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In re Virtus Investment Partners, Inc. Securities Litigation

United States District Court, S.D. New York

May 15, 2017

In re VIRTUS INVESTMENT PARTNERS, INC. Securities Litigation

          OPINION & ORDER


         Lead Plaintiff the Arkansas Teacher Retirement System brings this securities class action on behalf of itself and others who purchased the publicly traded securities of Defendant Virtus Investment Partners (“Virtus Partners”) between January 25, 2013 and May 11, 2015. Lead Plaintiff moves to certify a class. For the reasons that follow, Lead Plaintiff's motion is granted.


         The allegations of the Amended Complaint (“Complaint”) are accepted as true for the purpose of this motion for class certification.[1] In brief, Lead Plaintiff alleges that, in 2009, Virtus Partners began marketing a family of funds called “AlphaSector.” (Compl. ¶¶ 4-5.) In marketing materials, Defendants represented that the outsized performance of the AlphaSector indices had been achieved through live trading with real client assets beginning in 2001. (Compl. ¶ 6.) But, in fact, the AlphaSector indices did not come into existence until 2008. (Compl. ¶ 50.) Then, in a January 2013 conference call, President and Chief Executive Officer George R. Aylward stated that “[o]ur portfolio managers continued to deliver strong relative investment performance, and this performance has been a key driver of our high level sales and net flows.” (Compl. ¶ 165.) In his remarks, Aylward neglected to state that at least a portion of that performance was attributable to the misleading statements in the AlphaSector indices.


         Federal Rule of Civil Procedure 23 governs class certification and “does not set forth a mere pleading standard.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Rather, “[t]he party seeking class certification must affirmatively demonstrate compliance with the Rule, and a district court may only certify a class if it is satisfied, after a rigorous analysis, that the requirements of Rule 23 are met.” In re Am. Int'l Grp., Inc. Sec. Litig., 689 F.3d 229, 237-38 (2d Cir. 2012) (internal quotation marks and alterations omitted).

         The moving party must first satisfy Rule 23(a), which “requires that a proposed class action (1) be sufficiently numerous, (2) involve questions of law or fact common to the class, (3) involve class plaintiffs whose claims are typical of the class, and (4) involve a class representative or representatives who adequately represent the interests of the class.” Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010) (citing Fed.R.Civ.P. 23(a)). In addition, “the proposed class must satisfy at least one of the three requirements listed in Rule 23(b).” Wal-Mart, 131 S.Ct. at 2548. Plaintiffs here rely on Rule 23(b)(3), which “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, 624 F.3d at 547 (quoting Fed.R.Civ.P. 23(b)(3)).

         “Generally, claims alleging violations of Section[ ] 10(b) . . . of the Exchange Act are especially amenable to class certification, ” In re Smith Barney Transfer Agent Litig., 290 F.R.D. 42, 45 (S.D.N.Y. 2013) (internal quotation marks omitted). And, “[i]n light of the importance of the class action device in securities fraud suits, these factors are to be construed liberally.” Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990).


         Lead Plaintiff moves to certify a class of investors in Virtus Partners common stock harmed by Virtus's misstatements. Specifically, the proposed class consists of:

all persons and entities that, during the period between January 25, 2013 and May 11, 2015, inclusive (the “Class Period”), who purchased or otherwise acquired shares of the publicly traded common stock of Virtus Investment Partners, Inc. and were damaged thereby (the “Class”).

(Mem. In Support of Motion to Certify Class, ECF No. 80, at 3.)

         Defendants oppose class certification and argue that (1) Lead Plaintiff fails to allege that common questions predominate because it does not allege class-wide reliance, (2)

         Lead Plaintiff's trading history makes it an unsuitable representative, and (3) in any event, if certification is granted the class period should be shortened.

         I. Rule 23(a) Requirements

         a. Numerosity

         Plaintiff must show that the proposed “class is so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). “‘Impracticable' simply means difficult or inconvenient, not impossible.” In re Currency Conversion Fee Antitrust Litig., 230 F.R.D. 303, 307 (S.D.N.Y. 2004) (citing Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993)). In the Second Circuit, “numerosity is presumed at a level of 40 members.” Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995). Here, several hundred million shares of Virtus stock were traded on the NASDAQ during the class period, with daily trading volumes averaging approximately sixty-five thousand shares. (See Expert Report of Chad Coffman (“Coffman Rep.”), ECF No. 81, Ex. D, ¶¶ 23-24.) Not only is the proposed class likely comprised ...

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