffman Reportf 118).
The 8.875% Note and the 7.625% Note displayed similar reactions. Id. Moreover, Coffman's

report demonstrated that trading volume ofall three types of bonds responded in a statistically
significant manner to earnings announcements and other Nil news. Id.

Defendants attempt to defeat Lead Plaintiffs' claim that the market was efficient by
attacking Coffman's methodology and conclusions. To do this, they rely on a report produced by

their expert, Paul A. Gompers, a Professor ofBusiness Administration at Harvard, Defs.' Opp'n,
Ex. A (hereinafter "Gompers Report"). First, defendants argue that Coffman's conclusions are

unfounded because he failed toanalyze whether the news released on the 18 event days was new or
unexpected. Defs.' Opp'n at 13. Lead Plaintiffs persuasively rebut this attack, arguing that

Coffman's study avoids bias by using objective measures ofevent days, namely those days on

which Nil earnings announcements were made. Pis.' Reply Mem. in Supp. at 11 [Dkt. No. 220],
Oct. 28, 2015 ("Pis.' Reply"). Indeed, an expert report relying on a study containing cherry-picked
event dates is far less persuasive than one in which objective criteria were used. See, e.g.. In re
PolvMedica Corp. Sec. Litis.. 453 F. Supp. 2d 260, 270 (D. Mass. 2006) (finding an expert's
"mere listing offive days onwhich news was released and which exhibited large price fluctuations
proves nothing").

Defendants next contend that Coffman's analysis is flawed because he failed to analyze

whether price reactions were consistent with the nature ofthe news released in the earnings
reports. Defs.' Opp'n at 14. The record shows that one of the event days on which Coffman found
statistically significant price movement should be discounted because the movement was

inconsistent with the nature ofthe news released. Id Specifically, the Nil earnings announcement
on April 26, 2012 exceeded consensus expectations, yet the stock price exhibited a statistically

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significant decrease of 23.58%). Gompers Report f 37. This correction reduces the statistically
significant price impact to 61.1% of the time rather than 67.7% of the time, a negligible reduction
and hardly determinative of the outcome of this inquiry. In addition, defendants' contention that
Coffman's study is flawed because he failed to adjust his results for the Holm-Bonferroni1

correction ismisplaced because ofthe relatively small sample size here. Id at 15; Pis.' Reply at 13.
Moreover, study results with a confidence interval of99% are not required to show price impact in
this context. Pis.' Reply at 13 (citing Coffman Rebuttal ff 46-52). Even if Lead Plaintiffs' event
study were considered less than robust, defendants' critiques do notsuccessfully rebut Lead

Plaintiffs' showing on the fifth Cammer factor, nor are they dispositive ofthe market efficiency
inquiry.

In addition to the Cammer factors, Lead Plaintiffs put forth evidence of three additional

factors that support a finding of market efficiency suggested by Krosman v. Sterritt. 202 F.R.D.

467 (N.D. Tex. 2001). First, Lead Plaintiffs point to Nil's market capitalization, which was higher
than the majority offirms offering NASDAQ-traded stocks during the class period. Pis.' Mem. at

25. Specifically, between 166 million and 173 million shares ofNil stock were outstanding during
the class period, the market price of which denotes an average market capitalization of$3.73
billion. Id Likewise, as of December 5, 2011, more than $1.45 billion in Nil bonds were
outstanding, which also supports the conclusion that their market was efficient. Id at 25-26.

Similarly, the monthly bid-ask spread for Nil stocks during the class period ranged from
0.5 cents to 2 cents, meaning the weighted average spread was only 0.106%. Id "The bid-ask
spread is the difference between the price at which investors are willing to buy the stock and the

This is a statistical method for correcting the error rates involved in multiple comparisons and to
counteract the problem offalse positives. Sture Holm, ASimple Sequentially Reiective Multiple
Test Procedure, 6 Scand. J. Statist. 65 (1978), available at http://www.jstor.org/stable/4615733.

price at which current stockholders are willing to sell their shares." Krosman. 202 F.R.D. at 478. A

narrow bid-ask spread indicates the presence of an efficient market because it suggests that the

stock is liquid and more likely to be traded. Id. According to Coffman, Nil's weighted average
placed Nil stocks within the 42nd percentile of 100 otherrandomly sampled securities traded on
the NYSE andNASDAQ. Id (citing Coffman Report f 72). This spread is narrower than those that

other courts have found to weigh in favor of finding market efficiency. See, e.g.. Cheney v.

Cvbersuard Corp.. 213 F.R.D. 484, 501 (S.D. Fla. 2003) (finding that 2.44% average daily relative
bid-ask spread was suggestive of market efficiency). Accordingly, this Court finds this factor
weighs in support of a finding of market efficiency.

Lead Plaintiffs next raise the factor of the percentage of securities owned by outsiders,
including institutions. "This percentage, known as the 'float,' is helpful regarding market

efficiency as insiders may have information that is not yet reflected in stock prices, the prices of
stocks that have greater holdings by insiders are less likely to accurately reflect all available
information. Accordingly, a high percentage of insiders holding stock and a relatively low float

weigh against a finding of market efficiency." Cheney. 213 F.R.D. at 502 (internal quotation
marks and citations omitted). Lead Plaintiffs highlight Nil's strong public float of 98.9%, which

means that insiders held only 1.1 %ofoutstanding shares. Pis.' Mem. at27. Institutional ownership
ofNil stock was also robust; institutions held anaverage of 95.03% ofthe public float at the end of

each quarter during the class period. ]d Nil bonds also displayed a public float suggestive of

market efficiency. An average ofapproximately 50% ofNil bonds were held by institutions during
the class period. Accordingly, the public floats of both Nil stocks and bonds support a finding of
market efficiency.

Despite defendants' vigorous attacks on Coffman's findings and on Lead Plaintiffs'

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arguments as to market efficiency, they neither rebut Coffman's findings nor offer any evidence to
demonstrate that the market was not efficient. Accordingly, even if the fifth Cammer factor were
considered weak, the evidence offered in support of the other Cammer factors as well as the

non-Gammer factors is more than sufficient to demonstrate by a preponderance of the evidence
that the stocks and bonds at issue traded in an efficient market. As such, Lead Plaintiffs are entitled

to the Basic presumption and, at this stage, need not make individualized showings of reliance.

Furthermore, as a result, the element of reliance poses no obstacle to the finding of predominance
required for class certification.

The final issue within the predominance inquiry is the damages element. Lead Plaintiffs
argue that classwide damages are subject to a common methodology that does not scuttle

predominance. Pis.' Mem. at 29. Specifically, they point to the standard formula for assessing

damages under Rule 10b-5, which is the artificial inflation at the time of purchase reduced by the
artificial inflation at the time of sale if the security was sold before the fraud was revealed, or

otherwise merely the artificial inflation at the time of purchase. Coffman Report ff 138-39.

Despite the defendants' arguments to the contrary, Comcast merely held that "a model purporting
to serve as evidence of damages in [a] class action must measure only those damages attributable

to that theory. 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)."
Comcast Corp. v. Behrend. 133 S. Ct. 1426, 1433 (2013). Moreover, the Fourth Circuit has not

articulated any requirement of a fulsome classwide damages model at the certification stage.
Lead Plaintiffs provide adequate detail regarding a method for calculating classwide

damages and measuring the artificial inflation of each share on a given day. Coffman Report ff
138, 139. The method offered by Lead Plaintiffs is widely accepted as the traditional measure of

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damages for Rule 10b-5 actions. See, e.s.. Affiliated Ute Citizens of Utah v. United States. 406

U.S. 128, 155 (1972) ("In our view, the correct measure of damages ... is the difference between
the fair value of all that the mixed-blood seller received and the fair value of what he would have

received had there been no fraudulent conduct."). There is no convincing demonstration by the
defendants that this damages theory does not closely hew to Lead Plaintiffs' theory of liability or
that such a theory could not be applied class-wide. Accordingly, Lead Plaintiffs' damages model
supports a finding of predominance.
2. Superiority

Finally, the Court finds that litigation through "class action is superior to other available
methods for fairly and efficiently adjudicating the controversy," Fed. R. Civ. P. 23(b)(3), with
reference to:

(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

Lead Plaintiffs correctly argue that class members have a limited interest in asserting
individual claims because they are geographically dispersed and their damages claims have a

negative value insofar as they would be uneconomical to assert individually. Pis.' Mem. at 29.
Class treatment is the superior method for resolving this action because it would alleviate those
problems, allowing the pooling of damages claims so as to make prosecution of the action

economically rational. Id at 30. Further, Lead Plaintiffs submit that they are unaware of any
pending litigation in the United States putting forth similar allegations aside from those already
consolidated within the pending action. Id Relatedly, Lead Plaintiffs contend that class treatment
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would eliminate the risk of inconsistent adjudication and promote the fair and efficient use of the
judicial system. Id Finally, Lead Plaintiffs highlight that federal securities fraud cases are

routinely certified and present no unusual issues of manageability. Id. (citing In re BearinsPoint.
Inc. Sec. Litis.. 232 F.R.D. 534, 544 (E.D. Va. 2006)).
III. Conclusion

For all ofthe above-stated reasons. Lead Plaintiffs have demonstrated that they satisfy the
requirements of Fed. R. Civ. P. 23(a) and (b) by a preponderance of the evidence and their Motion

for Class Certification and Appointment of Class Representatives and Class Counsel [Dkt. No.
199] will be granted in an appropriate Order to be issued with this Memorandum Opinion.

Entered this _[]_ day of November, 2015.
Alexandria, Virginia

Leonie M. Brinkema

United States District Judge

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