The opinion of the court was delivered by: P. Kevin Castel, District Judge:
MEMORANDUM AND ORDER THIS DOCUMENT RELATES TO: CONSOLIDATED SECURITIES ACTION
The named plaintiffs move for class certification and the appointment of class representatives and class counsel pursuant to Rule 23, Fed. R. Civ. P.
For the reasons explained, the motion is granted.
Plaintiffs assert that the defendants made material misstatements and omissions regarding the acquisition of Merrill, Lynch & Co., Inc. ("Merrill") by defendant Bank of America Corporation ("BofA"). They bring claims pursuant to sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 (the "'34 Act"), 15 U.S.C. §§ 78j(b), 78n(a), 78t(a), and regulations promulgated thereunder, 17 C.F.R. §§ 240.10b-5, 240.14a-9(a), and sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the "'33 Act"), 15 U.S.C. §§ 77k, 77l(a)(2), 77o. The Court previously granted in part and denied in part the defendants' motions to dismiss. See In re Bank of Am. Corp. Sec., Deriv, & ERISA Litig., 757 F. Supp. 2d 260 (S.D.N.Y. 2010); In re Bank of Am. Corp. Sec., Deriv., & ERISA Litig., 2011 WL 3211472 (S.D.N.Y. July 29, 2011). Among other things, the Court concluded that plaintiffs could pursue direct claims asserting Section 14(a) liability, that the plaintiffs adequately alleged material misstatements as to Merrill's employee bonuses and that the plaintiffs adequately alleged material omissions concerning Merrill's losses in the fourth quarter of 2008. 757 F. Supp. 2d 291-93, 295-302, 303-07. Familiarity with the Court's previous opinions is assumed.
In an Order dated July 29, 2011, the Court directed that class discovery would conclude no later than October 3, 2011. (Docket # 406.) Plaintiffs now move to certify the following classes:
(i) As to claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), all persons and entities who held BoA common stock as of October 10, 2008, and were entitled to vote on the merger between BoA and Merrill, and were damaged thereby; and (ii) as to claims under Sections 10(b) and 20(a) of the Exchange Act, all persons and entities who purchased or otherwise acquired BoA common stock during the period from September 18, 2008 through January 21, 2009, inclusive, excluding shares of BoA common stock acquired by exchanging stock of Merrill for BoA stock through the merger between the two companies consummated on January 1, 2009, and were damaged thereby; and (iii) as to claims under Sections 10(b) and 20(a) of the Exchange Act, all persons and entities who purchased or otherwise acquired January 2011 call options of BoA from September 18, 2008 through January 21, 2009, inclusive, and were damaged thereby; and (iv) as to claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, all persons and entities who purchased BoA common stock issued under the Registration Statement and Prospectus for the BoA common stock offering that occurred on or about October 7, 2008, and were damaged thereby. Excluded from the Class are Defendants, present or former executive officers of BoA and Merrill, present or former members of Merrill's and BoA's Board of Directors and their immediate family members (as defined in 17 C.F.R. § 229.404, Instructions). (Notice of Motion, Docket # 478.)
Defendants contend that, in light of class discovery, plaintiffs cannot maintain these claims on a classwide basis because they have not established predominance under Rule 23(b)(3). They argue that certification should be denied because the Section 14(a) claim is meritless and because the plaintiffs cannot prove either materiality or shareholder reliance as to certain alleged misstatements and omissions. Defendants also challenge the plaintiffs' class definitions as overbroad, and contend that Section 11 of the '33 Act requires individualized inquiries as to the proposed class members' share ownership.
Defendants' opposition extensively relies on the opinions of their expert, Professor Allan Ferrell. Defendants have submitted an expert report by Professor Ferrell. (Naftalis Dec. Ex. 4.) Plaintiffs have submitted an expert report by Chad Coffman, CFA and rebuttal reports by Coffman and Professor Stephen J. Choi. (Castaldo Dec. Exs. 1-2, 9.) Deposition transcripts of the three experts have been submitted to the Court. (Naftalis Dec. Exs. 7-9.)
"In determining whether class certification is appropriate, a district court must first ascertain whether the claims meet the preconditions of Rule 23(a) of numerosity, commonality, typicality, and adequacy." Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 201-02 (2d Cir. 2008). A court "may then consider granting class certification where it 'finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.'" Id. at 202 (quoting Rule 23(b)(3)).
Certification of a class is proper "only if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011) (internal quotation marks omitted); see also In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 42 (2d Cir. 2006) ("A district judge is to assess all of the relevant evidence admitted at the class certification stage and determine whether each Rule 23 requirement has been met . . . ."). The party moving to certify bears the burden of satisfying Rule 23(a). In re Literary Works in Elec. Databases Copyright Litig., 654 F.3d 242, 249 (2d Cir. 2011).
"Frequently that 'rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim." Wal-Mart, 131 S. Ct. at 2551; accord Teamsters Local 445, 546 F.3d at 202 (a district court makes factual determinations when there is "overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement.") (quotation marks omitted). However, "in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement." In re IPO, 471 F.3d at 41. The Court has discretion on questions of class certification because "the district court is often in the best position to assess the propriety of the class and has the ability . . . to alter or modify the class, create subclasses, and decertify the class whenever warranted." Sumitomo Copper Litig. v. Credit Lyonnais Rouse, Ltd., 262 F.3d 134, 139 (2d Cir. 2001). Similarly, "district courts retain 'ample discretion' to limit discovery and 'the extent of the hearing' on Rule 23 issues 'in order to assure that a class certification motion does not become a pretext for a partial trial of the merits.'" Teamsters Local 445, 546 F.3d at 204 (quoting In re IPO, 471 F.3d at 41).
I. PLAINTIFFS' '34 ACT CLAIMS SATISFY RULE 23(a).
A. Plaintiffs Have Established Numerosity.
The numerosity requirement is satisfied when joinder is "impracticable." Rule 23(a); see alsoRobidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993) (surveying numerosity requirements). Plaintiffs need not set forth an exact class size to establish numerosity. Id.
Numerosity may be presumed when a class consists of forty or more plaintiffs. Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995).
"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.'" Teachers' Ret. Sys. of Louisiana v. ACLN Ltd., 2004 WL 2997957, at *3 (S.D.N.Y. Dec. 27, 2004) (quoting Garfinkel v. Memory Metals, Inc., 695 F. Supp. 1397, 1401 (D. Conn. 1988)). Courts have certified classes based on the volume of outstanding shares. See,e.g.,In re Globalstar Sec. Litig., 2004 WL 2754674, at *3 (S.D.N.Y. Dec. 1, 2004) (108,746,069 shares); In re Nortel Networks Corp. Sec. Litig., 2003 WL 22077464, at *2 (S.D.N.Y. Sept. 8, 2003) (estimating "hundreds or thousands" of possible class members based on defendant's 3 billion outstanding shares); In re Frontier Ins. Grp., Inc. Sec. Litig., 172 F.R.D. 31, 40 (E.D.N.Y.1997) ("[c]ommon sense suggests" that 13 million shares of outstanding common stock makes joinder impracticable).
Plaintiffs have set forth evidence that BofA had between 4.6 billion and 6.4 billion outstanding shares of common stock during the class period, with an average daily trading volume of 133,640,000 shares. (Castaldo Dec. Ex. 2 ¶¶ 26, 60.) As to plaintiffs' '34 Act claims, defendants do not challenge these figures or dispute that plaintiffs have established numerosity.
I conclude that the numerosity requirement of Rule 23(a)(1) is satisfied.
B. Plaintiffs Have Established Commonality. "The commonality requirement is met if plaintiffs' grievances share a common question of law or of fact." Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997). "Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury. This does not mean merely that they have suffered a violation of the same provision of law." Wal-Mart, 131 S. Ct. at 2551 (internal quotation omitted); see also Public Emps. Ret. Sys. of Mississippi v. Merrill Lynch & Co., Inc., 277 F.R.D. 97, 105-06 (S.D.N.Y. 2011) ('33 Act claims alleging misstatements satisfy Wal-Mart's requirements of common injury and facts). "The commonality requirement has been applied permissively in securities fraud litigation. In general, where putative class members have been injured by similar material misrepresentations and omissions, the commonality requirement is satisfied." Fogarazzao v. Lehman Bros., Inc., 232 F.R.D. 176, 180 (S.D.N.Y. 2005).
Because they are based on the same alleged misstatements and omissions, plaintiffs' '34 Act claims implicate common injuries and common facts. The commonality requirement of Rule 23(a)(2) is satisfied.
C. Plaintiffs Have Established Typicality.
Rule 23(a)(3) requires that class representatives have claims typical of those shared by the class members. "To establish typicality under Rule 23(a)(3), the party seeking certification must show that '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.'" In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009) (quoting Robidoux, 987 F.2d at 936). In a securities class action, when "plaintiffs will necessarily seek to develop facts relating to . . . the dissemination of allegedly false or misleading statements underlying their claims," the claims and nature of evidence "are generally considered sufficient to satisfy the typicality requirement." In re Vivendi Universal, S.A., 242 F.R.D. 76, 85 (S.D.N.Y. 2007).
The proposed class representatives are the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System, the Teacher Retirement System of Texas, Stichting Pensioenfonds Zorg en Welzijn, represented by PGGM Vermogensbeheer B.V., Fjarde AP-Fonden, and Grant Mitchell. (See Notice of Motion, Docket # 478.) As with the proposed class members, the class plaintiffs assert that they acquired BofA securities at prices allegedly inflated by defendants' misstatements and/or omissions, and have an interest in maximizing their recovery. Plaintiffs have established that their claims are typical of those shared by the class. The typicality requirement of Rule 23(a)(3) is satisfied.
D. Plaintiffs Have Established Adequacy.
The adequacy of representation inquiry under Rule 23(a) considers "whether: 1) plaintiff's interests are antagonistic to the interests of other members of the class and 2) plaintiff's attorneys are qualified, experienced and able to conduct litigation." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000). The adequacy and typicality prongs of Rule 23(a) are "often overlapping . . . ." In re Flag Telecom 574 F.3d at 31. "The focus is on uncovering 'conflicts of interest between named parties and the class they seek to represent.'" Id. at 35 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997)). The conflict must be "genuine." In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 291 (2d Cir. 1992); see also In re Literary Works, 654 F.3d at 249 (conflict "must be 'fundamental.'").
As discussed with respect to the typicality requirement, the interests of the proposed class representatives are not antagonistic to the interests of the proposed class members. Defendants do not contend otherwise. Separately, plaintiffs have retained experienced and qualified counsel who have, to date, ably conducted this litigation. (Castaldo Dec. Exs. 4-6.) The plaintiffs have satisfied the adequacy requirement.
E. The Proposed Class Is Ascertainable.
Courts have also found an implied requirement of ascertainability to the express requirements set forth in Rule 23(a). SeeIn re Sadia, S.A. Sec. Litig., 269 F.R.D. 298, 305 (S.D.N.Y. 2010) (citing In re IPO, 471 F.3d at 30). "An identifiable class exists if its members can be ascertained by reference to objective criteria." In re Fosamax Prods. Liab. Litig., 248 F.R.D. 389, 395 (S.D.N.Y. 2008) (quoting In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 209 F.R.D. 323, 337 (S.D.N.Y. 2002)). Whether a potential class member purchased BofA stock during the Class Period and thereby suffered damages can be determined via objective criteria. Thus, members of the class are ascertainable.
II. PLAINTIFFS' '34 ACT CLAIMS SATISFY RULE 23(b)(3).
Rule 23(b)(3) "requires the party seeking certification to show that 'questions of law or fact common to class members predominate over any questions affecting only individual members' and that class treatment would be superior to individual litigation." Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010) (quoting Rule 23(b)(3)). The "predominance requirement tests whether a proposed class is sufficiently cohesive to warrant adjudication by representation." In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 480 (2d Cir. 2008). It "ensures that the class will be certified only when it would 'achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.'" Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 104 (2d Cir. 2007) (ellipsis in original; quoting Amchem, 521 U.S. at 615). "Therefore the requirement is satisfied 'if resolution of some of the legal or factual questions that qualify each class member's ...