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IBEW Local 98 Pension Fund v. Best Buy Co., Inc.

United States District Court, D. Minnesota

June 23, 2017

IBEW Local 98 Pension Fund, Marion Haynes, and Rene LeBlanc, individually and on behalf of all others similarly situated, Plaintiffs,
v.
Best Buy Co., Inc.; Brian J. Dunn; Jim Muehlbauer; and Mike Vitelli, Defendants.

          Clayton D. Halunen, Esq., and Melissa W. Wolchansky, Esq., Halunen & Associates; Shawn J. Wanta, Esq., Baillon Thome Jozwiak & Wanta LLP; Aelish M. Baig, Esq., Kenneth J. Black, Esq., Daniel J. Pfefferbaum, Esq., and Shawn A. Williams, Esq., Robbins Geller Rudman & Dowd LLP; and Vernon J. Vander Weide, Esq., Lockridge Grindal Nauen PLLP, counsel for Plaintiffs IBEW Local 98 Pension Fund and Marion Haynes, Lead Plaintiff.

          Clayton D. Halunen, Esq., Halunen & Associates; Shawn J. Wanta, Esq., Baillon Thome Jozwiak & Wanta LLP; D. Seamus Kaskela, Esq., and David M. Promisloff, Esq., Barroway Topaz Kessler Meltzer & Check, LLP; and Garrett D. Blanchfield, Jr., Esq., Reinhardt Wendorf & Blanchfield, counsel for Plaintiff Rene LeBlanc, individually and on behalf of all others similarly situated.

          Daniel J. Stujenske, Esq., George S. Wang, Esq., and Joseph M. McLaughlin, Esq., Simpson Thacher & Bartlett LLP; Eric J Magnuson, Esq., Jeffrey Sullivan Gleason, Esq., Nicole S. Frank, Esq., and Stephen P. Safranski, Esq., Robins Kaplan LLP; Jan M. Conlin, Esq., and Michael V. Ciresi, Esq., Ciresi Conlin LLP, counsel for Defendants.

          MEMORANDUM OPINION AND ORDER

          DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         Plaintiffs are stockholders of Defendant Best Buy Co., Inc. (“Best Buy”). Plaintiffs filed suit against Defendants for securities fraud and seek to represent a class of stockholders who were injured. This case is back on remand from the Eighth Circuit's reversal of this Court's order certifying the class. Plaintiffs now request permission to file a new motion for class certification. For the reasons discussed below, the Court denies Plaintiffs' request

         BACKGROUND

         On September 14, 2010, Best Buy issued a press release summarizing its financial performance for the second quarter of its fiscal year 2011. IBEW Local 98 Pension Fund v. Best Buy Co., 818 F.3d 775, 777 (8th Cir. 2016) (“Eighth Circuit Order”). The press release drove up the stock price. Then a few hours later, Best Buy held a conference call where its Chief Financial Officer stated that Best Buy's earnings would be “in line” with its original expectations and that Best Buy was “on track” with its original earnings-per-share guidance. Id. On December 14, 2010, Best Buy issued a press release reporting a decline in sales for the third quarter. Id. Likewise, Best Buy's CFO explained the lower sales in a conference call that day. Id. at 778. After these announcements, Best Buy's stock price fell.

         Plaintiffs filed suit for securities fraud based on the alleged misstatement in the September 14, 2010 press release and conference call. Defendants moved to dismiss. Id. This Court granted the motion to dismiss in part. The Court concluded that claims for the press release were not actionable, but that the claims for the conference call were. Id. Later, the Court granted Plaintiffs' motion to certify a class. Defendants appealed. On appeal, the Eighth Circuit reversed the certification and remanded the case. Plaintiffs now ask the Court to revisit class certification.

         DISCUSSION

         A plaintiff asserting liability for securities fraud under Section 10(b) or Rule 10b-5 must adequately allege: “‘(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.'” Minneapolis Firefighters' Relief Ass'n v. MEMC Elec. Materials, Inc., 641 F.3d 1023, 1028 (8th Cir. 2011) (quoting Stoneridge Inv. Partners, LLC v. Sci.-Atl., Inc., 552 U.S. 148, 157 (2008)). At issue here, is the reliance element of the claim. One way that a plaintiff can demonstrate that he relied on a misrepresentation is by showing that he knew about the statement and that he bought or sold stock based on that statement. Halliburton Co. v. Erica P. John Fund, Inc., 134 S.Ct. 2398, 2407 (2014) (“Halliburton II”). Having recognized the practical shortcomings of this approach in securities-fraud cases, a plaintiff is allowed to proceed based on a rebuttable presumption of reliance, often referred to as the fraud-on-the-market theory. Id. at 2407-08. This theory is based on the assumption that “well-developed markets reflect all publicly available information, and, hence, any material misrepresentation.” Id. at 2408. As a result, a stock buyer or seller is presumed to rely on the accuracy of the information because that information is deemed to be reflected in the market price. Id.

         A plaintiff can invoke the fraud-on-the-market theory by showing: “(1) that the alleged misrepresentations were publicly known, (2) that they were material, (3) that the stock traded in an efficient market, and (4) that the plaintiff traded the stock between the time the misrepresentations were made and when the truth was revealed.” Id. Without each of these elements, the plaintiff cannot invoke the fraud-on-the-market theory because it cannot be presumed that the purchase price fully incorporated all of the information in the market. Id. The use of the presumption proves vital for certifying a class action for securities fraud because without it the court would have to make individual inquiries into each plaintiff's reliance. Id. at 2416 (“Without proof of those prerequisites, the fraud-on-the-market theory underlying the presumption completely collapses, rendering class certification inappropriate.”).

         In Haliburton II, the Supreme Court acknowledged some of the shortcomings of the fraud-on-the-market theory. In particular, the Court conceded that we do not live in a binary world where markets are either efficient or not. For example, it turns out that some information is incorporated into the market price much quicker than other information. See Id. at 2421 (Thomas, J., concurring) (citing articles that determine that technical filings were digested and incorporated much slower than Wall Street Journal articles, for example). The Supreme Court therefore examined how to determine whether a particular misstatement had been incorporated into the stock price.

         The Court noted that the first three elements of the fraud-on-the-market theory (publicity, materiality, and efficient market) are directed toward price impact-that is, “whether the alleged misrepresentation affected the market price in the first place.” Id. at 2414. “In the absence of price impact, [the] fraud-on-the-market theory and presumption of reliance collapse.” Id. The Court held that after a plaintiff invokes the fraud-on-the-market presumption by showing price impact, a ...


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