in the united states district court western district...

IN THE UNITED STATES DISTRICT COURTWESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

CITY OF PONTIAC GENERALEMPLOYEES’ RETIREMENTSYSTEM,Individually and on Behalf of All OthersSimilarly Situated

Plaintiff,

v.

WAL-MART STORES, INC., andMICHAEL T. DUKE,

Defendants.

))))))))))))))))))

No. 5:12-cv-05162 SOH

MEMORANDUM IN SUPPORT OF DEFENDANTS’MOTION TO SEQUENCE CLASS AND MERITS DISCOVERY

Case 5:12-cv-05162-SOH Document 151 Filed 10/10/14 of 31 PageID #: 2719

i

TABLE OF CONTENTS

Page

I. INTRODUCTION .............................................................................................................. 1

II. THIS COURT SHOULD EXERCISE ITS BROAD DISCRETION TOSEQUENCE CLASS AND MERITS DISCOVERY......................................................... 3

III. THIS CASE INVOLVES SIGNIFICANT QUESTIONS TO BE RESOLVEDUNDER RULE 23 .............................................................................................................. 9

IV. SEQUENCING IS PARTICULARLY APPROPRIATE HERE GIVEN THESUBSTANTIAL QUESTIONS ABOUT WHETHER PGERS CAN CARRY ITSBURDEN TO ESTABLISH PREDOMINANCE AND MANAGEABILITY ................ 12

A. The Presumption Of Reliance In Basic May Not Apply Because Of ALack Of Price Impact. ........................................................................................... 12

B. Defendants Are Entitled To Rebut The Basic Presumption In Other WaysThat May Effectively End The Case With Denial Of Class Certification. ........... 15

V. SEQUENCING IS ALSO APPROPRIATE BECAUSE OF THE SUBSTANTIALQUESTIONS ABOUT PGERS’S ADEQUACY AND TYPICALITY AS ACLASS REPRESENTATIVE........................................................................................... 19

A. Preliminary Facts Strongly Suggest That PGERS Cannot AdequatelyRepresent The Proposed Class.............................................................................. 20

B. Class Discovery Is Also Likely To Show That PGERS Will Be Subject ToUnique Defenses And Cannot Meet Its Burden On Typicality. ........................... 23

VI. CONCLUSION................................................................................................................. 24


iii

TABLE OF AUTHORITIES

Page(s)

Cases

Amchem Prods., Inc. v. Windsor,521 U.S. 591 (1997).................................................................................................................. 17

Amgen Inc. v. Ct. Ret. Plans & Trust Funds,133 S. Ct. 1184 (2013).......................................................................................................... 6, 13

Antonson v. Robertson,1990 WL 58028 (D. Kan. 1990) ................................................................................................. 6

Basic Inc. v. Levinson,485 U.S. 224 (1988)...................................................................................................... 10, 11, 16

Biben v. Card,789 F. Supp. 1001 (W.D. Mo. 1992) ........................................................................................ 16

Bielski v. Cabletron Sys.,311 F.3d 11 (1st Cir. 2002)....................................................................................................... 12

Broussard v. Meineke Disc. Muffler Shops, Inc.,155 F.3d 331 (4th Cir. 1998) .................................................................................................... 17

Carrera v. Bayer Corp.,727 F.3d 300 (3d Cir. 2013) ..................................................................................................... 17

Comcast Corp. v. Behrend,133 S. Ct. 1426 (2013).................................................................................................... 9, 10, 11

Cox v. Zurn Pex, Inc. and Zurn Indus., Inc.,No. 07-cv-03652 (D. Minn. Oct. 26, 2007) ................................................................................ 7

Dirks v. SEC,463 U.S. 646 (1983).................................................................................................................. 16

Eisen v. Carlisle & Jacquelin,417 U.S. 156 (1974).................................................................................................................. 10

Erica P. John Fund, Inc. v. Halliburton Co.,No. 3:02-cv-01152-M (N.D. Tex. July 22, 2014)..................................................................... 12

Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II),134 S. Ct. 2398 (2014)....................................................................................................... passim

In re Hamilton Bancorp Secs. Litig.,2002 WL 463314 (S.D. Fla. Jan. 14, 2002) ................................................................................ 9

Harris v. comScore, Inc.,2012 U.S. Dist. LEXIS 27665 (N.D. Ill. Mar. 2, 2012).......................................................... 6, 7



Page(s)

iv

Heerwagen v. Clear Channel Commc’ns,435 F.3d 219 (2d Cir. 2006) ....................................................................................................... 7

In re Hydrogen Peroxide Antitrust Litig.,552 F.3d 305 (3d Cir. 2009) ..................................................................................................... 17

Iron Workers Local No. 25 Pension Fund v. Credit-Based Asset Servicing & Securitization, LLC,616 F. Supp. 2d 461 (S.D.N.Y. 2009) ...................................................................................... 23

Kassover v. Computer Depot, Inc.,691 F. Supp. 1205 (D. Minn. 1987).......................................................................................... 20

Larson v. Burlington N. & Santa Fe Ry. Co.,210 F.R.D. 663 (D. Minn. 2002) ............................................................................................ 4, 7

Lawrence E. Jaffe Pension Plan v. Household Int’l, Inc.,2004 U.S. Dist. LEXIS 18993 (N.D. Ill. Sept. 20, 2004) ........................................................... 6

Lindsey v. Normet,405 U.S. 56 (1972).................................................................................................................... 16

Mathers, et al. v. Northshore Mining Co.,No. 99-cv-01938 (D. Minn. Jan. 17, 2001)................................................................................. 7

McLaughlin v. Am. Tobacco Co.,522 F.3d 215 (2d Cir. 2008) ..................................................................................................... 17

Miles v. Merrill Lynch & Co. (In re IPO Secs. Litig.),471 F.3d 24 (2d Cir. 2006) ..................................................................................................... 5, 6

In re Milk Prods. Antitrust Litig.,195 F.3d 430 (8th Cir. 1999) .................................................................................................... 23

Nat. Org. for Women v. Sperry Rand Corp.,88 F.R.D. 272 (D. Conn. 1980) .................................................................................................. 5

In re Northfield Labs. Sec. Litig.,264 F.R.D. 407 (N.D. Ill. 2009)...................................................................................... 6, 12, 21

Ortiz v. Fibreboard Corp.,527 U.S. 815 (1999).................................................................................................................. 17

PGERS v. Lockheed Martin Corp.,844 F. Supp. 2d 498 (S.D.N.Y. 2012) ................................................................................ 21, 22

Phillips v. Philip Morris Cos.,2013 U.S. Dist. LEXIS 91189 (N.D. Ohio June 28, 2013)......................................................... 5

Pipes v. Life Investors Ins. Co. of Am.,254 F.R.D. 544 (E.D. Ark. 2008) ............................................................................................. 20

Public Pension Fund Group v. KV Pharmaceutical,679 F.3d 972 (8th Cir. 2012) .................................................................................................... 18



Page(s)

v

Rakes v. Life Inv. Ins. Co. of Am.,582 F.3d 886 (8th Cir. 2009) .................................................................................................. 4, 8

In re Red Hat, Inc. Sec. Litig.,2011 WL 4434053 (E.D. N.C. Sept. 22, 2011)........................................................................... 6

Roseman Profit Sharing Plan v. Sports & Rec.,165 F.R.D. 108 (M.D. Fla. 1996) ............................................................................................. 21

In re Salomon Analyst Metromedia Litig.,544 F.3d 474 (2d Cir. 2008) ........................................................................................... 6, 12, 16

In re SemGroup Energy Partners, L.P.,2010 U.S. Dist. LEXIS 135209 (N.D. Okla. Dec. 21, 2010)................................................ 9, 12

Smith v. Dominion Bridge Corp.,2007 U.S. Dist. LEXIS 26903 (E.D. Pa. Apr. 11, 2007) ............................................................ 6

Stewart v. Winter,669 F.2d 328 (5th Cir. 1982) ...................................................................................................... 4

Stoneridge Inv. Partners, LLC v. Scientific-Atlanta,552 U.S. 148 (2008).................................................................................................................. 16

Stringfellow v. Perry,869 F.2d 1140 (8th Cir. 1989) .................................................................................................... 3

Telco Group, Inc. v. Ameritrade, Inc.,2006 U.S. Dist. LEXIS 13264 (D. Neb. Mar. 6, 2006) .............................................................. 5

Tracy v. Dean Witter Reynolds, Inc.,185 F.R.D. 303 (D. Colo. 1998) ................................................................................................. 5

Wal-Mart Stores, Inc. v. Dukes,131 S. Ct. 2541 (2011)....................................................................................................... passim

Washington v. Brown & Williamson Tobacco Corp.,959 F.2d 1566 (11th Cir. 1992) .............................................................................................. 4, 7

In re Zurn Pex Plumbing Prods. Liab. Litig.,644 F.3d 604 (8th Cir. 2011) .................................................................................................. 4, 7

Statutes

28 U.S.C. § 2072(b) ...................................................................................................................... 17

Rules

Fed. R. Civ. P. 23........................................................................................................................ 3, 4

Fed. R. Civ. P. 23(b)(3)................................................................................................................. 10

Fed. R. Civ. P. 23(b)(3)(D) ........................................................................................................... 17

Fed. R. Civ. P. 23(c)(1)................................................................................................................. 17



Page(s)

vi

Fed. R. Civ. P. 26(c) ....................................................................................................................... 3

Fed. R. Evid. 301 .......................................................................................................................... 14

W.D. Ark. L.R. 26.1(13)................................................................................................................. 7

Other Authorities

Macey, The Fraud on the Market Theory:Some Preliminary Issues, 74 Cornell L. Rev. 923 (1989) ........................................................ 16

Manual for Complex Litigation § 21.14 (4th ed. 2004).......................................................... 5, 7, 8

Newberg on Class Actions § 7.17 (5th ed. 2013) ........................................................................... 5

Stout, Are Stock Markets Costly Casinos?Disagreement, Market Failure, and Securities Regulation, 81 Va. L. Rev. 611 (1995).......... 16


1

I. INTRODUCTION

Now that the Court has ruled on the motion to dismiss, this case will move into

discovery. Defendants respectfully submit that a staged approach, beginning initially with a

short period focused on class-related discovery issues, will best conserve the resources of the

parties and the Court, and is the most efficient way to proceed with this lawsuit. There are

serious questions to be resolved at the class certification stage that could be case-dispositive, and

therefore it makes sense to resolve class certification before requiring the parties to bear the

significant burdens of merits-related discovery before class certification is resolved.

As made clear by the cases discussed below, when plaintiffs seek to litigate Section 10(b)

claims—or any claims—on a classwide basis, class discovery relating to Rule 23 is frequently

prioritized before other discovery and sequenced first. In this way, the parties can focus on the

question of class certification at the outset, potentially avoiding the need for burdensome

inquiries into other issues that, as a practical matter, may be mooted.

Sequencing class and non-class discovery is particularly appropriate here, because there

are substantial questions about whether PGERS will be able to carry its burden under Rule 23 to

establish all the elements required for this Court to certify the class, including adequacy,

typicality, and predominance of common issues of law and fact such that the case can be tried

manageably as a class action in a manner that preserves Defendants’ rights to present all their

available defenses. As an initial matter, there is a substantial reason to believe that the so-called

“fraud-on-the-market” presumption of investor reliance will not apply here, which would

potentially defeat predominance, and thus class certification; and this prospect makes a

sequenced, deliberate approach to discovery especially prudent. This is true for two reasons.

First, under the Supreme Court’s recent decision in Halliburton Co. v. Erica P. John Fund, Inc.


2

(Halliburton II), 134 S. Ct. 2398, 2412 (2014), Defendants intend to show that the putative class

cannot be certified because the alleged misrepresentations found by the Court in its September

26, 2014 ruling did not result in any measurable “price impact” in connection with Wal-Mart

stock. Based on the showing Defendants intend to make in their opposition to class certification

(as previewed in this motion), PGERS will be required to come forward with persuasive

evidence demonstrating that the December 2011 Form 10-Q upon which this case is centered did

in fact impact Wal-Mart’s stock price. Defendants believe that Plaintiff will be unable to make

this showing. Second, the nature of the alleged misstatements here—as framed by this Court’s

ruling on Defendants’ motion to dismiss that PGERS has adequately alleged that the Form 10-Q

misrepresented to investors that the Company only learned of the alleged improper conduct at

Wal-Mex in the first quarter of fiscal 2012—is such that, even assuming the statements were

material, it is likely that most individual and institutional investors would not have changed their

investment decisions even if they had been made aware of the alleged misstatement at the time

they decided to purchase Wal-Mart stock between December 8, 2011 and the end of the class

period. In short, Wal-Mart expects to show that this is not a case where Defendants merely can

“pick off the occasional class member here or there through individualized rebuttal,” but rather a

case in which the presumption of reliance—which the Supreme Court has emphasized is

rebuttable—will be inapplicable to many, if not all, investors. Halliburton II, 134 S. Ct. at 2412.

If, as here, the presumption of reliance does not apply classwide for any reason, this Court must

find that individualized questions would predominate and render a classwide trial unmanageable,

precluding class certification. Such a ruling likely would effectively end the case, and along

with it, any need to engage in the wide-ranging and costly discovery that Plaintiff says it intends

to pursue. Id.


3

Moreover, a sequenced, orderly approach to discovery here is particularly appropriate

given the existence of substantial questions concerning PGERS’s adequacy as a class

representative. PGERS has been involved in more than 40 securities class actions, and

approximately half of those were with its current counsel; the frequency with which Plaintiff

engages in similar securities litigation with its counsel suggests that PGERS may be a “litigation

opportunist” that will be subject to unique defenses rendering it unfit to serve as the named

plaintiff here. There is also strong evidence indicating that PGERS lacks the resources to

adequately oversee this litigation.

Accordingly, as discussed below, the Court should exercise its broad discretion to

sequence discovery here in a manner that will serve the interests of conserving resources for the

Court and the parties.

II. THIS COURT SHOULD EXERCISE ITS BROAD DISCRETION TO SEQUENCECLASS AND MERITS DISCOVERY

Pursuant to Federal Rule of Civil Procedure 26(c), this Court “may, for good cause, issue

an order to protect a party or person from annoyance, embarrassment, oppression, or undue

burden or expense,” including by “limiting the scope of disclosure or discovery to certain

matters.” See also Stringfellow v. Perry, 869 F.2d 1140, 1143 (8th Cir. 1989) (“District courts

are afforded wide discretion in their handling of discovery matters.”).

PGERS made clear in a recent telephone call with defense counsel (see Declaration of

Jonathan C. Dickey ¶ 5) that it intends to demand sweeping discovery that would unnecessarily

impose substantial expenditures of time and resources on the parties and the Court, bogging

down these proceedings and unduly delaying the potentially case-dispositive question of whether

PGERS can satisfy its burdens under Federal Rule of Civil Procedure 23.

There is no reason to proceed that way. Courts frequently exercise their discretion to


4

sequence class and merits discovery, recognizing that doing so often serves the interests of

judicial efficiency and economy. “To make early class determination practicable and to best

serve the ends of fairness and efficiency, courts may allow classwide discovery on the

certification issue and postpone classwide discovery on the merits.” Washington v. Brown &

Williamson Tobacco Corp., 959 F.2d 1566, 1570–71 (11th Cir. 1992); see also, e.g., Stewart v.

Winter, 669 F.2d 328, 331 (5th Cir. 1982) (“In light of the mandate of Rule 23(c)(1) . . . we think

it imperative that the district court be permitted to limit pre-certification discovery to evidence

that, in its sound judgment, would be ‘necessary or helpful’ to the certification decision.”

(footnote omitted)); Larson v. Burlington N. & Santa Fe Ry. Co., 210 F.R.D. 663, 666 (D. Minn.

2002); accord 2003 Advisory Committee Note to Fed. R. Civ. P. 23 (recognizing that bifurcation

may be appropriate to limit discovery to material relevant to class certification inquiry).

Although the Eighth Circuit does not appear to have squarely ruled on a dispute

concerning bifurcation of class and merits discovery, it has stated “there is little doubt that

bifurcated discovery may increase efficiency in a complex case.” In re Zurn Pex Plumbing

Prods. Liab. Litig., 644 F.3d 604, 612–13 (8th Cir. 2011); see also Rakes v. Life Inv. Ins. Co. of

Am., 582 F.3d 886, 896 (8th Cir. 2009) (affirming denial of Rule 56(f) motion and grant of

summary judgment following first phase of bifurcated discovery encompassing “class

certification and fact discovery as to named plaintiffs”).

The Manual on Complex Litigation encourages bifurcation of class certification and

merits discovery where the issues may be separated: although class certification issues

frequently overlap with the merits, “[d]iscovery relevant only to the merits delays the

certification decision and may ultimately be unnecessary. Courts often bifurcate discovery

between certification issues and those related [exclusively] to the merits of the allegations. . . .”


5

Manual for Complex Litigation § 21.14 (4th ed. 2004) (emphasis added). In securities class

actions, “a district judge must be accorded considerable discretion to limit both discovery and the

extent of the hearing on Rule 23 requirements,” and in ruling on class certification, the court

should not “assess any aspect of the merits unrelated to a Rule 23 requirement.” Miles v. Merrill

Lynch & Co. (In re IPO Secs. Litig.), 471 F.3d 24, 41 (2d Cir. 2006).

In deciding whether to bifurcate or sequence class and merits discovery, “[c]ourts

ordinarily assess the efficiency of such bifurcation, particularly as it relates to the quantity of

discovery and the timing of court proceedings.” Newberg on Class Actions § 7.17 (5th ed.

2013).

The discovery permitted must be sufficiently broad in order that the plaintiffshave a realistic opportunity to meet these requirements [of Rule 23, Fed. R. Civ.P.]; at the same time, the defendant must be protected from discovery which isoverly burdensome, irrelevant, or which invades privileged or confidential areas.Discovery is not to be used as a weapon, nor must discovery on the merits becompleted precedent to class certification. Unnecessarily broad discovery willnot benefit either party.

Phillips v. Philip Morris Cos., 2013 U.S. Dist. LEXIS 91189, at *8 (N.D. Ohio June 28, 2013)

(quoting Nat. Org. for Women v. Sperry Rand Corp., 88 F.R.D. 272, 277 (D. Conn. 1980)); see

also Telco Group, Inc. v. Ameritrade, Inc., 2006 U.S. Dist. LEXIS 13264, at *10–11 (D. Neb.

Mar. 6, 2006); Tracy v. Dean Witter Reynolds, Inc., 185 F.R.D. 303, 304–05 (D. Colo. 1998).

In addition to these general principles of burden and relevance, courts often consider

three factors in determining whether to sequence class certification and non-class certification

issues: (1) the severability of class certification and other issues; (2) whether bifurcated

discovery will serve the interest of expediency by aiding the court in making a timely

determination on the class certification motion; and (3) the interest of economy, measured both

by the potential impact the class certification decision will have upon the pending litigation, as


6

well as whether the class definition would help the court to impose limits on merits discovery.

Harris v. comScore, Inc., 2012 U.S. Dist. LEXIS 27665, at *8–9 (N.D. Ill. Mar. 2, 2012).

Here, each of the relevant factors favors sequencing class and merits discovery. First, as

discussed in greater detail below, the class certification inquiry here will focus substantially

(although not exclusively) on the “fraud-on-the-market” presumption of reliance—a presumption

that Defendants are entitled to rebut at the class certification stage. See infra Parts III, IV. In

such circumstances, numerous courts have exercised their broad discretion to limit discovery at

the Rule 23 stage, in part because discovery focused on the fraud-on-the-market presumption can

be undertaken separately from the more burdensome inquiries concerning other aspects of a

Section 10(b) class action.1 For example, whether the statements at issue were actually false or

misleading, whether the statements were material or immaterial, whether Defendants made them

with the requisite scienter, and other elements of the merits of Plaintiff’s claims have no or little

bearing on the class certification-specific issues of numerosity, commonality, typicality,

predominance, or superiority that Plaintiff must prove under Rule 23(a) and (b). See, e.g.,

Amgen Inc. v. Ct. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1191 (2013) (materiality was not a

“prerequisite to class certification” and had no bearing on predominance because it “is judged

according to an objective standard” and “would be so equally for all investors composing the

class”); Harris, 2012 U.S. Dist. LEXIS 27665, at *14.

Second, bifurcating discovery here serves Rule 23’s mandate that the class certification

1 See, e.g., In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 485–86 (2d Cir. 2008)(citing In re IPO, 471 F.3d at 41); In re Red Hat, Inc. Sec. Litig., 2011 WL 4434053, at *10(E.D. N.C. Sept. 22, 2011); In re Northfield Labs. Sec. Litig., 264 F.R.D. 407, 408 (N.D. Ill.2009); Smith v. Dominion Bridge Corp., 2007 U.S. Dist. LEXIS 26903, at *4 (E.D. Pa. Apr.11, 2007); Lawrence E. Jaffe Pension Plan v. Household Int’l, Inc., 2004 U.S. Dist. LEXIS18993, at *4 (N.D. Ill. Sept. 20, 2004); Antonson v. Robertson, 1990 WL 58028, at *3 (D.Kan. 1990).


7

decision be made at an early practicable time in the litigation by avoiding the unnecessary delay

that engaging simultaneously in merits discovery poses.2 Bifurcation will allow the parties and

the Court to focus on the class certification issues and expedite a class certification hearing.

Again, class certification discovery is likely to focus largely on expert reports and testimony

relating to market efficiency, price impact, and other issues relevant to reliance. That limited

discovery could be completed, and a decision on certification could well be determined, within a

few months, rather than after a protracted period in which the Defendants search for, and the

Plaintiff examines, possibly hundreds of thousands or even millions of pages of documents

relevant only to the underlying merits of Plaintiff’s claims. See also W.D. Ark. L.R. 26.1(13)

(“In the typical case, the deadline for filing motions for class certification should be no later than

ninety (90) days after the Fed. R. Civ. P. 26(f) conference.”). Wal-Mart respectfully submits that

a relatively short period for class certification discovery would suffice, as reflected on the

attached illustrative schedule.3

Third, and relatedly, limiting discovery to class certification issues would greatly

“reduce expense” and “conserve the resources of the parties.” Heerwagen v. Clear Channel

2 See, e.g., Washington, 959 F.2d at 1570–71; Cox v. Zurn Pex, Inc. and Zurn Indus., Inc., No.07-cv-03652 (D. Minn. Oct. 26, 2007), ECF No. 22 at 8; Mathers, et al. v. NorthshoreMining Co., No. 99-cv-01938 (D. Minn. Jan. 17, 2001), ECF No. 20 at 1, 4; Larson v.Burlington Northern & Santa Fe Railway Co., 210 F.R.D. 663, 665–66 (D. Minn. 2002);Manual for Complex Litigation § 21.14 (4th ed. 2004); see also Harris, 2012 U.S. Dist.LEXIS 27665, at *9 (“Proceeding with merits discovery, which may well involve the reviewof millions of documents not directly relevant to the issues of class certification, may delaythe parties’ submission of supplemental briefing on the class certification issue. Any delaywould frustrate the court’s effort to certify the action as a class action ‘[a]t an earlypracticable time,’ as is mandated by Rule 23(c)(1)(A).”).

3 Defendants propose to meet and confer with Lead Plaintiff after the Court rules on thismotion and to adopt a joint proposed schedule to submit to the Court. The illustrativeschedule attached as Exhibit A is intended to show at least one approach to achieving thenecessary class certification discovery in a reasonably short period of time.


8

Commc’ns, 435 F.3d 219, 233–34 (2d Cir. 2006); see also In re Zurn Pex, 644 F.3d at 612–13;

Rakes, 582 F.3d at 896. The core issues concerning the fraud-on-the-market presumption are

driven largely by expert analysis of publicly available information, rather than any significant

inquiry into merits-related documents that may be in Defendants’ possession. See infra Part

IV.A. Therefore, Defendants, Plaintiff, and the Court should not be required to bear the

considerable burdens of merits discovery until after the Court has resolved the question of class

certification.

An early decision on class certification is particularly desirable here because a finding

that PGERS had not carried its burdens under Rule 23 would effectively end the class nature of

the proceeding, and potentially cause PGERS to abandon its claims if it chooses not to proceed

individually, or at minimum facilitate the expeditious resolution of any remaining individual

claims. See, e.g., Halliburton II, 134 S. Ct. at 2416 (“without proof of [reliance], the fraud-on-

the-market theory underlying the presumption completely collapses, rendering class certification

inappropriate”); Manual for Complex Litigation at § 21.14 (“in cases that are unlikely to

continue if not certified, discovery into aspects of the merits unrelated to certification . . . can

create extraordinary and unnecessary expense and burden”). And even if PGERS does carry its

burdens, an early decision on class certification will allow the Court to better determine the

scope of the proceedings going forward.

The “rigorous analysis” required to determine whether plaintiffs have carried their

burdens under Rule 23 will frequently “entail some overlap with the merits of the plaintiff’s

underlying claim”—here, in particular, between the reliance element and the predominance and

manageability requirements of Rule 23(b)(3). Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541,


9

2552 (2011); Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013).4 See infra Parts III, IV.

But there is no reason to rush to discovery concerning merits issues that are unrelated to class

certification, when the class certification issues can be litigated first with far less burden and may

well be dispositive. And Plaintiff cannot demonstrate that it will be materially prejudiced by the

sequencing of class and merits discovery.

III. THIS CASE INVOLVES SIGNIFICANT QUESTIONS TO BE RESOLVEDUNDER RULE 23

There are good reasons why discovery in Section 10(b) cases is so often sequenced

between class certification-related and other discovery. Securities plaintiffs, like other class

action plaintiffs, “must actually prove . . . that their proposed class satisfies each requirement of

Rule 23 . . . .” Halliburton II, 134 S. Ct. at 2412.

Under Rule 23(a), the party seeking certification must demonstrate, first, that:

(1) the class is so numerous that joinder of all members is impracticable,

(2) there are questions of law or fact common to the class,

(3) the claims or defenses of the representative parties are typical of the claimsor defenses of the class, and

(4) the representative parties will fairly and adequately protect the interests ofthe class . . . .

4 Notably, even where the courts have rejected formal bifurcation in a securities case becauseof some concern about crossover between the merits and class certification, they havefrequently “prioritized” class discovery and directed that the parties defer purely merits-related discovery until after certification, except where such discovery overlaps with classcertification issues. See, e.g., In re SemGroup Energy Partners, L.P., 2010 U.S. Dist. LEXIS135209, at *13 (N.D. Okla. Dec. 21, 2010); In re Hamilton Bancorp Secs. Litig., 2002 WL463314, at *1 (S.D. Fla. Jan. 14, 2002) (“A more reasoned approach is for the Court toapprove a detailed discovery plan which prioritizes ‘class’ related discovery, while notdepriving a plaintiff or defendant from engaging in ‘merits’ discovery when facts and issuesare inextricably intertwined, or to otherwise address requirements which are essentialprerequisites to class determination under Federal Rule of Civil Procedure 23(a).”).


10

Dukes, 131 S. Ct. at 2548 (quotation marks omitted). Because it seeks money damages, PGERS

must also “satisf[y] the requirement of Rule 23(b)(3) that ‘the questions of law or fact common

to class members predominate over any questions affecting only individual members.’”

Halliburton II, 134 S. Ct. at 2406; see also Comcast, 133 S. Ct. at 1432 (“Certification is proper

only if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a)

have been satisfied[,]” and “[t]he same analytical principles govern Rule 23(b).” (citation and

internal quotation marks omitted)). If PGERS fails to do so, this Court must deny class

certification.5

Much (but not all) of the class certification dispute here will surround alleged reliance by

putative class members—an element of the Section 10(b) cause of action for which Plaintiff

bears the burden, and for which discovery can readily be focused. As the Supreme Court has

recently reaffirmed, “[i]nvestors can recover damages in a private securities fraud action only if

they prove that they relied on the defendant’s misrepresentation in deciding to buy or sell a

company’s stock.” Halliburton II, 134 S. Ct. at 2405, 2407; see also, e.g., Basic Inc. v.

Levinson, 485 U.S. 224, 243 (1988). Proving actual reliance on an individual basis would cause

individual issues to predominate over common issues, rendering class certification inappropriate.

However, in Basic, the Supreme Court adopted a “fraud-on-the-market” presumption, under

which reliance may be presumed if (among other things) a plaintiff proves that the securities

traded in an efficient market, such that material public statements are quickly incorporated into

5 Of course, Plaintiff must also satisfy Rule 23(b)(3)’s superiority and manageabilityrequirements by demonstrating that “a class action is superior to other available methods forfairly and efficiently adjudicating the controversy” and that any “difficulties likely to beencountered in the management of a class action” will not “render the class action formatinappropriate for a particular suit.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 164 & n.3(1974) (quoting Fed. R. Civ. P. 23(b)(3)); accord Dukes, 131 S. Ct. at 2558.


11

the trading price. Basic, 485 U.S. at 243; Halliburton II, 134 S. Ct. at 2408, 2416. If a plaintiff

cannot establish this presumption, however, the individualized inquiries concerning whether

investors relied on the supposed misstatements would overwhelm and predominate over any

common issues. Halliburton II, 134 S. Ct. at 2407–08.

Whether the Basic presumption will apply is therefore a proper question on which to

focus discovery in the first instance. Critical to the Supreme Court’s ruling in Halliburton II

upholding the Basic “fraud-on-the market” theory was the fact that the presumption is rebuttable

and “does not relieve plaintiffs of the burden of proving—before class certification—that

[predominance] is met.” Halliburton II, 134 S. Ct. at 2412. The presumption is rebutted if the

defendants make “any showing that severs the link between the alleged misrepresentation and

either the price received (or paid) by the plaintiff,” or the plaintiff’s decision to purchase or sell

at the market price—including that the investor did not actually rely on the market price, or that

the statements at issue did not impact the market price. Id. at 2408. Further, the Supreme Court

reemphasized its prior holdings in Dukes and Comcast, which required that “plaintiffs wishing to

proceed through a class action must actually prove—not simply plead—that their proposed class

satisfies each requirement of Rule 23, including . . . the predominance requirement of Rule

23(b)(3),” when it held in Halliburton II that “defendants must be afforded an opportunity before

class certification to defeat the presumption through evidence that an alleged misrepresentation

did not actually affect the market price of the stock.” Id. at 2412, 2417 (citing Dukes, 131 S. Ct.

at 2551; Comcast, 133 S. Ct. at 1432). Once defendants meet their burden of production to rebut

the fraud-on-the-market presumption, the burden of persuasion shifts back to plaintiffs to

establish classwide reliance. The failure of PGERS to meet this burden would mean that

individualized inquiries concerning investor reliance would defeat predominance under Rule


12

23(b)(3).

The availability of the Basic presumption can be determined through expert testimony

analyzing price impact, along with discovery of a limited number of individual investors, without

the need for burdensome document production and deposition testimony from Defendants. See

Halliburton II, 134 S. Ct. at 2412, 2415; In re Salomon, 544 F.3d at 485–86. Therefore,

considerations of efficiency and judicial economy heavily favor beginning with this targeted

discovery concerning class certification, because it may well obviate the need for further

proceedings.6 In fact, on remand from the Supreme Court, the Halliburton II district court

recently stayed merits discovery pending a determination on class certification, while allowing

further expert witness discovery regarding price impact. Erica P. John Fund, Inc. v. Halliburton

Co., No. 3:02-cv-01152-M, ECF #561 (N.D. Tex. July 22, 2014).

IV. SEQUENCING IS PARTICULARLY APPROPRIATE HERE GIVEN THESUBSTANTIAL QUESTIONS ABOUT WHETHER PGERS CAN CARRY ITSBURDEN TO ESTABLISH PREDOMINANCE AND MANAGEABILITY

A. The Presumption Of Reliance In Basic May Not Apply Because Of A LackOf Price Impact.

There are particularly good reasons to sequence class and non-class discovery here,

because of the substantial questions concerning whether the alleged misstatements had any

impact on Wal-Mart’s stock price. Plaintiff is not entitled to proceed as a class using the fraud-

on-the-market presumption if the alleged misstatements did not impact the price of Wal-Mart

stock. Halliburton II, 134 S. Ct. at 2414. Without the presumption, individualized inquiries into

6 See, e.g., In re Salomon, 544 F.3d at 485–86; Bielski v. Cabletron Sys., 311 F.3d 11, 42 (1stCir. 2002) (holding that prior to class certification in securities cases, “the district court may,in its discretion, limit or structure discovery so that potentially dispositive issues areaddressed first”); In re SemGroup, 2010 U.S. Dist. LEXIS 135209, at *13 (prioritizing classdiscovery would “alleviate . . . concerns about extensive and costly discovery” concerningnon-class issues); In re Northfield Labs., 264 F.R.D. at 408.


13

reliance would predominate and the standards for class certification could not be met. Id. at

2416. As noted above, the Supreme Court recently clarified in Halliburton II that “[p]rice

impact is . . . an essential precondition for any Rule 10b-5 class action,” that “has everything to

do with the issue of predominance at the class certification stage.” Id. (emphasis added). The

Court further ruled that courts must allow defendants to present evidence on the absence of price

impact at the class certification stage. Id. at 2417.

The fundamental premise underlying the Basic presumption is that an investor

presumptively relies on the integrity of the market for a company’s stock, and thus relies on the

market price of the stock to reflect a public material misrepresentation of fact that is rapidly

incorporated into the market price at the time of the investor’s transaction. Id. at 2414. But “if it

was not [so incorporated], then there is no grounding for any contention that the investor

indirectly relied on that misrepresentation . . . .” Id. (quoting Amgen, 133 S. Ct. at 1199).

Absent “price impact,” that is, a demonstration that “the alleged misrepresentations affected the

market price in the first place,” “‘the basis for finding that the fraud had been transmitted

through market price would be gone’” and the presumption would fail—and “without the

presumption of reliance, a Rule 10b-5 suit cannot proceed as a class action.” Id. at 2414–16.

And, as discussed above, Halliburton II mandated that “defendants must be afforded an

opportunity before class certification to defeat the presumption through evidence that an alleged

misrepresentation did not actually affect the market price of the stock.” Id. at 2417 (emphasis

added). It would be “bizarre” if the rule were otherwise, because when the evidence

demonstrates that the Basic presumption will not apply, there is no reason a case “should be

certified and proceed as a class action (with all that entails).” Id. at 2416.

Under Halliburton II, therefore, Defendants intend to provide the Court with evidence


14

rebutting the Basic presumption on the ground that the alleged misrepresentations concerning

Wal-Mart’s global internal review and investigation made in its December 8, 2011 Form 10-Q

did not impact the price of Wal-Mart stock.7 Defendants expect to show through expert

testimony included with its briefing on class certification that the challenged statement did not

impact the price of Wal-Mart’s stock at the time it was made. For example, a preliminary

analysis of the contemporaneous stock price reaction shows that there was no statistically

significant movement in Wal-Mart’s stock price following the filing of the Company’s

December 8, 2011 Form 10-Q after the market closed. See Declaration of Dr. Andrew S. Carron

¶¶ 20–22. On December 8, 2011, the stock price closed at $57.98, and closed on December 9,

2011 at $58.32, which was statistically insignificant when appropriately adjusted for normal

market variation. Id. ¶ 21 & Ex. 6. For example, the Carron Declaration at Exhibit 6 shows that,

after adjusting for normal market variation, the change in closing price one day after Wal-Mart’s

10-Q filing was less than seven cents per share, which was not statistically significant in light of

the expected variation between the actual observed stock price and the stock price predicted by

market and industry factors. Id. Defendants also expect to provide further expert analysis of the

absence of price impact during the class certification briefing. Although more investigation is

required, the preliminary analysis is an important indication that the December 8, 2011 statement

did not “actually affect the stock’s price . . . .” Halliburton II, 134 S. Ct. at 2405. And if it did

not, then PGERS cannot meet its burden under Rule 23(b)(3), and a class cannot be certified

because individualized issues would predominate. Id. at 2405, 2416.

7 Under Federal Rule of Evidence 301, even assuming Plaintiff offers evidence to support thefraud-on-the-market presumption (i.e., evidence of an efficient market), Defendants wouldmerely bear the burden of production of evidence to rebut it (i.e., evidence of no priceimpact); Plaintiff would at all times retain the burden of persuasion to establish that thepresumption should apply.


15

Critically, market efficiency and price impact will be established here largely through

expert reports analyzing publicly available information; no discovery of Defendants’ emails,

documents, or other files will be necessary to address this threshold issue of whether common

questions will predominate. See Halliburton II, 134 S. Ct. at 2415 (noting that price impact can

be established through “‘event studies’—regression analyses that seek to show that the market

price of the defendant’s stock tends to respond to pertinent publicly reported events”).

At a minimum, the apparent lack of any statistically significant price impact on the days

following the alleged misstatement means that there is a substantial question whether this class

will be certified and whether full-blown merits discovery will ever be needed. Given the

considerable potential that this Court’s ruling on price impact—and therefore on

predominance—may wholly or largely dispose of this class action, it would be most efficient to

defer merits-only discovery until after resolution of the class certification question. Accordingly,

sequenced discovery is appropriate here.

B. Defendants Are Entitled To Rebut The Basic Presumption In Other WaysThat May Effectively End The Case With Denial Of Class Certification.

Another reason for sequencing class and non-class discovery here is that the alleged

misstatements at issue are particularly unlikely to have been relied upon by many Wal-Mart

investors. Because Defendants are entitled to rebut the presumption of reliance as to individual

investors in opposition to class certification, this is another substantial reason that the case could

effectively end with a denial of class certification, which would obviate the need to conduct

burdensome discovery unrelated to whether PGERS can meet the requirements of Rule 23.

As Halliburton II explained, a defendant is entitled to rebut the Basic presumption as to

individual plaintiffs. 134 S. Ct. at 2412. Most directly, a defendant may rebut the presumption

of reliance by showing “that an individual plaintiff traded or would have traded despite his


16

knowing the statement was false.” Basic, 485 U.S. at 248 (emphasis added). If individual

investors would not have altered their investment decisions even had they been aware of the

misstatement, the presumption is rebutted and the 10b-5 claim fails as to those investors.

Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 159 (2008); see also Dirks v.

SEC, 463 U.S. 646, 666–67 n.27 (1983). More commonly, the defendant may “rebut the

presumption of reliance with respect to an individual plaintiff by showing that he did not rely on

the integrity of the market price in trading stock.” Halliburton II, 134 S. Ct. at 2412; accord,

e.g., In re Salomon, 544 F.3d at 485–86 (remanding to allow defendants to attempt to rebut the

presumption by showing that “particular plaintiffs may not have relied on market price”); Biben

v. Card, 789 F. Supp. 1001, 1003 (W.D. Mo. 1992).8 If the defendant offers proof that “‘severs

the link between the alleged misrepresentation and either the price received (or paid) by the

plaintiff, or his decision to trade at a fair market price,’” the presumption is rebutted and the

“plaintiff would have to prove that he directly relied on the defendant’s misrepresentation in

buying or selling the stock.” Halliburton II, 134 S. Ct. at 2408 (quoting Basic, 485 U.S. at 248).

A defendant’s right to rebut the Basic presumption as to individual plaintiffs is

constitutionally protected. Due process “requires that there be an opportunity to present every

available defense,” Lindsey v. Normet, 405 U.S. 56, 67 (1972), and “a class cannot be certified

on the premise that [defendant] will not be entitled to litigate” its “defenses to individual claims,”

Dukes, 131 S. Ct. at 2561. Moreover, using the class action device to sweep away individual

8 See also Macey, The Fraud on the Market Theory: Some Preliminary Issues, 74 Cornell L.Rev. 923, 925 (1989) (some investors “attempt to locate undervalued stocks in an effort to‘beat the market’ . . . in essence betting that the market . . . is in fact inefficient”); Stout, AreStock Markets Costly Casinos? Disagreement, Market Failure, and Securities Regulation, 81Va. L. Rev. 611, 656–58 (1995) (investor transactions can be “motivated by liquidity, tax[and] portfolio-balancing concerns” rather than a belief in the integrity of the market price).


17

defenses would violate the Rules Enabling Act, which “forbids interpreting Rule 23 to ‘abridge,

enlarge or modify any substantive right.’” Id. (quoting 28 U.S.C. § 2072(b)).9

Wal-Mart expects class discovery to show that the issue of reliance is inherently

individualized in this case—that is, the question whether a given investor relied on the Form 10-

Q or on the integrity of the market price is not “capable of classwide resolution,” and resolving it

as to any single class member will not “generate common answers apt to drive the resolution of

the litigation.” Dukes, 131 S. Ct. at 2551. Indeed, there is no conceivable trial plan that would

allow defendants to fairly present rebuttal evidence as to every individual class member within

the context of class proceedings. See Fed. R. Civ. P. 23(c)(1), advisory committee note, 2003

amend. (“A critical need is to determine how the case will be tried.”); In re Hydrogen Peroxide

Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2009) (“in introducing the concept of a ‘trial plan,’

the Advisory Committee’s 2003 note focuses attention on a rigorous evaluation of the likely

shape of a trial”). Plaintiff is thus unlikely to carry its burden of proving that a class action

would be manageable. Fed. R. Civ. P. 23(b)(3)(D).

The case may effectively end on this basis. Defendants expect to rebut the Basic

presumption by offering substantial evidence in opposition to class certification that many

individual investors would not have invested differently had they been aware of the alleged

9 See also Ortiz v. Fibreboard Corp., 527 U.S. 815, 845 (1999); Amchem Prods., Inc. v.Windsor, 521 U.S. 591, 612–13 (1997); Carrera v. Bayer Corp., 727 F.3d 300, 307 (3d Cir.2013) (a “class action cannot be certified in a way that eviscerates” a defendant’s “dueprocess right to raise individual challenges and defenses to claims”); McLaughlin v. Am.Tobacco Co., 522 F.3d 215, 232 (2d Cir. 2008) (shortcuts adopted to “mask the prevalence ofindividual issues” are “an impermissible affront to defendants’ due process rights”);Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 345 (4th Cir. 1998).


18

misstatement contained in the December 2011 Form 10-Q.10 Plaintiff’s theory is that the Form

10-Q gave the “false impression” that the Company only learned of the alleged misconduct in

2011 and then immediately commenced an internal investigation and contacted government

authorities. Amended Complaint ¶¶ 7, 24, 32. Adopting Plaintiff’s theory, this Court held that

the December 2011 Form 10-Q “could have left a reasonable investor with the impression that

Defendants first learned of the suspected corruption during fiscal year 2012.” Dkt. 146 at 5.

Significantly, this Court did not hold that Defendants had a duty to disclose any particular facts

about the 2005 and 2006 events, much less the myriad salacious details reported in The New

York Times on April 21, 2012 that allegedly led to a temporary price decline.11 Thus, even

assuming that the Form 10-Q was misleading (which, Defendants maintain, it was not),

PGERS’s preferred disclosure would have informed investors only that the Company received

information about alleged FCPA violations in 2005, that it previously looked into those

allegations, and that it was now investigating both the original allegations and the way in which

the company handled them in 2006. The lack of any direct relationship between the statements

at issue and the Company’s future cash flows or underlying financial condition make it relatively

unlikely that most investors’ “decision[s] to engage in the transaction[s]” were actually affected

by the alleged misstatement in the December 2011 Form 10-Q.

At a minimum, following Halliburton II and Dukes, Defendants are allowed to raise this

10 Defendants may also present evidence that certain investors—such as hedge funds and othertraders who use non-value-based analytics—did not rely on the integrity of the market price.

11 That is well, because no such duty exists. See Dkt. 134 at 12–21 (citing cases); PublicPension Fund Group v. KV Pharmaceutical, 679 F.3d 972, 984 (8th Cir. 2012) (“While Rule10b-5 requires an actor to provide complete and non-misleading information with respect tothe subjects on which he undertakes to speak . . . the requirement is not to dump all knowninformation with every public announcement[.]”).


19

individualized defense at class certification. Specifically, Defendants intend to develop evidence

showing that certain individual investors would not have transacted differently even had they

been made aware of the alleged misstatement, thereby rebutting the presumption of reliance as to

those class members. And although Defendants obviously cannot rebut the presumption for

every class member at class certification (neither could they do so at trial given the large number

of class members, which is why Plaintiff is unlikely to satisfy its burden of proving that a class

action is manageable), they intend to demonstrate that they would be able to show non-reliance

for many, if not most, investors.

To make this showing, Wal-Mart will need only limited discovery from individual

members of the putative class, including deposition testimony and transaction history. That

rebuttal evidence may obviate the need for a full-blown trial on the merits, or at minimum the

need for extensive discovery concerning other elements of PGERS’s case, such as scienter or

falsity. See supra.

In sum, there is a substantial question as to whether PGERS can establish predominance

and manageability. As such, deferring merits discovery until after resolution of the class

certification motion is warranted to avoid what would be an enormous undue burden on the

parties and the Court.

V. SEQUENCING IS ALSO APPROPRIATE BECAUSE OF THE SUBSTANTIALQUESTIONS ABOUT PGERS’S ADEQUACY AND TYPICALITY AS A CLASSREPRESENTATIVE

Finally, sequencing class and non-class discovery is particularly appropriate here

because there are substantial questions about whether PGERS can carry its burdens under

Rule 23(a) to demonstrate that it is an adequate or typical plaintiff.


20

A. Preliminary Facts Strongly Suggest That PGERS Cannot AdequatelyRepresent The Proposed Class.

As to adequacy, there is already good reason to believe that PGERS is a frequent plaintiff

that abdicates control of the numerous cases in which it is represented by Robbins Geller, and if

these concerns are borne out by class discovery, the class cannot be certified. “Although

Plaintiffs are entitled to rely on the expertise of counsel, a class representative is inadequate

when he has so little knowledge of and involvement in the case that he is unable to adequately

protect class interests against the possibly competing interests of attorneys.” Pipes v. Life

Investors Ins. Co. of Am., 254 F.R.D. 544, 550 (E.D. Ark. 2008); see also Kassover v. Computer

Depot, Inc., 691 F. Supp. 1205, 1213 (D. Minn. 1987) (plaintiff’s deposition revealed that he was

“unfamiliar with several critical aspects of” the litigation and “rather than competently

controlling the course of the litigation, plaintiff . . . contented himself to rely entirely upon his

attorney’s direction”).

As shown by the chart attached as Exhibit C to the Declaration of Steven J. Johnson,

PGERS has been represented by Robbins Geller or its predecessor firm as the plaintiff in a large

number of securities class actions over the past several years. Defendants believe that class

discovery will show that Robbins Geller and PGERS are parties to a “monitoring agreement,” by

which Robbins Geller monitors the companies in which PGERS owns common stock and

recommends to PGERS that a class action be filed whenever there has been a significant price

decline in a stock held by PGERS in one of its investment funds. See Johnson Decl., Ex. A at

3:8–4:23. Defendants believe that further class discovery will show that Robbins Geller is hired

by PGERS in such circumstances to prosecute the case that Robbins Geller has recommended,

and that thereafter there is no meaningful oversight of Robbins Geller by PGERS. Discovery

regarding the named plaintiff’s involvement in other, similar actions—particularly where, as


21

here, the same Plaintiff and law firm have worked together on several cases involving similar

securities class action claims—is plainly appropriate at the class certification stage to challenge

adequacy. See, e.g., Roseman Profit Sharing Plan v. Sports & Rec., 165 F.R.D. 108, 111 (M.D.

Fla. 1996); see also In re Northfield Labs., 264 F.R.D. at 411 (explaining that Roseman

plaintiffs’ involvement in “as many as ten or eleven” similar securities lawsuits “raised a concern

that the plaintiffs were litigation opportunists who were attempting to ‘buy a lawsuit’ rather than

relying on the integrity of the market”).

Indeed, Defendants believe that class discovery will show that, at the time Robbins Geller

recommended to PGERS that the present case be filed, the primary client contact at PGERS for

Robbins Geller was Ellen Zimmerman, who testified at a 2011 hearing on the issue of PGERS’s

proposed appointment as lead plaintiff in another class action initiated by Robbins Geller for

PGERS, PGERS v. Lockheed Martin Corp., 844 F. Supp. 2d 498 (S.D.N.Y. 2012), that she had

been in charge of monitoring PGERS litigation cases since 2004, and that her role included

reporting on the cases to the Board of Trustees. See Johnson Decl., Exhibit A at 5:10–12, 12:6–

15. Ms. Zimmerman further testified that she reviewed court filings and amended complaints for

many years but never asked the lawyers to make a single change. Id. at 21:12–22:2. Instead, she

merely received monthly reports from Robbins Geller and forwarded them to the PGERS Board

of Trustees. Id. at 20:19–22 (Court: “So as I understand it, your monitoring consists of receiving

their reports and presenting it to the Board; yes?” Ms. Zimmerman: “Yes, you could say that.”).

Ms. Zimmerman also stated that she had never called Robbins Geller to ask a question about a

particular report, and she had difficulty describing anything she did with respect to PGERS’s

cases. Id. at 18:6–22:2. Although the court in Lockheed ultimately appointed PGERS as the lead

plaintiff, the court expressed reservations over PGERS’s lack of meaningful oversight of


22

Robbins Geller and the litigation. 844 F. Supp. 2d at 502.

Defendants believe that Ms. Zimmerman was the executive director of PGERS at the

time that Robbins Geller was engaged in this case, and that Ms. Zimmerman monitored the case

for PGERS during the pendency of this action until she passed away unexpectedly in January

2014. See Johnson Decl., Exs. D, E, F. Thereafter, PGERS’s finance director, Deborah Munson,

was appointed interim executive director. Johnson Decl., Ex. F. With limited staffing, and with

Ms. Munson fulfilling two different positions, PGERS began a search to find a permanent

executive director later in 2014. Id. At the June 2014 PGERS board meeting, the chairman

noted that finding a permanent executive director should be a priority because “it has been six

months and Ms. Munson has been working long hours.” Johnson Decl., Ex. G at 6. According

to PGERS’s website, PGERS was accepting applications for the permanent position of executive

director through September 5, 2014. Johnson Decl., Ex. T.

Defendants intend to take Ms. Munson’s deposition as well as additional depositions

during class discovery to determine whether, in fact, there has been any meaningful oversight of

Robbins Geller in this case since inception, and whether this action has, in fact, been purely

lawyer-driven by Robbins Geller from the very start. Defendants believe that following class

discovery, the evidence will show in this case that PGERS is stretched so thin that it relies on

one executive director to run all of its operations, that there has been no permanent executive

director in place since January 2014, and that it is not clear whether any new executive director

of PGERS will be able to direct this litigation at all or control Robbins Geller in any meaningful

way.

In addition, Defendants intend to take discovery concerning the relationship between

PGERS and Robbins Geller under the “monitoring agreement” between the two that apparently


23

led to the filing of the present lawsuit—the same sort of monitoring agreement that has been

criticized when used by Robbins Gellar’s predecessor firm as “foster[ing] the very tendencies

towards lawyer-driver litigation that the PSLRA was designed to curtail.” Iron Workers Local

No. 25 Pension Fund v. Credit-Based Asset Servicing & Securitization, LLC, 616 F. Supp. 2d

461, 464 (S.D.N.Y. 2009) (finding that Coughlin Stoia’s client was not a suitable lead plaintiff

because its representative “had only a rough idea of what [the] lawsuit was all about” and had

employed no steps to obtain disinterested advice or counsel from any lawyers other than

Coughlin Stoia). A monitoring agreement could well constitute an additional reason that PGERS

is not an adequate class representative, precluding certification of the proposed class and

obviating the need to conduct discovery that is unrelated to class certification issues.

B. Class Discovery Is Also Likely To Show That PGERS Will Be Subject ToUnique Defenses And Cannot Meet Its Burden On Typicality.

A class representative is not typical if “it is subject to a unique defense that threatens to

play a major role in the litigation.” In re Milk Prods. Antitrust Litig., 195 F.3d 430, 437 (8th Cir.

1999). Defendants believe that class discovery will show that throughout the pendency of this

litigation, the PGERS board has been in turmoil. In addition to allegations of misconduct by its

board, as detailed in several articles and other materials, PGERS continues to rely on an

investment consultant who has been involved in a number of scandals as well, including one in

which he purportedly recommended a PGERS investment in a fund that turned out to be

fraudulent. Johnson Decl., Exs. H, I, J, K, M, N, Q, R, S. Accordingly, Defendants believe that

when PGERS’s investment in Wal-Mart stock is placed in issue, PGERS may be subject to

unique defenses.

These are all proper subjects of class discovery on the issues of adequacy and typicality,

and given the preliminary facts so far, such discovery should be ordered to proceed first, because


24

the need for other discovery could well be mooted.

VI. CONCLUSION

Staying or limiting merits discovery while the parties focus their resources on class

certification issues, with the goal of expediting the class certification decision, will conserve the

resources of the Court and the parties—and resolution of price impact and other class

certification issues could dispose of the class aspect of the litigation entirely. Accordingly, there

is good cause for sequencing of discovery here.

DATED: October 10, 2014

THEODORE J. BOUTROUS JR.JONATHAN C. DICKEY

MARK A. PERRY

GEORGE H. BROWN

BRIAN M. LUTZ

GIBSON DUNN & CRUTCHER LLP333 SOUTH GRAND AVENUE

LOS ANGELES, CA 90071-3197TELEPHONE: (213) 229-7000FAX: (213) 229-7520

Respectfully submitted,

/s/ Jess Askew IIIJESS ASKEW III (Ark. Bar No. 86005)[email protected] WINELAND (Ark. Bar No. 81168)[email protected] ROCK LLP124 WEST CAPITOL AVENUE, SUITE 2000LITTLE ROCK, AR 72201TELEPHONE: (501) 975-3000FAX: (501) 975-3001

Counsel for Wal-Mart Stores, Inc. and Michael T. Duke


25

CERTIFICATE OF SERVICE

I hereby certify that on this 10th day of October, 2014, I electronically filed the foregoingwith the Clerk of Court using the Electronic Case Filing system, which will send notification ofsuch filing to the following counsel for plaintiff:

BARRETT JOHNSTON MARTIN & GARRISON, LLCGeorge E. BarrettJerry E. MartinDouglas S. Johnston, Jr.Timothy K. Miles414 Union Street, Suite 900Nashville, TN 37219Tel: 615-244-2202Fax: 615-252-3798

ROBBINS GELLER RUDMAN & DOWD LLPDarren J. RobbinsDavid C. WaltonJason A. ForgeDanielle Myers655 West Broadway, Suite 1900San Diego, CA 92101Tel: 619-231-1058Fax: 619-231-7423

PATTON, TIDWELL, SCHROEDER & CULBERTSON, L.L.P.Nicholas H. PattonGeoffrey P. Culbertson2800 Texas BoulevardTexarkana, TX 75503Tel: 903-792-7080Fax: 903-792-8233

SULLIVAN WARD ASHER PATTON PCCynthia J. Billings25800 Northwestern Highway, Suite 1000Southfield, MI 48075Tel: 248-746-0700

/s/ Jess Askew IIIJess Askew III


in the united states district court western district...

Documents