United States District Court, D. Minnesota
Pfefferbaum, Kenny Black, and Mack Reid, for Lead Plaintiff.
McLaughlin, for Defendants.
FRANKLIN L. NOEL UNITED STATES MAGISTRATE JUDGE
MATTER came before the undersigned United States
Magistrate Judge on Lead Plaintiff's motions for leave to
file a second amended class complaint for violations of
federal securities law (ECF No. 284), and motion to compel
(ECF No. 213). For the reasons set forth below, Lead
Plaintiff's motion for leave to file a second amended
class complaint (ECF No. 284) is DENIED, and
his motion to compel (ECF No. 213) is DENIED without
Best Buy's 2010 Statements
protracted securities litigation stems from a dispute over
the impact that a series of Defendant Best Buy Company
Incorporated's (“Best Buy”) late 2010 public
statements had on the valuation of, and demand for, its
publicly traded stock shares. At the heart of the dispute is
Lead Plaintiff's allegation that Best Buy knew that its
late 2010 statements were false and were issued with the
fraudulent intent of galvanizing investor interest and
confidence in its stock value at a time when its sales,
revenues, and market share were in perceptible decline.
Buy is a Minnesota based retailer, focusing its product line
and services, primarily, on a range of consumer electronics.
On September 14, 2010, at around 8:00 a.m., Best Buy issued a
press release regarding its forecasted financial performance,
market position, and product line sales revenue for the
second fiscal quarter of 2011. See ECF No. 282 at 2.
Specifically, the press release reported “a decline of
0.1% in comparable store sales growth; lower sales across
home theater, and entertainment hardware and software;
decreased traffic in stores; and its first decline in market
share in eighteen quarters.” ECF No. 200 at 2-3.
Despite the tepid substance of the forecast, the 8:00 a.m.
press release announced that Best Buy was increasing its
earnings-per-share guidance by ten cents. See Id.
Best Buy's common stock, which closed the day before at
$34.65, opened the morning of September 14, 2010, at $37.25
per share, a 7.5% increase. See ECF No. 240 at 3.
same day, at around 10:00 a.m., Best Buy held a conference
call, in which its Chief Financial Officer
(“CFO”), Jim Muehlbauer issued a more favorable
statement regarding its expected financial prospects and
market share for the second fiscal quarter in 2011. See
Id. Muehlbauer stated that “Best Buy [was] on
track to deliver and exceed [the] annual [earnings-per-share]
. . . guidance and . . . that Best Buy's earnings [were]
essentially in line with [its] original expectations for the
year and offered further earnings-per-share guidance.”
ECF No. 200 at 3. Best Buy's stock closed trading that
day at $36.73 per share. See ECF No. 240 at 3.
November of 2010, Best Buy's stock value continued to
rise, trading at a high point of $45.63 per share on November
23, 2010. See ECF No. 41 at 8. On November 24, 2010,
two days before Black Friday, Mike Vitelli, Best Buy's
Enterprise Executive Vice President and President for the
Americas claimed in an interview with Neil Cavuto of Fox News
that Best Buy's flat-screen television sales were
“going really strong” and intimated that customer
demand for this product was high. ECF No. 78 at 20. On the
morning of Black Friday, November 26, 2010, Best Buy's
Chief Executive Officer (“CEO”), Brian Dunn
stated that Best Buy “estimat[ed] about an 8 percent
increase in our [store] traffic . . . . The crowds are
terrific . . . people are absolutely spending money.”
ECF No. 41 at 6. Later that day, “[i]n another
interview . . . with Bloomberg's Erik Schatzker's
Inside Track, . . . Dunn stated that based on the activity he
had seen thus far at Best Buy stores, people are absolutely
spending money. The registers have been going nonstop since
we opened the doors.” ECF No. 61 at 56. On December 13,
2010, Best Buy's stock value had stabilized at $41.70 per
share. See ECF No. 41 at 7.
the optimism of the Black Friday statements, beginning in mid
December 2010, Best Buy's public statements reported
marginal or poor sales performance. See ECF No. 78
at 20. On December 14, 2010, Best Buy issued a press release
reporting declining sales revenues for its third fiscal
quarter of 2010. See Id. at 6. In addition, during
the same December 14, 2010, press release, Best Buy reduced
its previous earning-per-share guidance. See Id.
Later that day, Muehlbauer explained that Best Buy's
sales revenues were lower than expected in the third fiscal
quarter of 2010, and by the day's end on December 14,
2010, Best Buy's stock value had dropped to $35.52 per
share, a 14% decline. See Id. at 7.
February 18, 2011, this action was initiated on behalf of
Best Buy common stock purchasers between September 14, 2010,
and December 13, 2010 (“Class Period”). See
generally ECF No. 1. Throughout this case, Plaintiffs
have asserted that both Best Buy's 8:00 a.m. press
release and 10:00 a.m. conference call on September 14, 2010,
were false and misleading statements and issued with the
intended effect of causing Best Buy's stock to trade at
artificially inflated prices throughout the Class Period.
See generally ECF No. 25. Plaintiffs have also
maintained that, as to the Black Friday related November 24,
2010, Fox News interview, Best Buy knew that its flat-screen
television sales were declining long before the interview was
given, and that Vitelli's false statement was material to
investors. See generally Id. “Plaintiffs . . .
allege that when Best Buy's true financial condition and
revenue and earnings prospects for FY11 were revealed,
investors transacted more than 64 million Best Buy
shares.” ECF No. 78 at 7.
7, 2011, Marion Haynes was appointed Lead Plaintiff, and this
Court consolidated several related actions against Best Buy
into this action pursuant to Federal Rule of Civil Procedure
42(a). See ECF No. 18. On July 22, 2011, Plaintiffs
filed an Amended Consolidated Class Complaint, raising two
counts under § 10(b), Rule 10b-5, and § 20(a) of
the Securities Exchange Act, 15 U.S.C. §§ 78j(b)
and 78t. See ECF No. 25.
March 20, 2012, the District Court dismissed Plaintiffs'
Amended Consolidated Class Complaint with prejudice, and
denied Plaintiffs' motion for leave to file a proposed
first amended class complaint. See generally ECF No.
41. The District Court concluded that Best Buy's
September 14, 2010, statements, both the 8:00 a.m. press
release and 10:00 a.m. conference call, included sufficient
cautionary language to immunize those statements from
securities liability under the Private Securities Litigation
Reform Act's (“PSLRA”) Safe Harbor provision,
15 U.S.C. § 78u-5c.See generally Id. Central to
the District Court's Order was its reasoning that
although “[Best Buy's] predictions of future growth
turned out to be wrong, [that] however, does not by itself
render [Best Buy's] projections fraudulent.”
Id. at 17. Regarding the November 24, 2010, Fox News
interview and Black Friday related statements, the District
Court concluded that “when considered along with [Best
Buy's] cautionary statements, the alleged
misrepresentations are simply forward-looking statements
concerning Best-Buy's estimated future economic
performance, and [were] immaterial statements.
Forward-looking statements of this nature and immaterial
statements are not actionable under the SEC Act . . .
.” Id. at 16. In addition, the District Court
opined that “Dunn's statements on November 26, 2010
concerned sales at one of Best Buy's stores, . . . [and]
were not intended as a blanket statement on [Best Buy's
behalf]” and Vitelli's “November 24, 2010[,
Fox News] interview was given before the Black Friday
weekend, and [was, therefore, mereley] anecdotal in nature .
. . .” Id. As to the request for leave to
amend, the District Court concluded that given “the
amount of time Plaintiffs took to complete their Amended
Complaint, as well as the large number of amended
allegations, [it] cannot envision a set of facts or
circumstances wherein a second amended complaint could
survive a motion to dismiss.” Id. at 19.
October 22, 2012, the District Court, pursuant to Federal
Rule of Civil Procedure 59(e), vacated judgement and granted
Plaintiffs' motion for leave to file their proposed first
amended class complaint pursuant to Federal Rule of Civil
Procedure 15(a). See ECF No. 60. The District Court
concluded that the “First Amended Class Action
Complaint . . . clarifies which [of Best Buy's]
statements are alleged to be false[, ] . . . why the
statements were false and material, provides additional
characterizations as to why [Best Buy's] purported risk
warnings were not sufficient to justify [S]afe [H]arbor
protection, and alleges . . . facts unknown [when] the
Consolidated Complaint was filed.” Id. at 6.
On October 29, 2012, Plaintiffs filed their First Amended
Class Complaint, again raising two counts under § 10(b),
Rule 10b-5, and § 20(a) of the Securities Exchange Act,
15 U.S.C. §§ 78j(b) and 78t, based again on the
September 14, 2010, 8:00 a.m. press release and 10:00 a.m.
conference call, Vitelli's November 24, 2010, Fox News
interview, and other related Black Friday statements. See
generally ECF No. 61.
August 5, 2013, the District Court, pursuant to Federal Rule
of Civil Procedure 12(b)(6), again dismissed Plaintiffs'
claims related to the September 14, 2010, 8:00 a.m. press
release, because it concluded that the statement was forward
looking and supported by sufficient cautionary language,
rendering it eligible for PLSRA Safe Harbor protection.
See ECF No. 78 at 18. Conversely, the District Court
concluded that Plaintiffs' claims related to the
September 14, 2010, 10:00 a.m. conference call were not
protected by the PLSRA Safe Harbor and did not dismiss those
claims. See Id. at 20. As to the Black Friday
statements, the District Court held that they were immaterial
and protected by the PSLRA Safe Harbor provision because
“Vitelli's November 24, 2010 [Fox News] interview
was given before the Black Friday weekend and is hyperbole .
. . [and] cannot form a basis for liability under federal
securities laws.” Id. at 22.
September 13, 2013, the parties filed a joint report pursuant
to Federal Rule of Civil Procedure 26(f) for the remaining
claims related to the September 14, 2010, 10:00 a.m.
conference call. See ECF No. 95. Shortly thereafter,
on September 25, 2013, this Court entered the Scheduling
Order, which provided that motions to amend the pleadings
must be filed by December 1, 2013, discovery must be
completed by January 1, 2015, all non-dispositive motions
must be filed by June 1, 2015, and all dispositive motions
must be filed by August 1, 2015. See ECF No. 102 at
January 31, 2014, Plaintiffs moved to certify the class on
the remaining claims relating to the September 14, 2010,
10:00 a.m. conference call. See ECF No. 126. On
August 6, 2014, the District Court, pursuant to Federal Rule
of Civil Procedure 23, certified the class on those claims.
See ECF No. 200 at 18. The District Court
acknowledged “that the question of [class]
certification in this action was difficult and involved
evolving and novel issues of law that were material to the
Court's decision” and concluded that class
certification “will prevent further, duplicative
litigation of the relevant claims and will serve to conserve
the resources of the Court and the parties by permitting the
issues to be litigated in an economical fashion.”
September 4, 2014, Plaintiffs filed the instant motion to
compel Best Buy to “reverse the indiscriminate and
improper designation of documents highly confidential and to
search for and produce documents from personal e-mail text
messages.” ECF No. 213. The instant motion to compel
was noticed for a September 29, 2014, hearing date.
See ECF No. 214. However, on September 11, 2014,
before Best Buy was required to respond to the instant motion
to compel, and before a hearing could be held, the District
Court provisionally stayed the case because Best Buy had
petitioned the Eighth Circuit to review the District
Court's class certification Order on the remaining
September 14, 2010, 10:00 a.m. conference call claims.
See ECF No. 223. The District Court reasoned that a
provisional stay was warranted pending the Eighth
Circuit's decision of whether to review the class
certification Order because “there [was] a good chance
the Eighth Circuit will grant [Best Buy's] petition for
permission to appeal . . . class certification” given
that “[Best Buy's] petition . . . raises legal
issues regarding Halliburton II that have not yet
been addressed by the Eighth Circuit.” Id. at
4. On September 24, 2014, the Eighth Circuit granted Best
Buy's petition to appeal the District Court's class
certification Order. See ECF Nos. 226, 227. On
October 22, 2014, the District Court indefinitely stayed the
case, “pending appeal” and the Eighth
Circuit's resolution of the class certification issue on
the remaining September 14, 2010, 10:00 a.m. conference call
claims. ECF No. 235 at 3; see also ECF No. 286 at
April 12, 2016, the Eighth Circuit Court reversed the
District Court's grant of class certification on the
claims relating to the remaining September 14, 2010, 10:00
a.m. conference call claims and remanded the case for further
proceedings. See generally ECF No. 240; see
also ECF No. 246. The Eighth Circuit found that
“[Best Buy presented] strong evidence . . . that the
economic substance of the non-fraudulent press release
statements and the alleged misrepresentations in the
immediately following conference call [were] virtually the
same, and that the two would have been expected to be
interpreted similarly by investors[, ]” which
“showed that the forward-looking [earnings per share]
guidance in the press release had an immediate impact on
[Best Buy's] market price, whereas the confirming
statements in the conference call two hours later had no
additional price impact.” ECF No. 240 at 11. On June 1,
2016, the Eighth Circuit denied Plaintiffs' Petition for
an en banc rehearing, rendering its reversal of the
District Court's class certification Order as final.
See ECF No. 244.
30, 2016, the District Court directed the parties to submit
proposals regarding: “(1) the current status of the
case; and (2) how best to proceed going forward.” ECF
No. 246. On July 7, 2016, Lead Plaintiff requested a brief
delay in responding in order to weigh his “options . .
. on how best to proceed going forward[, and requested that
a] case management conference be set for a date after the
petition for certiorari deadline” to appeal the issue
of class certification on the remaining September 14, 2010,
10:00 a.m. conference call claims to the United States
Supreme Court. ECF No. 250. On July 8, 2016, Best Buy
responded that it believed “it would be prudent to
continue the stay of the . . . trial court proceedings until
[L]ead Plaintiff advises the Court and [it] that he will not
file a petition, or until the [United States] Supreme Court
disposes of any petition filed” seeking review of the
Eighth Circuit's ruling on the issue of class
certification. ECF No. 251.
October 13, 2016, Lead Plaintiff notified the District Court
that he would not be filing a petition for
certiorari on the issue of class certification on
the remaining September 14, 2010, conference call claims to
the Untied States Supreme Court. See ECF No. 256. On
October 27, 2016, Lead Plaintiff represented that he intended
to move the case “forward as a class action not
inconsistent with” United States Supreme Court and
Eighth Circuit precedent. ECF No. 258. On November 4, 2016,
the District Court scheduled a case management conference for
January 6, 2017. See ECF No. 259.
January 6, 2017, case management conference, as a basis to
move the case forward, the parties discussed the need for
briefing on Lead Plaintiff's request for leave to file a
motion to once again certify the class on the remaining
September 14, 2010, 10:00 a.m. conference call claims.
See ECF No. 266 at 9, 35, 36. Lead Plaintiff
maintained that briefing on the issue of class certification
was not needed because the “cases that [he] . . . cited
to this Court from Judge Kyle clearly state that the renewed
motion for class certification is appropriate when there is
new evidence or new developments” notwithstanding the
Eighth Circuit's reversal. Id. at 36. The
viability of Lead Plaintiff's First Amended Class
Complaint or his desire to amend his First Amended Class
Complaint were not raised by Lead Plaintiff nor discussed by
the parties or the District Court at the January 6, 2017,
case management conference. See generally id.
January 20, 2017, Lead Plaintiff formally moved for leave to
file a new motion for class certification on the remaining
September 14, 2010, conference call claims. See ECF
No. 267. Lead Plaintiff's request to revisit the issue of
class certification was based on his desire to proffer new
“evidence that the September 14[, 2010, 10:00 a.m.]
conference call had a price impact by artificially
maintaining the inflated stock price.” Id. at
5. On June 23, 2017, the District Court denied Lead
Plaintiff's request for leave to file a new motion for
class certification. See ECF No. 282. In denying,
the District Court reasoned, inter alia, that
because the “Eighth Circuit concluded that the alleged
misstatements on the conference call did not have a price
impact[, ]” Lead Plaintiff would “have to proceed
with traditional evidence of reliance” to prevail on
his remaining security claims related to the September 14,
2010, 10:00 a.m. conference call. Id. at 5, 9.
“That is, [Lead Plaintiff] will have to show that [he]
heard the September 14[, 2010, 10:00 a.m.] conference call
and bought and sold [Best Buy's] stock because of that
call . . . .” Id. at 9.