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Youngers v. Virtus Investment Partners Inc.

United States District Court, S.D. New York

May 15, 2017

MARK YOUNGERS, et al., individually and on behalf of all others similarly situated, Plaintiffs,
v.
VIRTUS INVESTMENT PARTNERS INC., et al., Defendants.

          OPINION & ORDER

          WILLIAM H. PAULEY III, District Judge:

         Lead Plaintiffs Mark Youngers, et al. (“Plaintiffs”) bring this securities class action on behalf of themselves and others who purchased various mutual funds issued by Virtus Opportunities Trust (“Virtus Trust”) between May 8, 2010 and December 22, 2014. Plaintiffs move to certify a class. For the reasons that follow, Plaintiffs' motion is denied.

         BACKGROUND

         The allegations of the Second Amended Complaint (“Complaint”) are accepted as true for the purpose of this motion for class certification.[1] In brief, Plaintiffs allege that, in 2009, Virtus Partners began marketing a family of funds called “AlphaSector.” (Compl. ¶ 56.) 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. ¶¶ 69-76.) But, in fact, the AlphaSector indices did not come into existence until 2008. (Compl. ¶ 4.)

         LEGAL STANDARD

         Federal Rule of Civil Procedure 23, which governs class certification, “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). But “‘Rule 23(b)(3)'s predominance criterion is even more demanding' than the ‘rigorous analysis' mandated under Rule 23(a), and requires a ‘close look at whether common issues predominate over individual ones.'” Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70, 103 (2d Cir. 2015) (quoting Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432 (2013)).

         DISCUSSION

         Plaintiffs move to certify a class of investors in Virtus Partners stock who were harmed by Virtus's misstatements. Specifically, the proposed class consists of:

purchasers of Virtus Allocator Premium AlphaSector Fund Class A, C, and I shares (VAAAX, VAACX, VAISX), Virtus AlphaSector Rotation Fund Class A, C, and I shares, (PWBAX, PWBCX, VARIX), Virtus Dynamic AlphaSector Fund Class A, B, C, and I shares (EMNAX, EMNBX, EMNCX, VIMNX), Virtus Global Premium AlphaSector Fund Class A, C, and I shares (VGPAX, VGPCX, VGPIX), and Virtus Premium AlphaSector Fund Class A, C, and I shares (VAPAX, VAPCX, VAPIX) (“AlphaSector Funds”) during the period from May 8, 2010 through December 22, 2014, inclusive (the “Class Period”).

(Mem. In Support of Motion to Certify Class, ECF No. 130, at 1.)

         Defendants do not dispute that the proposed class meets the requirements for numerosity, commonality, or superiority. Instead, they argue, among other things, that Plaintiffs fail to allege that common questions predominate because it has failed to allege class-wide reliance or damages.

         I. Predominan ...


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