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Vrakas v. United States Steel Corp.

United States District Court, W.D. Pennsylvania

December 31, 2019

CHRISTAKIS VRAKAS, et al., Plaintiffs,
v.
UNITED STATES STEEL CORPORATION, et al., Defendants.

          MEMORANDUM ORDER

          CATHY BISSOON UNITED STATES DISTRICT JUDGE

         Pending before the Court are two motions: Plaintiffs' Motion for Class Certification (“Pl. Class Cert. Mt., ” Doc. 182) and Defendants' Motion to Strike the Expert Rebuttal Report of Michael L. Hartzmark, Ph.D (“Def. MTS, ” Doc. 207). For reasons that follow, the Court will grant the Motion for Class Certification and grant in part and deny in part the Motion to Strike.

         I. Memorandum

         Given the complicated history and nature of this case, the Court will address only the background relevant to the current posture of the case.

         On August 16, 2017, this Court issued an order consolidating this case, as well as any other subsequently-filed related actions, appointing Mr. Christakis Vrakas to serve as Lead Plaintiff in the consolidated action and approving Mr. Vrakas's choice of counsel. Order, Doc. 47. In October 2017, Mr. Vrakas, along with Plaintiffs Leann Reed and Robert Myer, filed an Amended Complaint against United States Steel Corporation (“U.S. Steel” or the “Company”), individuals Mario Longhi, David Burritt and Dan Lesnak, and many entities that served as underwriters for U.S. Steel's secondary public offering on August 15, 2016.

         On September 29, 2018, the Court dismissed all but one of Plaintiffs' claims against all Defendants. Since then, Mr. Myer has withdrawn from the Action (Doc. 173), and Ms. Reed voluntarily dismissed her claims, with prejudice, against the underwriter defendants. Doc. 176. In January 2019, the parties filed their Rule 26(f) Joint Report of the Parties Pursuant to Appendix LCvR 23.E (Class Action) (“Rule 26(f) Report, ” Doc. 160) and the Court issued its Case Management Order (“CMO, ” Doc. 165) shortly thereafter.

         In April 2019, Plaintiffs Mr. Vrakas and Ms. Reed (“Plaintiffs”) filed a Motion for Class Certification, accompanied by a Memorandum in Support of Motion for Class Certification (“Pl. Class Cert. Mem., ” Doc. 183) and Declaration (“Pl. Class Cert. Dec., ” Doc. 184) in support of their Motion. Plaintiffs moved, pursuant to Fed. R. Civ. Pro. 23(a), (b)(3) and (g), to: (1) certify this action as a class action;[1] (2) appoint Plaintiffs as Class representatives; (3) appoint Levi & Korsinsky, LLP as Class counsel, and (4) grant any other relief the Court deems just and proper. Pl. Class Cert. Mt. at ¶1. Plaintiffs posit that the Court should certify the proposed Class because they contend that it meets the following requirements of Fed.R.Civ.P. 23(a) and 23(b)(3):

Numerosity - During the Class Period, U.S. Steel had 146.3 million and 174.7 million shares outstanding as of January 27, 2016 and April 24, 2017, respectively, with an average of 17.3 million shares trading daily. According to Plaintiffs, this supports their contention that the class is sufficiently numerous.
Commonality and typicality - Both are met where each proposed class member asserts the same claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, 15. U.S.C. §§ 78j(b) and 78t(a), based on the same alleged misconduct against the same Defendants and seeks damages for the same type of harm.
Adequacy - Plaintiffs have retained Levi & Korsinsky, highly qualified counsel with substantial experience successfully prosecuting securities class actions such as this, who have zealously represented the interests of the Class. Plaintiffs also have no known conflicts with the class.
Predominance and Superiority of a Class Action - Individualized issues concerning reliance will not predominate because (i) Plaintiffs' expert has opined that the market for U.S. Steel common stock and options was efficient during the Class Period and thus the “fraud on the market” presumption of reliance, established by the Supreme Court in Basic Inc. v. Levinson, 485 U.S. 224 (1988) applies; and (ii) the other elements of a securities fraud claim involve class wide proof and are highly suitable to litigation on a class basis. Class action is the superior method for dealing with securities class actions involving hundreds or thousands of potential class members.

         Defendants filed an Opposition to Plaintiffs' Motion for Class Certification (“Def. Class Cert. Opp., ” Doc. 203) along with a Declaration (“Def. Class Cert. Dec., ” Doc. 204) in support of their Opposition.[2] Specifically, Defendants argue that Plaintiffs have failed to meet the following requirements:

Predominance - Plaintiffs have not proven that common questions predominate because they have not supplied a damages model that fits their liability theory and failed to provide a workable methodology to address damages on a class-wide basis.
Numerosity - Plaintiffs have not provided sufficient proof that the proposed class would be so numerous that joinder of all parties would be impracticable.
Adequacy - Plaintiffs have not shown that Ms. Reed will adequately represent the proposed class because of her lack of involvement in the strategy and dismissal of the Securities Act claims, because she did not expect to be involved in or attend the mediation and because she would rely on legal counsel with respect to resolving the case.

         Defendants also filed a Motion to Strike the Expert Rebuttal Report of Michael L. Hartzmark, Ph.D accompanied by a Memorandum of Law in support (“Def. MTS Mem., ” Doc. 208). Plaintiffs filed a Response in Opposition to Motion to Strike the Hartzmark Rebuttal Report (“Pl. MTS Opp., ” Doc. 209) along with a Declaration in support (“Pl. MTS Dec., ” Doc. 210). Defendants' Motion for Leave to File Reply in Support of Defendants' Motion to Strike was denied. Doc. 212. The Court will first address the Motion for Class Certification before proceeding to the Motion to Strike.

         A. Motion for Class Certification

         To obtain class certification under Rule 23(b), Plaintiffs must “satisfy Rule 23(a)'s … prerequisites of numerosity, commonality, typicality, and adequacy of representation … and must also establish that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Amgen Inc., v. Conn. Ret. Plans and Trust Funds, 568 U.S. 455, 460 (2013).

         The Court must engage in a “rigorous analysis” and find that “each Rule 23 requirement is met.” Ferreras v. Am. Airlines, Inc., 2019 WL 7161214, at *3 (3d Cir. Dec. 24, 2019) (internal quotations and citations omitted). To do so, the Court “must resolve every dispute that is relevant to class certification.” Id. Plaintiffs' “[f]actual determinations supporting Rule 23 findings must be made by a preponderance of the evidence.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 307 (3d Cir. 2008), as amended (Jan. 16, 2009). Defendants oppose class certification on the following grounds: (1) failure to prove numerosity; (2) failure to prove that Ms. Reed is an adequate class representative; and (3) failure to prove predominance of common questions. Def. Class Cert. Opp.

         1. Rule 23(a) Requirements

         a. Numerosity

         Plaintiffs argue that while no minimum number of plaintiffs is required to determine whether a class is sufficiently numerous as to justify proceeding as a class action, there “is a presumption that the numerosity requirement is satisfied when a class action involves a nationally traded security.” Pl. Class Cert. Mem. at 8, citing In re CIGNA Corp. Sec. Litig., 2006 WL 2433779, at *2 (E.D. Pa. Aug. 18, 2006). See also City of Sterling Heights Gen. Employees' Ret. System v. Prudential Fin. Inc., 2015 WL 5097883, at *8 (D.N.J. Aug. 31, 2015) (holding that the “[numerosity] requirement is readily met in securities cases involving an issuer whose stock trades publicly on the NYSE, ” where the stock in question “trades on the NYSE with significant daily volume”). According to Plaintiffs, U.S. Steel had approximately 146.3 million and 174.7 million shares outstanding as of January 27, 2016 and April 25, 2017, respectively, with an average of 17.3 million shares trading daily on the New York Stock Exchange. Pl. Class Cert. Mem. at 8.

         Defendants focus on Plaintiffs' citations of several older cases stating that courts “may accept common sense assumptions in order to support a finding numerosity, ”[3] criticizing this “common sense” approach as no longer being good law. Def. Class Cert. Opp. at 20. Defendants further argue that subsequent Supreme Court and Third Circuit cases also abrogate the presumption that in securities class actions, plaintiffs can show numerosity by showing significant daily trading volume on a nationally traded exchange.[4] The Court disagrees. Defendants cite no securities class action that has taken a different approach after their cited Supreme Court and Third Circuit cases. On the other hand, Plaintiffs have cited Roofer's Pension Fund v. Papa, 2019 WL 6015392 (D.N.J. Nov. 14, 2019) as an example of a peer court that has more recently found numerosity under similar circumstances. Pl. Notice of Supp. Auth. at ¶7.

         Defendants argue that Roofer's Pension Fund does not apply because the defendants in that case did not challenge numerosity. Def. Response to Supp. Auth. at ¶5. Defendants further argue that the facts here indicate that stockholders could exist who would have “derived substantial benefit” rather than injury. Def. Class Cert. Opp. at 22. However, the Court does not see how this allegation is any less speculative than Plaintiffs'. Thus, the Court finds that the facts alleged by Plaintiffs about the number of shares and trades are sufficient to meet the numerosity requirement of Rule 23(a)(1).[5]

         b. Commonality

         Commonality under Rule 23(a)(2) is satisfied where class representatives share “at least one question of fact or law with the grievances of the prospective class.” Reyes v. Netdeposit, LLC, 802 F.3d 469, 486 (3d Cir. 2015). The “court's focus must be on whether the defendant's conduct is common as to all of the class members” and the “bar is not a high one.” Id. (internal quotations, alterations and citations omitted). Plaintiffs suggest a number of questions of law and fact in common for all Class members, such as whether (1) Defendants' statements and omissions were materially false or misleading; (2) Defendants made their misrepresentations and omissions with scienter; (3) the price of U.S. Steel securities was artificially inflated (or deflated for the put options on U.S. Steel common stock) during the Class Period; (4) Defendants' misrepresentations and omissions caused economic harm to Class members; and (5) Defendants Longhi, Burritt and Lesnak were control persons. Defendants do not contest that these questions are common to the Class, and the Court finds that the examples cited by Plaintiffs meet the standard for commonality.

         c. Typicality

         The Third Circuit generally considers these three factors when determining typicality under Rule 23(a)(3):

1. The claims of the class representatives must be generally the same as those of the class in terms of both (a) the legal theory advanced, and (b) the factual circumstances underlying the theory;
2. The class representative must not be subject to a defense that is both inapplicable to many class members and likely to become a major focus of the litigation; and
3. The interests and incentives of the class representative must be sufficiently aligned with those of the class.

         In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 599 (3d Cir. 2009). According to Plaintiffs, all of these factors have been met. In particular, Mr. Vrakas and Ms. Reed purchased U.S. Steel securities during the Class Period; they suffered damages because of Defendants' alleged Exchange Act Section 10(b) and 20(a) violations; their claims arise from the same legal theories and alleged misrepresentations and omissions as those of all Class members, and they were damaged when the shares of U.S. Steel shares declined after those alleged misrepresentations and omissions were disclosed or became apparent to the market. Pl. Class Cert. Mem. at 11. Plaintiffs maintain that they do not have any unique defenses, interests or incentives that differ from those of the proposed Class. Defendants do not contest Plaintiffs' claims in this context, and the Court finds that the typicality requirement is satisfied.

         d. Adequacy

         Plaintiffs represent that they and their counsel meet the adequacy requirement of Rule 23(a)(4).[6] They provide declarations outlining their respective experiences in investing, their understanding of the litigation and their responsibilities as class representatives, as well as some documents they have reviewed thus far in the litigation. Pl. Class Cert. Dec. at Ex. 3-4 (Doc. 184-5 and 184-6). Plaintiffs state that they have suffered the same injury as the proposed Class members, are “willing and able to prosecute this action on behalf of the Class to a successful conclusion” and that no conflicts exist. Pl. Class Cert. Mem. at 12-13.

         Defendants have not challenged the adequacy of Mr. Vrakas. They contend, however, that Ms. Reed is an inadequate class representative because she allegedly was “not consulted in advance about the dismissal with prejudice of her [Securities Act] claims” and that “she did not expect her opinion to be sought in connection with the mediation, did not plan to attend [or actually attend] the mediation, and did not expect to weigh in on any potential resolution of the case.” Def. Class Cert Opp. at 25-26.

         Plaintiffs contest this. In their Reply, Plaintiffs state that Ms. Reed is “more than adequately versed about the facts and her responsibilities in this case.” Pl. Class Cert. Reply at 10. As shown by Ms. Reed's deposition transcript, she can articulate the claims, identify Defendants and describe her involvement and her responsibilities. Pl. Class Cert. Reply Dec. at Ex. 4, Doc. 206-4. Plaintiffs further contend that Ms. Reed's deposition testimony shows that she learned of the dismissal of the Securities Act claims beforehand, and that she understood why they were dismissed. Id. After reviewing the transcript, as well as Ms. Reed's declaration, the Court cannot agree with Defendants that Ms. Reed lacked knowledge of the dismissal of her Securities Act claims and that she could not serve as an adequate class representative.

         First, Defendants claim that “[t]he list of materials Reed says she reviewed in this matter conspicuously omits the stipulation by which her Securities Act claims were dismissed, as well as the order approving the stipulation.” Def. Class Cert. Opp. at 25. The Declaration clearly states that she reviewed documents “including” a list of examples-it never represented that the list was exhaustive. Pl. Class. Cert. Dec. at Ex. 4. This omission is not evidence. Second, claiming that Ms. Reed “was merely ‘informed' that the Securities Act claims had been dismissed, rather than ‘consulted' beforehand” (Def. Class Cert. Opp. at 25) is more wordsmithing than a substantive distinction.[7]

         Defendants also argue that Ms. Reed's lack of attendance at the mediation and her expectation that she would not provide an opinion on the mediation makes her an inadequate class representative. The Court does not see Ms. Reed's statements in her deposition as a “total abdication” to counsel.[8] Rather, the context of the question reflects Ms. Reed's understanding that her opinion would not be sought on legal matters.[9] Alone, such a remark is insufficient to show that Ms. Reed cannot act as a class ...


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