South Ferry LP 2 v. Killinger

271 F.R.D. 653, 78 Fed. R. Serv. 3d 484, 2011 U.S. Dist. LEXIS 1200, 2011 WL 43725
CourtDistrict Court, W.D. Washington
DecidedJanuary 6, 2011
DocketNo. C04-1599-JCC
StatusPublished
Cited by2 cases

This text of 271 F.R.D. 653 (South Ferry LP 2 v. Killinger) is published on Counsel Stack Legal Research, covering District Court, W.D. Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
South Ferry LP 2 v. Killinger, 271 F.R.D. 653, 78 Fed. R. Serv. 3d 484, 2011 U.S. Dist. LEXIS 1200, 2011 WL 43725 (W.D. Wash. 2011).

Opinion

ORDER

JOHN C. COUGHENOUR, District Judge.

This matter comes before the Court on Plaintiffs’ motion for class certification (Dkt. No. 210), Individual Defendants’ response (Dkt. No. 231), Plaintiffs’ reply (Dkt. No. 241), Individual Defendants’ surreply (Dkt. No. 244), and Plaintiffs’ response to the sur-reply (Dkt. No. 247). Having thoroughly considered the parties’ briefing and the record, the Court finds oral argument unnecessary and GRANTS in part and DENIES in part the motion for the reasons explained herein.

I. BACKGROUND

Plaintiffs seek to certify a class defined as: “All persons who purchased the common stock of Washington Mutual, Inc. between April 15, 2003 and June 28, 2004, inclusive (the ‘Class Period’) and who were damaged thereby (the ‘Class’).” (Class Certification Mot. 1 (Dkt. No. 210 at 6).) Plaintiffs propose excluding from the class:

Washington Mutual, Inc. and the Individual Defendants ...; former defendants William W. Longbrake, Craig J. Chapman and James G. Vanasek; the officers and directors of the Company at all relevant times; members of their immediate families and their legal representatives, heirs, successors or assigns; and any entity in which any of the Defendants or former defendants have or had a controlling interest.

(Id.) The “Individual Defendants” are:

(i) Kerry K. Killinger (“Killinger”), Chairman of the Board of Directors, President, and Chief Executive Officer of WaMu during the Class Period; (ii) Thomas W. Casey (“Casey”), Executive Vice President, Chief Financial Officer, member of the Executive Committee and President’s Counsel during the Class Period; and (iii) Deanna Oppenheimer (“Oppenheimer”), President of the Consumer Group and an executive management team member during the Class Period.

(Id.)

The lead plaintiffs and proposed class representatives are Walden Management Co. Pension Plan (Walden) and Metzler Investment GmbH (Metzler). (Id. at 1, 4.) Walden, a pension fund, purchased 5,816 shares of Washington Mutual (WaMu) common stock between December 30, 2003, and May 14, 2004. (Id. at 5; Second Am. Certification 1 (Dkt. No. 211-2).) Metzler, a capital investment company headquartered in Germany, purchased 193,801 shares of WaMu common stock for three German funds between April 30, 2003, and May 25, 2004. (Class Certification Mot. 4 (Dkt. No. 210 at 9); Ex. A1 (Dkt. No. 8-2).)

When appointed lead plaintiff, Metzler claimed standing from its position as an investment manager for the three funds under German law. (Consolidation Mot. 1 n. 1 (Dkt. No. 6 at 2).) Metzler has since closed the funds and returned all assets to investors. (Buchmann Dep. 35-36 (Dkt. No. 232-2 at 3-4).) Plaintiffs concede that Metzler lost standing when it closed the funds but contend that Metzler cured the deficiency by obtaining assignments of the right to litigate. (Pis.’ Reply to Defs.’ Surreply 1 (Dkt. No. 247 at 2).)

The Court lays out Plaintiffs’ claims and allegations in detail in the Court’s previous orders. (See Dkt. Nos. 73, 179.) The Court does not address them separately here.

[656]*656II. DISCUSSION

Defendants attack the propriety of the proposed class representatives and the length of the proposed class period. The Court addresses the length of the proposed class period before turning to the challenges to the class representatives. The Court declines to close the class period on September 9, 2003, instead establishing the class period as April 15, 2003, through June 28, 2004. The Court finds that Metzler is an atypical plaintiff and therefore not suited to be a class representative. The Court finds that Walden is an adequate class representative and grants certification with Walden as the class representative.

A. Class Period

Defendants contend that the class period should end on September 9, 2003, the date on which Defendants allege that WaMu made a fully curative disclosure of its operational problems with pipeline hedging. (Defs.’ Resp. 6 (Dkt. No. 231 at 11).) Plaintiffs’ complaint relies on the fraud-on-the-market presumption, which requires that a “plaintiff traded the shares between the time the misrepresentations were made and the time the truth was revealed.” No. 84 Emp’r-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 947 (9th Cir.2003) (citing Basic Inc. v. Levinson, 485 U.S. 224, 248 n. 27, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)). “Any showing 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, will be sufficient to rebut the presumption of reliance.” Basic Inc., 485 U.S. at 248, 108 S.Ct. 978. Defendants argue that the September 9, 2003, statement revealed the truth about its pipeline hedging problems and thus rebuts Plaintiffs’ fraud-on-the-market presumption. (Defs.’ Resp. 6 (Dkt. No. 231 at 11).)

Plaintiffs not only contend that the September 9, 2003, disclosure was not fully corrective, Plaintiffs allege that the disclosure was materially false and misleading. (Am. Compl. ¶ 76 (Dkt. No. 54-2 at 10).) The Court twice upheld the sufficiency of these allegations. See S. Ferry LP No. 2 v. Kil-linger, 399 F.Supp.2d 1121, 1138-1140 (W.D.Wash.2005); S. Ferry LP # 2 v. Killinger, 687 F.Supp.2d 1248, 1253 (W.D.Wash.2009).

The Court declines to rule on whether the September 9, 2003, statement was fully curative at this time. “Whether or not a particular release or disclosure actually cured a prior misrepresentation is a sensitive issue to rule on at this early stage of the proceedings because it comes so close to assessing the ultimate merits in the case, and courts therefore decline to find reliance thereafter unreasonable, as a matter of law, unless there is no substantial doubt as to the curative effect of the announcement.” In re LDK Solar Sec. Litig., 255 F.R.D. 519, 528 (N.D.Cal.2009) (citing In re Fed. Nat’l Mortg. Ass’n Sec. Litig., 247 F.R.D. 32, 39 (D.D.C.2008)); see also In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267, 307 (S.D.N.Y.2003) (“[A] class period should not be cut off if questions of fact remain as to whether the disclosures completely cured the market.”). The Court finds substantial doubt as to the curative effect of the September 9, 2003, statement.

Further, the Court is not persuaded by Defendants’ late attempt to bifurcate the complaint into two separate causes of action. As the Court previously stated, “the nub of the Complaint is that Defendants repeatedly represented to the investing public that (1) WaMu had successfully integrated the various technology platforms and operational processes from certain recent acquisitions, and that (2) WaMu was well positioned to withstand market changes in interest rates because of its hedging operations and the natural counterbalance of its risk.” S. Ferry LP #2, 687 F.Supp.2d at 1250. These allegations suggest an ongoing course of action not limited to the pipeline-hedging problems. Accordingly, the Court declines to close the class period on September 9, 2003. The Class Period is set as April 15, 2003, through June 28, 2004.

B.

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Bluebook (online)
271 F.R.D. 653, 78 Fed. R. Serv. 3d 484, 2011 U.S. Dist. LEXIS 1200, 2011 WL 43725, Counsel Stack Legal Research, https://law.counselstack.com/opinion/south-ferry-lp-2-v-killinger-wawd-2011.