UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
BRATYA SPRL,
Plaintiff,
v. Case No. 1:22-cv-02541 (TNM)
BED BATH & BEYOND CORPORATION, et al.
Defendants.
MEMORANDUM ORDER
Once more, this Court must comb out a snarl in the securities fraud case against Bed Bath
and Beyond investor Ryan Cohen. The Court previously denied class certification to the
investors who claim they were defrauded by Cohen. Lead Plaintiff Bratya now moves for
reconsideration of that order. Bratya insists that the Court erroneously required it prove reliance
for a handful of its claims that require no such showing. And it argues that the Court wrongly
concluded shares for Bed Bath did not trade on an efficient market during the class period.
But Bratya’s arguments run the gamut from forfeited to recycled. Neither type of claim
is proper in a motion for reconsideration. In short, the Court finds no reason to depart from its
previous holdings.
I.
Only a brief background is necessary, as the relevant facts are found in the Court’s prior
order. See Bratya SPRL v. Bed Bath & Beyond Corp., --- F. Supp. 3d ---, 2024 WL 4332616, at
*1–*3 (D.D.C. Sept. 27, 2024). Cohen became a significant investor in Bed Bath and Beyond
stock (“BBBY”) at a time when the company was flailing. Id. at *1. But Cohen’s efforts to
revitalize the organization did not work. Id. Stock prices continued to fall—until, suddenly, and seemingly inexplicably, the trend reversed itself. Id. at *2. The share price soared in the
summer of 2022, although no positive information about the company was released. Id. Many
analysts contributed this rise to a short squeeze on the stock, consistent with a pattern of “meme
stock” investing. Id.
Cohen, a meme stock veteran, was active online at the time. On August 12, he retweeted
an article from CNBC that argued the price of BBBY was disconnected from its fundamental
value. Id. The article displayed a cover photo of a woman pushing a shopping cart stuffed with
Bed Bath merchandise. Id. In his retweet, Cohen retorted: “At least her cart is full ” Id.
To meme stock investors, this moon emoji is meaningful: It can suggest that a stock is
going “to the moon” and serve as “a rallying cry” to buy a certain stock. Id. In the days
following the tweet, the stock price continued to increase.
After the markets closed on August 15, Cohen and his investment firm filed an SEC
Form 3 that mirrored the Schedule 13D they had filed in March. Id. It noted their ownership
share in BBBY. Id. Before the market opened the next morning, Cohen and his firm filed an
amendment to the March Schedule 13D, noting that their share had increased “solely due to a
change in the number of outstanding Shares of the Issuer.” Id. The stock price continued to
climb.
But then Cohen swerved. On August 17, the Securities and Exchange Commission
published Cohen’s Form 144. Id. This form was backdated August 16 and revealed a “proposed
sale” of Cohen’s entire BBBY position. Id. And indeed, by market close that day, Cohen and
his firm had sold all their stock in the company. Id. The liquidation became public on August
18 when Cohen and his firm filed a Schedule 13D amendment disclosing that they had sold their
2 entire position on August 16 and 17. Id. After Cohen’s departure, the heyday was over. By
August 23, the stock was trading at less than a third of its peak price. Id.
This suit followed, alleging various violations of federal securities laws resulting from
the BBBY collapse. 1 After a round of motions briefing, these claims stood against Cohen and
his investment firm: violations of Section 10(b) of the Securities Exchange Act of 1934
(“Exchange Act”) and Rule 10b-5(b) promulgated thereunder; as well as violations of Sections
20(a), 9(a)(3), 9(a)(4), 9(f), and 20A of the Exchange Act. See Order on Mot. Dismiss, ECF No.
92; Second Am. Compl., ECF No. 66.
Investor Bratya SPRL then moved to certify a class of investors in BBBY common stock
and long call options who acquired the securities between August 12 and August 18, 2022. Bed
Bath & Beyond Corp., 2024 WL 4332616, at *3. This Court denied that motion. Id. at *21.
Although the Court found that Bratya satisfied the requirements of Rule 23(a), it concluded that
Bratya failed to show that common questions of law or fact would “predominate over any
questions affecting only individual members,” as required by Rule 23(b)(3). Id. at *4–*8, *21.
More specifically, the Court concluded that Bratya could not invoke the presumption put forth in
Basic Inc. v. Levinson, 485 U.S. 224 (1988), because it did not show that BBBY traded in an
efficient market during the stock period. Id. *19. And because Bratya could not lean on Basic, it
could not prove reliance—an essential element of its Exchange Act claims—on a class wide
basis. Id. at *9. Consequently, individual questions would swamp common ones. Id. So
resolution through a class action would be improper.
1 The original suit was against Cohen, his investment firm, Bed Bath & Beyond, and Bed Bath’s CEO, Sue Gove. Gove’s Motion to Dismiss was granted in full. In re Bed Bath & Beyond Corp. Sec. Litig., 687 F. Supp. 3d 1, 8 (D.D.C. 2023). And the case was stayed against Bed Bath because it declared bankruptcy. Id.
3 Bratya objects to that conclusion. It urges the Court to redo its work. Bratya offers four
reasons why the Court got it wrong the first time. First, it insists that its Section 20A claims do
not require reliance or, by extension, the Basic presumption, so the Court erred in throwing these
claims out along with the others. Pl.’s Mot. Recons., ECF No. 133, at 2–3. Second, it argues
that the defense failed to meet its burden of showing a lack of price impact, so the Basic
presumption was unrebutted. Id. at 3–5. Third, it contends that the Court wrongly assessed
questions of loss causation at the class certification stage, when that inquiry is only proper on the
merits. Id. at 5–8. And finally, it argues that the Court’s previous factual analysis of short-
selling constraints in the market for BBBY was erroneous. Id. at 8–10.
Cohen disagrees. Opp’n Recons., ECF No. 136. He argues that Bratya’s claims are
inappropriate for reconsideration because they are either forfeited or frivolous. Id. at 2–9. The
motion is now ripe for review.
II.
Rule 59(e) of the Federal Rules of Civil Procedure allows a court to alter or amend a
prior judgment, “but it may not be used to relitigate old matters, or to raise arguments or present
evidence that could have been raised” beforehand. Exxon Shipping Co. v. Baker, 554 U.S. 471,
485 n.5 (2008) (cleaned up). Such relief “is discretionary and need not be granted unless the
district court finds that there is an intervening change of controlling law, the availability of new
evidence, or the need to correct a clear error or prevent manifest injustice.” Messina v.
Krakower, 439 F.3d 755, 758 (D.C. Cir. 2006). A “clear error” means that the prior judgment is
“dead wrong”—that is, it “strike[s] [the Court] as wrong with the force of a five-week-old,
unrefrigerated dead fish.” Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233
(7th Cir. 1988). In short, a motion for reconsideration is not a vehicle for a litigant to rehash its
4 grievances or raise arguments it should have raised before. Instead, a motion for reconsideration
should be granted only when something new and salient has surfaced, or when the previous
judgment seriously stinks.
III.
Start with Bratya’s claim that its Section 20A allegations do not require an underlying
showing of reliance, rendering the Basic presumption nugatory. These claims are forfeited, and
therefore are improper for the present motion. And even if they were not forfeited, they are
wrong.
The Court and parties dedicated considerable resources to resolve the motion for class
certification. Bratya itself filed four briefs totaling 88 pages in support of its motion. And it
participated in hours of in-person testimony and argument to help clarify the complex issues. A
substantial fraction of this paper and presentation was spent belaboring the applicability of the
Basic presumption. Yet at no point did Bratya posit that “[r]eliance or the Basic presumption is
not necessary for” its Section 20A claim. Mot. Recons. at 2. Indeed, this is the first time the
Court is hearing the claim. But “Rule 59(e) motions are aimed at reconsideration, not initial
consideration.” District of Columbia v. Doe, 611 F.3d 888, 896 (D.C. Cir. 2010). Because
Bratya “could have made” this argument at several points earlier “but elected not to do so,” the
argument is forfeited. GSS Grp. Ltd v. Nat’l Port Auth., 680 F.3d 805, 812 (D.C. Cir. 2012).
Even if the argument had been preserved, it would still fail. Section 20A of the Exchange
Act provides that “[a]ny person who violates any provision of this chapter or the rules and
regulations thereunder by purchasing or selling a security while in possession of material,
nonpublic information” is liable to contemporaneous traders of securities of the same class. 15
U.S.C. § 78t-1. Thus a plaintiff must allege that the defendant (1) committed an underlying
5 violation of the Exchange Act or its rules and regulations (2) “by purchasing or selling a
security” (3) while having insider information. Id. (emphasis added). In effect, this means
“there can only be § 20A liability if the predicate violation of the Exchange Act was an act of
insider trading.” In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 665 (S.D.N.Y. 2007); see also
Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 362 (1991) (“The
language of § 20A makes clear that the 100th Congress sought to alter the remedies available in
insider trading cases, and only in insider trading cases.”). More, a plaintiff must prove a
violation of the underlying Exchange Act provision, meaning it must establish that each element
of that predicate offense is satisfied. Johnson v. Aljian, 490 F.3d 778, 781 (9th Cir. 2007).
Bratya’s allegations fail for a couple of reasons. First, because it points to Sections 13(d)
and 16(a) of the Exchange Act, as well as SEC Rules 144 and 13d-1, as predicate violations
supporting its Section 20A claim. This will not do. All four of these provisions impose
disclosure and reporting requirements on investors. 15 U.S.C. § 78m(d); 15 U.S.C. § 78p(a); 17
C.F.R. § 230.144; 17 C.F.R. § 240.13d-1. Flouting these registration obligations is not insider
trading. That is, the failure to accurately fill out a form is different from the buying and selling
of securities based on nonpublic and material information—even if the form were willfully
manipulative. See 4 Thomas Lee Hazen, Treatise on the Law of Securities Regulation 292 (8th
ed., 2024).
Under the plain language of Section 20A, Cohen did not violate these reporting
obligations “by purchasing or selling a security.” 15 U.S.C. § 78t-1. If he did violate the
requirements, he did so by giving false information to the SEC. Thus these disclosure provisions
cannot serve as predicate violations for a Section 20A claim. See Jackson Nat. Life Ins. Co. v.
6 Merrill Lynch & Co., 32 F.3d 697, 703 (2d Cir. 1994) (“Congress added § 20A . . . to remedy the
very specific problems inherent in prosecuting insider trading cases.”).
Bratya also argues that violations of Sections 9 and 10(b) of the Exchange Act undergird
its Section 20A assertion. Mot. Recons. at 2. These predicates fail for a different reason:
Contrary to Bratya’s claims, proving a Section 20A infraction requires a showing that each
element of the predicate violation is met. Aljian, 490 F.3d at 781 (holding that “violates” as used
in § 20A “mean[s] that a person has satisfied the essential elements of the proscribed act.”). And
because Sections 9 and 10(b) both require a showing of reliance, so too does a Section 20A claim
based on them. Id. at 782 (holding that a plaintiff using § 10(b) as a predicate violation must
prove reliance); Cohen v. Stevanovich, 722 F. Supp. 2d 416, 433 (S.D.N.Y. 2010) (§ 9(a)). But
this Court already found that Bratya failed to demonstrate class wide reliance. Bed Bath &
Beyond Corp., 2024 WL 4332616, at *19. So the Section 20A claim based on Sections 9 and
10(b) still fails. Accord Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., 663 F. Supp. 3d 334, 379
(S.D.N.Y. 2023) (dismissing Section 20A claim premised on implausible Section 10(b) claim,
and collecting cases in which Section 20A claims were dismissed for failure to allege elements
of underlying violation).
Move now to Bratya’s next line of attack. Bratya asserts that Cohen failed to meet his
burden of showing a lack of price impact and thus the Basic presumption went unrebutted. Mot.
Recons. at 3–4. Bratya points to the drop in stock price on August 19, the day the market learned
of Cohen’s wholesale liquidation. Id. at 3–4; see also Bed Bath & Beyond Corp., 2024 WL
4332616, at *20. Bratya contends the statistical significance of this “corrective disclosure”
undermines Cohen’s duty to show a lack of price impact of the earlier misrepresentations. Mot.
Recons. at 3.
7 There are a few problems with Bratya’s challenge. True, back-end price reductions when
a truth is revealed can show that front-end misrepresentations were previously factored into a
stock price. See FindWhat Inv. Grp. v. FindWhat.com, 658 F.3d 1282, 1310 (11th Cir. 2011) (“If
and when the misinformation is finally corrected by the release of truthful information (often
called a ‘corrective disclosure’), the market will recalibrate the stock price to account for this
change in information, eliminating whatever artificial value it had attributed to the price.”). This
theory is often called the inflation-maintenance theory of price impact. In re Allstate Corp. Sec.
Litig., 966 F.3d 595, 612 (7th Cir. 2020); but see Goldman Sachs Grp., Inc. v. Arkansas Tchr.
Ret. Sys., 594 U.S. 113, 120 n.1 (2021) (“Although some Courts of Appeals have approved the
inflation-maintenance theory, this Court has expressed no view on its validity or its contours.”).
But the Court has seen this film before. Bratya already pressed the Court at length about
the salience of the purported corrective disclosure. Bed Bath & Beyond Corp., 2024 WL
4332616, at *20; see also Pl.’s Suppl. Memo., ECF No. 129, at 2, 3, 8, 9, 17, 22; Tr. Evid. Hr’g,
ECF No. 127, 202:21–203:25. The Court did not find Bratya’s arguments compelling then. Bed
Bath & Beyond Corp., 2024 WL 4332616, at *20. Bratya may not now use its motion for
reconsideration to paddle in water under the bridge.
More, Bratya misunderstands the relevant sequence of events. Cohen would only need to
show a lack of price impact had Bratya established the Basic presumption. Goldman Sachs Grp.,
Inc. v. Arkansas Tchr. Ret. Sys., 594 U.S. 113, 125 (2021) (“[D]efendants may rebut the Basic
presumption at class certification by showing that the particular misrepresentation at issue did
not affect the stock’s market price.”). But Bratya did not fulfill its burden to show that it was
entitled to the presumption in the first place. Bed Bath & Beyond Corp., 2024 WL 4332616, at
*19. So Cohen never needed to explain away the “corrective disclosure.”
8 Bratya alludes to a subtler argument about the alleged corrective disclosure that merits
mention. It hints that Basic may not have been required to show reliance at all, since the effect
of the corrective disclosure establishes price impact directly. This is unusual; overwhelmingly,
class certification seekers in a securities fraud cases depend on Basic. But still, the route may
remain available for plaintiffs who opt to take it. The Supreme Court suggested as much when it
acknowledged that “the Basic presumption hinges on price impact” but is an “imperfect proxy
for price impact.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 278 (2014)
(“Halliburton II”); see also Goldman Sachs Grp., Inc. v. Arkansas Tchr. Ret. Sys., 594 U.S. 113,
126, (2021) (“[P]laintiffs need not directly prove price impact.”).
Still, even if a viable path forward, Bratya could not walk down it. The Court already
credited Professor Daniel R. Fischel’s conclusion that the so-called corrective disclosure was
untethered to the earlier misrepresentations. Bed Bath & Beyond Corp., 2024 WL 4332616, at
*20. Fischel cogently explained that the August 12 Tweet did not introduce artificial price
inflation into the stock price. Fischel Rep., ECF No. 117-1, at ¶ 39. And thus the deflation on
August 19 did not signal the Tweet’s apparent falsity had been impounded in the stock price all
along. Id. ¶ 36. Instead, Fischel concluded that short squeeze dynamics confounded all price
movements during the class period, rendering any clean link between the “corrective disclosure”
and the alleged misrepresentations tenuous at best. Id. ¶¶ 56, n.109. So any price drop that
coincided with Cohen’s exit was, to Fischel and the Court, more of an indication of a short
squeeze bubble bursting than a showing that the stock price had been incorporating the alleged
misrepresentations. Id. ¶ 58; see also ¶ 33 (“The economic literature establishes that short
squeezes are typically brief and end with a sharp price decline.”).
9 More, the Court had stressed that Bratya’s expert, Dr. Matthew D. Cain, failed to show
that value-relevant information impacted the price of BBBY stock for any day within the class
period. Bed Bath & Beyond Corp., 2024 WL 4332616, at *18. Bratya argues now that Cain’s
second event study proves that there was a statistically significant price decrease on August 19.
Mot. Recons. at 4. But the Court already discredited this study as being “flawed,” with Cain’s
methods “cast[ing] doubt on the accuracy of his conclusions.” Bed Bath & Beyond Corp., 2024
WL 4332616, at *19. So even putting aside the thought that the aftermath of the so-called
corrective disclosure was likely just the bubble bursting, Cain failed to reliably establish that
there was a statistically significant price decline on August 19 at all. Teamsters Loc. 445 Freight
Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 208 n.15 (2d Cir. 2008) (“An event study
may be rejected . . . if it is methodologically unsound or unreliable.”). Yet the burden of
showing that a stock price incorporated a defendant’s misrepresentations—either by showing an
entitlement to the Basic presumption or by proving direct price impact—falls on the plaintiff.
Haliburton II, 573 U.S. at 268. Bratya failed to do either, so it cannot show that the issue of
reliance can be determined class wide. In short, Bratya’s reclanging of the corrective disclosure
gong still falls flat.
Bratya’s third objection is related. It contends that the Court erred in noting that “the
price collapse following Cohen’s exit” was not “the result of the ‘truth’ about Cohen’s ‘full cart’
tweet finally surfacing.” Bed Bath & Beyond Corp., 2024 WL 4332616, at *20. Bratya insists
that this was a ruling on loss causation — an improper determination at the class certification
stage. Mot. Recons. at 5; see also Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804,
812 (2011) (“Halliburton I”) (holding that loss causation is not a precondition for invoking
Basic.).
10 But Bratya is mistaken. To start, even if this had been a comment on loss causation, the
stray remark would not alter the bottom line: Bratya never demonstrated it was entitled to the
Basic presumption, nor did it establish price impact directly, so it failed to show that reliance
could be proven on a class wide basis. The Court’s “even if” reasoning cannot change the fact
that Bratya failed to meet its threshold burden.
And besides, the Court was not commenting on loss causation—it was properly assessing
reliance. That is, the Court was not asking whether Cohen’s misrepresentations precipitated the
fall in stock price or whether “the drop could instead be the result of other intervening causes,
such as changed economic circumstances, changed investor expectations, new industry-specific
or firm-specific facts, conditions, or other events.” Halliburton I, 563 U.S. at 812–13 (cleaned
up). No, the Court was querying whether the price plunge following Cohen’s liquidation
revealed that his previous misrepresentations had been artificially buoying the stock during the
class period such that investors could be presumed to have relied on those misrepresentations.
See Arkansas Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., 77 F.4th 74, 80 (2d Cir. 2023) (“[In an
inflation-maintenance scenario,] the misrepresentation prevents preexisting inflation in a stock
price from dissipating, but does not cause a price uptick. Instead, the back-end price drop—what
happens when the truth is finally disclosed—operates as an indirect proxy for the front-end
inflation, or the amount that the misrepresentation fraudulently propped up the stock price.”).
And it determined that several factors rendered a proportional link between the events doubtful.
Bed Bath & Beyond Corp., 2024 WL 4332616, at *20. The Court had already noted that short
squeeze dynamics were pervasive during the class period, which impeded informational
efficiency and thus disrupted any potential “communication” between the class period
misrepresentations and later disclosures. Id. at *16, *18. More, the Court expressed skepticism
11 that “the specific disclosure actually corrected” the alleged misrepresentation, musing that the
price decline was likely the result of Cohen’s liquidation and the short squeeze bubble bursting
instead. Id. at 20; Goldman Sachs Grp., Inc., 594 U.S. at 123 (emphasis added).
In short, the Court concluded that there was “a mismatch between the contents of the
misrepresentation and the corrective disclosure” and thus the inference “that the back-end price
drop equal[ed] front-end inflation” collapsed. Goldman Sachs Grp., Inc., 594 U.S. at 123.
Without a yin-and-yang relationship between the misrepresentations and Cohen’s liquidation,
there was no evidence that the misrepresentations had been built into the stock price all along.
So there was no evidence that investors had relied on the misrepresentations in purchasing the
stock. See Halliburton I, 563 U.S. at 812 (“[A]n investor presumptively relies on a defendant’s
misrepresentation if that information is reflected in the market price of the stock at the time of
the relevant transaction.”) (cleaned up).
This is a perfect question for the class certification stage, even if the evidence is similar
to that used for issues at the merits stage. Goldman Sachs Grp., Inc., 594 U.S. at 124 (instructing
that courts “must take into account all record evidence relevant to price impact, regardless
whether that evidence overlaps with materiality or any other merits issue.”); see also Dura
Pharm. v. Broudo, 544 U.S. 336, 343 (2005) (noting that a loss causation analysis takes a “tangle
of factors” into account such as “changed economic circumstances” and cannot rest on a finding
that the stock price was inflated at the time of purchase). After all, it is a question of reliance—
that is, is there enough of a fit between the alleged corrective disclosure, its concomitant price
decline, and the purported misrepresentations to assume that the stock price subsumed the
misinformation during the class period? Or is there some reason that the logical link has
“br[oken] down”? Goldman Sachs Grp., Inc., 594 U.S. at 123. These are questions to be
12 answered “aided by a good dose of common sense.” Id. at 122. The Court is confident that it
did so here.
Finally, consider Bratya’s assertion that the Court’s previous analysis of short-selling
constraints was factually erroneous. Mot. Recons. at 8–10. Again, the significance of the short-
selling constraints was hotly litigated and extensively discussed by the experts at the evidentiary
hearing. See Pl.’s Suppl. Memo. at 17–19; Def.’s Suppl. Memo., ECF No. 128, at 13–14; Evid.
Hr’g Tr. at 23–29, 93–103. Bratya’s “mere disagreement” with the Court’s ultimate factual
determination “does not support a Rule 59(e) motion.” Hutchinson v. Staton, 994 F.2d 1076,
1082 (4th Cir.1993). Bratya offers no new facts in support of its position, nor does it contend the
Court made a clear error of law. Nat’l Ctr. for Mfg. Scis. v. Dep’t of Def., 199 F.3d 507, 511
(D.C. Cir. 2000). Thus Bratya’s purely factual disagreement with the Court’s resolution of a
disputed issue in the record is improperly before the Court.
IV.
In short, Bratya’s arguments are either too little or too late. It is therefore
ORDERED that Bratya’s Motion for Reconsideration is DENIED.
2025.03.06 12:04:53 -05'00' Dated: March 6, 2025 TREVOR N. McFADDEN, U.S.D.J.