United States District Court, N.D. Alabama, Southern Division
LOCAL 703, I.B. OF T. GROCERY AND FOOD EMPLOYEES WELFARE FUND, et al., PLAINTIFFS,
REGIONS FINANCIAL CORPORATION, et al., DEFENDANTS
For Local 703, I B of T Grocery and Food Employees Welfare Fund, individually and on behalf of all others similarly situated, Plaintiff: Andrew J Brown, Matthew Isaac Alpert, ROBBINS GELLER RUDMAN & DOWD LLP, San Diego, CA; James S Ward, Patrick C Cooper, WARD & WILSON LLC, Birmingham, AL.
For District No. 9, I.A. of M. & A.W. Pension Trust, Employees' Retirement System of the Virgin Islands, Lead Plaintiff, Plaintiff: Andrew J Brown, ROBBINS GELLER RUDMAN & DOWD LLP, San Diego, CA.
For Plaintiffs' Liaison Counsel, Plaintiff: Larry B Moore, MOORE BERRY & LINVILLE, Florence, AL; Patrick C Cooper, WARD & WILSON LLC, Birmingham, AL; Roger H Bedford, Jr, ROGER BEDFORD & ASSOCIATES PC, Russellville, AL.
For Regions Financial Corporation, Defendant: John N Bolus, Maibeth J Porter, Richard Jon Davis, MAYNARD COOPER & GALE PC, Birmingham, AL.
For C Dowd Ritter, Irene Esteves, Alton E. Yother, Defendants: Julian D Butler, SIROTE AND PERMUTT PC, Huntsville, AL.
For Burr & Forman LLP, ThirdParty Defendant: Kip Allen Nesmith, BURR & FORMAN LLP, Birmingham, AL.
INGE PRYTZ JOHNSON, SENIOR UNITED STATES DISTRICT JUDGE.
This action comes before the court after defendants' appeal of this court's Order of June 14, 2012, granting class certification. The Eleventh Circuit has remanded the action to this court, stating
... we affirm the District Court's well-reasoned order in nearly all respects. But we vacate and remand for further proceedings in light of Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II),
__ U.S. __, 134 S.Ct. 2398, 189 L.Ed.2d 339 (2014), to allow consideration of Region's evidence of price impact and for the District Court to review the duration of the class period.
Local 703, I.B. of T. Grocery and Food Employees Welfare Fund, et al., v. Regions Financial Corp., 762 F.3d 1248, 1252 (11th Cir.2014).
In its opinion, the Eleventh Circuit found that this court properly applied the presumption from Basic v. Levinson, 485 U.S. 224, 225, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988), namely that " the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations." Id., at 1253-1254. As noted by the Eleventh Circuit, the Basic presumption, as set forth by the Supreme Court in Erica P. John Fund v. Halliburton Co. (Halliburton I), 131 S.Ct. 2179, 180 L.Ed.2d 24 (2011) allows the court " to presume 'that an investor relies on public misstatements whenever he buys or sells stock at the price set by the market.'" Local 703, at 1254, citing Halliburton I, 131 S.Ct. at 2185. The Eleventh Circuit concluded that this court properly applied the presumption in its analysis of the efficiency of the market for Regions stock. Local 703, 762 F.3d at 1254. Furthermore, the Eleventh Circuit affirmed this court's finding that Regions stock was trading in an efficient market, as required for application of the Basic presumption. Id., at 1258.
In considering the effect of Halliburton II on this court's class certification order, the Eleventh Circuit noted that this court relied on the state of the law at the time it entered that order, without the advantage of Halliburton II, which issued from the Supreme Court almost two years later. Thus, the Eleventh Circuit vacated and remanded this court's order solely for this court to " review all facts and conduct the inquiry now required in the wake of Halliburton II ." Id., at 1259. This court thus confines its current review solely to the application of Halliburton II on the evidence previously submitted to this court, and on which this court based its class certification decision, with the benefit of additional briefs submitted by the respective parties. Specifically, Halliburton II requires this court to reconsider the defendants' price impact evidence, and whether that evidence rebuts the Basic presumption. In other words, if defendants' evidence supports a finding that its corrective disclosures on January 20, 2009, did not have an impact on the stock price, then the Basic presumption of fraud-on-the-market is rebutted. See Halliburton, 134 S.Ct. at 2415-2416.
The plaintiffs allege that investors in defendant Regions' stock were harmed by defendants' fraudulent statements and reports concerning the performance of Regions' investments, and specifically investments in real estate. As the Eleventh Circuit summarized the underlying facts,
According to the plaintiffs' amended complaint, Regions made a series of misrepresentations beginning in 2008, about the value of its assets and its financial stability. More specifically, the plaintiffs allege that Regions -- which was heavily invested in the real estate market -- manipulated the way unhealthy assets were carried on its books to avoid disclosing significant losses that would compromise the company's value.... Plaintiffs say that the failure to accurately represent the company's financial situation resulted in artificially high stock prices for Regions, and allowed it to avoid the precipitous decline of its stock price that would have resulted during the recession, absent the misleading disclosures. On January 20, 2009, Regions made a substantial corrective disclosure, reporting $5.6 billion in losses. That same day, Regions stock traded at $4.60 per share, compared to $23 per share on the first day of the proposed class period.
Local 703, 762 F.3d at 1252.
After listing the elements a plaintiff must prove in a private securities fraud action,  the Eleventh Circuit considered this court's analysis of the law concerning the reliance element the plaintiffs must prove. Specifically, under Basic v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988), the plaintiffs may have a rebuttable presumption of class-wide reliance on defendants' misrepresentations based on a " fraud-on-the-market theory." Id., at 245. The fraud-on-the-market theory postulates that " the market price of shares traded on a well-developed market reflects all publicly available information, and, hence, any material misrepresentations." Halliburton I, 131 S.Ct. at 2185 (discussing Basic ). Applying the theory allows the presumption that " an investor relies on public misstatements when he buys or sells stock at the price set by the market." Id. In its class certification opinion, this court found that the plaintiffs properly invoked the Basic presumption. Local 703, 762 F.3d at 1254.
To recapitulate, to invoke the Basic presumption, a plaintiff must prove that: (1) the alleged misrepresentations were publicly known, (2) they were material, (3) the stock traded in an efficient market, and (4) the plaintiff traded the stock between when the misrepresentations were made and when the truth ...