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Burges v. Bancorpsouth, Inc.

United States District Court, M.D. Tennessee, Nashville Division

June 26, 2017

WILLIAM E. BURGES, et al., Plaintiffs
v.
BANCORPSOUTH, INC., et al., Defendants

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE

         Pending before the Court, for the second time, is a Motion to Certify the Class (Doc. No. 97), filed by Palm Beach Gardens Firefighters Pension Fund (“the Fund”).[1] On April 28, 2016, this Court entered an Order granting the Fund's Motion to Certify the Class (Doc. Nos. 157-58.) The Sixth Circuit Court of Appeals vacated that Order and remanded the case to this Court for further proceedings. (Doc. No. 178.)

         The parties have agreed, since that remand, that all discovery necessary to the determination of class certification is completed and no further briefing on class certification is necessary. (Doc. No. 197.) The Magistrate Judge has ordered a stay of merits discovery pending resolution of the class certification motion. (Id.)

         INTRODUCTION

         In this federal securities fraud action, the Plaintiffs allege that Bancorpsouth, Inc. (“the Bank”) and its Chief Executive Officer (James Rollins), its Chief Operating Officer and President (James Kelley), and its Chief Financial Officer (William Prater) (collectively, “Defendants”) made materially false and misleading statements and omissions regarding the Bank's compliance with federal laws and that those statements and omissions violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Amended Complaint (Doc. No. 39) alleges that Defendants made false, misleading statements and omissions regarding (1) the Bank's compliance with critical anti-money laundering and Bank Secrecy Act regulations as well as the Bank's fair lending practices and (2) the closing of two pending mergers/acquisitions. Plaintiffs allege that Defendants knew the Bank was not in compliance with the anti-money laundering and Bank Secrecy Act regulations, and yet they affirmatively stated that (1) they were in compliance with all banking laws and regulations, (2) they expected the two planned mergers to close in the second quarter of 2014, and (3) they expected to receive regulatory approval for those mergers.[2] (Doc. No. 39, ¶¶ 108-155.)

         The Fund seeks to bring this action on behalf of all persons who purchased or otherwise acquired the common stock of the Bank from January 8, 2014, through July 21, 2014, and it asks the Court to certify a class of those persons pursuant to Fed.R.Civ.P. 23. Defendants maintain that the Fund has not met the requirements of Rule 23.

         In vacating this Court's prior Order certifying a class, the Sixth Circuit stated that this Court (1) did not set forth the standard requiring it to “rigorously analyze” Plaintiffs' claims before certifying the action as a class action, (2) did not address the bulk of Rule 23's requirements in its Order, and (3) did not define the class it certified. (Doc. No. 178.) The Court will address those concerns and further expand on why it is appropriate to grant Plaintiffs' Motion.

         The Court adopts its prior Order granting the Motion to Certify the Class (Doc. No. 158) that specifically defines the class as:

All persons who purchased or otherwise acquired the publicly traded common stock of BancorpSouth, Inc. between February 12, 2014 and July 21, 2014, inclusive, and who were damaged thereby. Excluded from the Class are Defendants, 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 Defendants have or had a controlling interest.

(Doc. No. 158 at 2.)

         CLASS CERTIFICATION

         In order to certify a class, the Court must be satisfied that the Fund has met the requirements of both Rule 23(a) and Rule 23(b) of the Federal Rules of Civil Procedure.[3] A class action will be certified only if, after rigorous analysis, the Court is satisfied that the prerequisites of Rule 23(a) have been met and also that the action falls within one of the categories under Rule 23(b). Castillo v. Envoy Corp., 206 F.R.D. 464, 467-68 (M.D. Tenn. 2002). The decision whether to certify a class is committed to the sound, broad discretion of the district judge and turns on the particular facts and circumstances of each individual case. In re Whirlpool Corp. Front-Loading Washers Product Liability Litigation, 722 F.3d 838, 850 (6th Cir. 2013); Ballan v. Upjohn Co., 159 F.R.D. 473, 479 (W.D. Mich. 1994). The party seeking class certification bears the burden of showing that the requirements for class certification are met. Bridging Communities Inc. v. Top Flite Financial Inc., 843 F.3d 1119, 1124 (6th Cir. 2016).

         RULE 23(a)

         Rule 23(a) establishes four requirements for class certification: the class is so numerous that joinder of all members is impracticable; there are questions of law or fact common to the class; the claims or defenses of the representative party are typical of those of the class; and the representative party will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a).

         Numerosity

         Rule 23 (a)(1) requires that the proposed class be so numerous that joinder of all members is impracticable. While there is no strict numerical test, “substantial” numbers usually satisfy the numerosity requirement. In re Polyurethane Foam Antitrust Litigation, 314 F.R.D. 226, 237 (N.D. Ohio 2014) (citing Daffin v. Ford Motor Co., 458 F.3d 549, 552 (6th Cir. 2006)). Numerosity is generally assumed to have been met in class action suits involving nationally traded securities. In re Direct General Corp. Securities Litigation, 2006 WL 2265472 at * 2 (M.D. Tenn. Aug. 8, 2006); Ross v. Abercrombie & Fitch Co., 257 F.R.D. 435, 442 (S. D. Ohio 2009).

         The Fund has adequately shown that the Bank's common stock is nationally traded, with more than 200 large institutional investors, and that there are most likely thousands of class members. (Doc. No. 98 at 8.) The Court finds that the numerosity requirement has been met in this case and that Defendants do not suggest otherwise. (Doc. No. 115.)

         Commonality

         Rule 23's second requirement for class certification is that there be questions of law or fact common to the class. Fed.R.Civ.P. 23(a)(2). To demonstrate commonality, the Fund must show that class members have suffered the same injury. Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2555 (2011); Whirlpool, 722 F.3d at 851. Their claims must depend upon a common contention of such a nature that it is capable of class-wide resolution, which means that determination of its truth or falsity will resolve an issue that is central to the validity of each claim in one stroke. Id.; Wal-Mart, 131 S.Ct. at 2551.

         What matters to class certification is not the raising of common questions, but the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation. Wal-Mart, 131 S.Ct. at 2551. The mere fact that questions peculiar to each individual member of the class remain after the common questions of the defendant's liability have been resolved does not dictate the conclusion that a class action is impermissible. In re American Medical Systems, Inc., 75 F.3d 1069, 1080 (6th Cir. 1996); see also Young v. Nationwide Ins. Co., 693 F.3d 532, 543 (6thCir. 2012) (presence of questions peculiar to each individual member of the class was no bar when liability arose from a single course of conduct).

         The Fund asserts that common questions in this case include: (1) whether Defendants' alleged statements and omissions were materially false or misleading; (2) whether federal law was violated by Defendants' alleged acts; and (3) to what extent class members have sustained damages.

         Defendants contest commonality based on the lack of reliance. The Court will address reliance and the Fund's reliance upon the “fraud-on-the-market presumption” in the discussion concerning Rule 23(b)(3) and predominance. See Halliburton Co. v. Erica P. John Fund, Inc., 134 S.Ct. 2398, 2404 (2014) (elements of the presumption have everything to do with the issue of predominance under Rule 23(b)(3)). In summary, as it relates to commonality, application of the “fraud-on-the-market presumption” allows the Court to presume that class members relied upon the alleged misstatements such that the question of liability is not an individualized issue.

         The first two common questions posed by the Fund - whether the alleged misstatements and omissions are materially false or misleading and whether Defendants' alleged acts violated federal law - do arise from a single course of conduct by Defendants. The alleged misstatements and omissions were the same as relates to all potential class members. Determination of their truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke. In re Whirlpool, 722 F.3d at 852. If those misstatements and omissions violated federal law, they violated federal law as to all potential class members. Therefore, answering those questions will generate common, class-wide answers concerning liability. The Court finds that the commonality requirement is satisfied.

         Typicality and Adequacy

         Rule 23(a)(3) requires the Fund to show that its claims are typical of the claims of the proposed class. A plaintiff's claim is typical if it arises from the same event, practice, or course of conduct that gives rise to the claims of other class members and if its claims are based on the same legal theory. American Medical Systems, 75 F.3d at 1082. The Fund's interests must be aligned with those of the putative class and, in pursuing its own claims, the Fund must also advance the interests of the class members. Id.

         Rule 23(a)(4) requires the Court to find that the Fund will fairly and adequately protect the interests of the class. In order to satisfy the requirement of adequacy, the class representative must be part of the class and possess the same interest and suffer the same injury as the class members. Young, 693 F.3d at 543. In other words, the Fund must have common interests with unnamed members of the class and must be able to rigorously prosecute the interests of the class through qualified counsel.

         The Fund has carried its burden of establishing that its claims are the same as those of the class. The Fund and the class both allege that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and Rule10b-5 by making statements that misrepresented or omitted material facts. The claims of the Fund and the class involve the same security (BancorpSouth), the same alleged misstatements and omissions, the same legal theories, and the same evidence. Whether those allegations are true or not will be the same for the Fund as for the proposed class members.

         Defendants argue that because the Fund failed to file the mandatory Reform Act Certification with its Amended Complaint (Doc. No. 39), it does not meet the typicality and adequacy requirements of Rule 23(a). Federal law provides that each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certificate with the complaint. 15 U.S.C. § 78u-4(a)(2)(A). The Fund filed a ...


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