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

United States District Court, D. Minnesota

July 11, 2018

IBEW Local 98 Pension Fund, et al., Plaintiffs,
v.
Best Buy Co., Inc., et al., Defendants.

          Daniel Pfefferbaum, Kenny Black, and Mack Reid, for Lead Plaintiff.

          Joseph McLaughlin, for Defendants.

          ORDER

          FRANKLIN L. NOEL UNITED STATES MAGISTRATE JUDGE

         THIS 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 prejudice.

         A. Background

         1. Best Buy's 2010 Statements

         This 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.

         Best 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.

         On that 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.

         Throughout 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.

         Despite 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.

         2. Procedural Posture

         On 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.

         On June 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.

         On 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.[1]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.

         On 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.

         On 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.

         On 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 1-2.

         On 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.” Id.

         On 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 14.

         On 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.

         On June 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.

         On 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.

         At the 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.

         On 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.

         3. ...


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