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Norfolk County Retirement System v. Community Health Systems, Inc.

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

October 2, 2019

NORFOLK COUNTY RETIREMENT SYSTEM, individually and on behalf of others similarly situated, Plaintiff,



         Pending before the Court is Lead Plaintiff's Motion to Clarify Class Definition (Doc. No. 400, “Motion to Clarify”). As set forth below, the Motion to Clarify will be granted in part and denied in part. In particular, the Court will decline to grant the very specific relief requested by Lead Plaintiff but will grant relief consistent with what Lead Plaintiff actually seeks, by otherwise amending its class certification order to account for Lead Plaintiff's legitimate concerns.

         Via the Motion to Clarify, Lead Plaintiff seeks to clarify (or, in Defendants' view, to expand) the definition of the class this Court recently certified (“current class definition”), namely:

All persons who and entities who purchased the publicly traded common stock of CHS from July 27, 2006 through April 8, 2011, 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 entities in which Defendants have or had a controlling interest.

(Doc. No. 396 at 1; Doc. No. 394 at 39). Lead Plaintiff claims that the Court should “clarify” this definition with respect to the period beginning after April 8, 2011 and continuing until October 26, 2011 (“extended period”). According to Lead Plaintiff, the Court should make clear that this definition includes persons and entities who, like Lead Plaintiff, purchased publicly traded common stock of CHS both before April 8, 2011 and also during the extended period. (Doc. No. 400 at 1). Lead Plaintiff claims that this clarification will make the definition consistent with what it characterizes as the Court's extant decision concerning the extended period: that “only ‘first time' purchasers of the stock during this extended period [should be excluded from the class].”[1] (Id.) In other words, Plaintiff seeks to clarify that those who purchased both during the period referenced in the current class definition (July 27, 2006 through April 8, 2011, “current class period”) and afterwards during the extended period should be included along with those who purchased only during the current class period (and not during the extended period).

         If this were the only issue implicated by the Motion to Clarify, the Motion to Clarify would be easy to resolve. The current class definition includes all who purchased CHS common stock during the class period (provided that they were damaged thereby); it therefore includes those who purchased during the class period and during the extended period. The latter group is merely a subset of the former group, and thus is necessarily included in the former group. Therefore, the Court could resolve the Motion to Clarify by making an easy (and ultimately immaterial) choice: (a) grant Lead Plaintiffs' request to amend the language to call specific attention to the fact that the subset is included in the larger group that falls within the current class definition; or (b) decline Lead Plaintiffs' request and stand on the fact that the subset is necessarily included within the current class definition, irrespective of whether that fact is specifically highlighted by the class definition. In other words, Lead Plaintiff's assertion that the subset is included within the class definition is obviously correct-so obviously that the clarification sought by Lead Plaintiff is not necessary (or also not incorrect, for that matter). Ultimately, the clarification would provide the benefits of ostensible hyper-clarity in the definition at the cost of extra verbiage that ultimately would be both unnecessary and possibly misleading.[2]

         Delving beneath the surface, however, the Court perceives that Lead Plaintiff is less concerned with the specification of class membership than it is with specification of the claims subject to class treatment. That is why Lead Plaintiff asserts that logically, based on certain language from the Court's Memorandum Opinion (Doc. No. 394) that pronounced the current class definition, “investors like [Lead Plaintiff], who bought stock both prior to and after Tenet's lawsuit, have all their purchases, before and after April 8, 2011, [3] included in the class.” (Doc. No. 400 at 2) (emphasis in original).

         Defendants opposes the Motion to Clarify. Initially, Defendants assert that the requested clarification is unnecessary because (according to Defendants) the current class definition “expressly includes those who purchased the stock of Community Health Systems, Inc. (“CHSI”) through and including April 8, 2011, and expressly excludes those who purchased the stock thereafter.” (Doc. No. 402 at 1-2) (emphasis in original). For two reasons, the Court cannot tell exactly why Defendants are claiming that class membership need not be clarified. The first is that Defendants provide an inexact characterization of the current class definition; it does not categorically exclude (expressly or otherwise) all those who purchased stock after April 8, 2011, but rather excludes (albeit only implicitly) those who purchased stock only after April 8, 2019. The second is that, like Plaintiffs, Defendants are concentrating not so much on who is included class membership but rather on which claims are subject to class treatment: Defendants' focus, like Lead Plaintiff's, is understandable but tends to obscure their analysis of why the current class definition need not be amended to clarify who is included in class membership. But in any event, as discussed above, the Court agrees that clarification of class membership is unnecessary (though not necessarily inappropriate on balance), albeit perhaps for a different reason than Defendants have in mind.

         Defendants then address what is truly at issue on the Motion to Clarify: which claims, of purchasers who bought both during the current class period and the extended period, are subject to class treatment? According to Defendants, it is only claims based on purchases on or before April 8, 2011. As noted above, not surprisingly, Lead Plaintiff asserts that claims based on purchases after April 8, 2011 and on or before October 26, 2011 are also subject to class treatment. This is the primary issue the Court actually needs to resolve on the Motion to Clarify.[4]


         It is understandable that the parties are raising and contesting this issue in the aftermath of the Court's Order granting class certification and defining the class. Although confident (for the reasons discussed above) that it provided an adequately clear definition of those included within the class, the Court acknowledges that it could have been clearer as to which claims are subject to class treatment. The Court did state, clearly enough, that “investors who purchased CHS stock on or before April 8, 2011 may bring claims based on events that transpired through October 26, 2011 (to the extent they held their stock until October).” (Doc. No. 394 at 38). But what was arguably left ambiguous was whether those falling within the current class definition may bring claims based on purchases (as opposed to other “events” that could impact a claim that is based on a purchase made within the current class period) made within the extended period. The Court will clarify whether such claims are subject to class treatment.

         For 16 years now, Rule 23 has required a class certification order to define, among other things, the claims subject to class treatment. “Included as part of the 2003 amendments to the rule was newly-created Subdivision (c)(1)(B), which provides in relevant part that ‘[a]n order certifying a class action must define the class and the class claims, issues, or defenses....'” Wachtel ex rel. Jesse v. Guardian Life Ins. Co. of Am., 453 F.3d 179, 184 (3d Cir. 2006) (quoting Fed.R.Civ.P. 23(c)(1)(B)). As the Third Circuit in particular has noted, this separate imperative of specifying the claims subject to class treatment is an important one-one the Third Circuit requires to be satisfied with particular rigor. E.g., Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 591-92 (3d Cir. 2012); Wachtel, 453 F.3d at 184. The Court perceives that courts within the Sixth Circuit have not always focused to the same extent on, or displayed the same rigor with respect to, this requirement; perhaps this is because in many cases the specification of the class will operate as a de facto indication of the claims subject to class treatment, thus making the specification of those claims something of an afterthought. Nevertheless, in any case the claims subject to class treatment must be defined with whatever specificity is necessary under the circumstances.[5]

         It is also understandable why each side contends that its take on this issue is the correct one. There is something to be said for each side's position. Defendants reasonably rely on the Court's rationale for excluding those who purchased only after the current class period. As Defendants note, “As the Court explained, the reason post-April 8, 2011 purchasers are excluded from the class is that their claims differ on the merits from those who purchased on or before April 8.” (Doc. No. 402 at 2) (emphasis in original).[6] Taken to its logical conclusion, Defendants imply, this rationale entails that all purchases in the extended period should be excluded as the basis for a claim subject to class treatment.

         Lead Plaintiff responds that the Court's extant decision, as well as Defendants' pre-certification briefing, were expressly focused specifically on whether to exclude purchasers who first purchased during the extended period. (Doc. No. 403 at 3). Lead Plaintiff also asserts that under (non-binding) case law regarding typicality, and regarding the need not to slice securities-fraud classes so thinly as to frustrate the purpose of class action ...

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