Case 3:16-cv RS Document 36 Filed 11/02/16 Page 1 of 6 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA I.

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1 Case :-cv-0-rs Document Filed /0/ Page of UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ROBERT CRAGO, Plaintiff, v. CHARLES SCHWAB & CO., INC., et al., Defendants. Case No. -cv-0-rs ORDER GRANTING ROBERT WOLFSON AND FRANK PINO S MOTION FOR APPOINTMENT AS LEAD PLAINTIFF, AND DENYING SCOTT POSSON S MOTION FOR APPOINTMENT AS LEAD PLAINTFF 0 I. INTRODUCTION Robert Wolfson and Frank Pino, collectively, and Scott Posson have filed cross-motions for appointment as lead plaintiff in this putative class action against Charles Schwab & Co., Inc. and related defendants. For the reasons that follow, Wolfson and Pino jointly are appointed lead plaintiff, and their designated attorneys at Glancy Prongay & Murray LLP and Bragar Eagel & Squire, P.C. are appointed lead counsel. II. BACKGROUND On July, 0, Robert Crago filed a complaint on behalf of a purported class of similarly situated Charles Schwab clients against Charles Schwab & Co., Inc, the Charles Schwab Corporation, Charles Schwab himself, and corporation CEO Walter W. Bettinger II (collectively defendants ). The complaint alleges defendants breached their duty of best execution by routing percent of their clients orders in equity securities and listed options through UBS Securities LLC ( UBS ), pursuant to an agreement by which UBS would pay for orders, rather than finding the method of best execution for each order. As a result, the class members allegedly suffered economic loss due to their orders going unfilled, underfilled, filled at a suboptimal price, and/or filled in a manner which adversely affects the order s performance post-execution. Compl..

2 Case :-cv-0-rs Document Filed /0/ Page of 0 Because of this practice and false and/or misleading statements allegedly made in connection with it, the complaint alleges defendants violated Section (b) of the Exchange Act, U.S.C. j(b), Rule b- promulgated thereunder by the SEC, and Section 0(a) of the Exchange Act, U.S.C. t(a) et seq. On September, putative class member Scott Posson filed a motion seeking appointment as lead plaintiff, and seeking appointment of his attorneys at Levi & Korsinsky, LLP as lead counsel. The same day, putative class members Robert Wolfson and Frank Pino filed a motion collectively seeking appointment as lead plaintiff, and seeking appointment of their attorneys at Glancy Prongay & Murray LLP and Bragar Eagel & Squire, P.C. as lead counsel. The movants have since filed cross-response and reply briefs. III. LEGAL STANDARD The Private Securities Litigation Reform Act ( PSLRA ), U.S.C. u- et seq., governs the process by which a lead plaintiff is appointed. The PSLRA requires that the member or members of the purported plaintiff class that the court determines to be the most capable of adequately representing the interests of the class members be appointed lead plaintiff. U.S.C. u-(a)()(b)(i); see Hodges v. Akeena Solar, Inc., F.R.D., (N.D. Cal. 00). The PSLRA establishes a rebuttable presumption that the most adequate plaintiff is the person or group of persons that (i) either filed the complaint or made a motion in response to the published notice; (ii) in the determination of the court, has the largest financial interest in the relief sought; and (iii) otherwise satisfies the requirements of Rule of the Federal Rules of Civil Procedure. U.S.C. u-(a)()(b)(iii). The Ninth Circuit has articulated a three-step process for determining which plaintiff meets these criteria. See In re Cavanaugh, 0 F.d, - (th Cir. 00). First, the court must determine whether the first plaintiff to file an action issued a notice publicizing the pendency of the action. Id. at (citing U.S.C. u-(a)()(a)). Second, the court must decide which plaintiff has the most to gain financially from the lawsuit, and whether that plaintiff satisfies the requirements of Rule of the Federal Rules of Civil Procedure. Id. at 0. The Rule inquiry CASE NO. -cv-0-rs

3 Case :-cv-0-rs Document Filed /0/ Page of 0 is primarily concerned with the typicality and adequacy factors of Rule (a). Id. Finally, the court must consider other class members attempts to rebut the presumptive plaintiff s showing that it satisfies Rule. Id. As long as the plaintiff with the largest financial interest satisfies the typicality and adequacy requirements, and withstands any rebuttal attempt, it must be appointed lead plaintiff. Id. at. IV. DISCUSSION Unlike a stock drop case, in which the plaintiff with the largest financial interest can typically be determined by considering the size of a movant s holdings and resulting losses, a best execution case does not allow for such a straightforward identification. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. LaBranche & Co., F.R.D., 0 (S.D.N.Y. 00) ( [H]ere there appears to be no readily identifiable baseline execution price with which to measure the losses alleged. ). The Ninth Circuit has not recognized a standard approach to measuring largest financial interest that can be applied in this case, and generally requires only that the court... select accounting methods that are both rational and consistently applied. Cavanaugh, 0 F.d at 0 n.. Movants apparently agree largest financial interest should be determined by the amount of losses they experienced, and suggest three possible metrics for measuring losses: gross dollars transacted, shares transacted, and number of transactions. Posson argues the appropriate measurement is shares transacted, a position Pino and Wolfson do not dispute. Shares transacted was also selected as the appropriate measurement in what appears to be the only other best execution case with a dispute for lead plaintiff appointment. See Pirelli, F.R.D. at 0 ( [T]he number of shares each movant has traded... during the proposed class period appears to be the most appropriate and seemingly anodyne measure with which to determine each movant s financial interest in this litigation. ). Indeed, shares transacted appears to be the best metric in this case, assuming, among other things, that larger orders tend to result in greater under-filling, and that the price of a security does not impact the magnitude of losses sustained by trading at a suboptimal price. Collectively, Wolfson and Pino transacted,,. shares, while Pino transacted CASE NO. -cv-0-rs

4 Case :-cv-0-rs Document Filed /0/ Page of 0,,. Thus, Wolfson and Pino have the largest financial interest in the case. Ordinarily, courts refuse to aggregate the interests of multiple plaintiffs who lack a pre-existing relationship. See, e.g., In re Network Associates, Inc., Sec. Litig., F. Supp. d, - (N.D. Cal. ) (refusing to aggregate losses of unrelated plaintiffs because doing so would result in attorney-driven litigation, undermining the PSLRA s goal of plaintiff-driven litigation); In re Donnkenny Inc. Sec. Litig., F.R.D., (S.D.N.Y. ) ( To allow an aggregation of unrelated plaintiffs to serve as lead plaintiffs defeats the purpose of choosing a lead plaintiff. One of the principal legislative purposes of the PSLRA was to prevent lawyer-driven litigation. ). This is not a case, however, in which lawyers aggregated plaintiffs in order to overcome the largest stake requirement, because Wolfson meets that requirement on his own. Bruce v. Suntech Power Holdings Co., No. CV -00 RS, 0 WL, at * (N.D. Cal. Nov., 0) (citation omitted). Wolfson personally transacted,, shares, while Posson transacted only,,. While a pre-litigation relationship amongst lead plaintiffs is preferred, it is not required, especially where, as here, the joint-plaintiffs form a small and cohesive group and one of the plaintiffs individually possesses the largest financial interest. Id. (citations omitted). In addition to having the largest financial interest, Pino and Wolfson also make a prima facie showing of typicality and adequacy. See Wenderhold v. Cylink Corp., F.R.D., (N.D. Cal. ) ( At this stage of the proceedings, nothing more than a preliminary showing [of adequacy and typicality] is required. ). Their claims are typical of the class in that they allege defendants breached their duty of best execution by automatically routing orders through UBS, and made false and misleading statements in connection with this routing practice in violation of Wolfson and Pino would have a greater financial interest than Posson under any proposed metric. Wolfson and Pino transacted $,,. in gross, whereas Posson transacted $,,.. Likewise, Wolfson and Pino engaged in, transactions, while Posson engaged in. Either Wolfson or Pino has a greater individual interest than Posson under the other possible metrics. Pino transacted $,0,.0 in gross, while Posson transacted $,,.. Meanwhile, Pino engaged in, transactions, while Posson engaged in. CASE NO. -cv-0-rs

5 Case :-cv-0-rs Document Filed /0/ Page of 0 the Exchange Act. Wolfson and Pino also submitted a joint declaration attesting that each is knowledgeable about the litigation, that they are working together, and that they are committed to protecting the interests of the class. This showing is sufficient to find that they will vigorously prosecute the action on behalf of the class, thereby meeting the adequacy requirement of Rule. See Bruce, 0 WL, at *. Because Wolfson and Pino have the greatest financial interest and preliminarily satisfy the Rule factors, they are presumptively the most adequate plaintiff. U.S.C. u-(a)()(b)(iii)(i). Posson attempts to rebut the presumption in favor of Wolfson and Pino on two grounds. First, he argues they cannot adequately represent the class because they are a pair of unaffiliated investors. This argument is easily dispatched. Not only does the appropriateness of a group of plaintiffs appear better evaluated under the largest financial interest inquiry, but Wolfson and Pino are not automatically inadequate class representatives merely because they were previously unaffiliated. See Bruce, 0 WL, at *-. Next, Posson argues Wolfson is subject to unique defenses because his trading figures suggest he traded mostly penny stocks that would not have been routed through UBS. According to Posson, the average price of a stock Wolfson transacted during the applicable period was $0., and Posson claims it is unlikely defendants arrangement with UBS covered orders for such penny stocks because UBS would have been paying to process extremely low-value orders. The PSLRA provides that the most-adequate-plaintiff presumption may be rebutted only upon proof that the presumptively most-adequate plaintiff will not fairly and adequate protect the interests of the class, or is subject to unique defenses preventing that plaintiff from adequately protecting the class. U.S.C. u-(a)()(b)(iii)(ii) (emphasis added). The statute does not precisely articulate the burden of proof for rebuttal, but [s]everal courts... have treated proof as synonymous with evidence. Schaffer v. Horizon Pharma Plc, No. -CV- (JMF), 0 WL, at * (S.D.N.Y. June, 0) (quoting Kaplan v. Gelfond, 0 F.R.D., (S.D.N.Y. 00) (finding the presumption may be rebutted if there is evidence that [the movant] will not fairly and adequately protect the interests of the class )). That does not necessarily shed CASE NO. -cv-0-rs

6 Case :-cv-0-rs Document Filed /0/ Page of 0 light on what the burden of proof is, but it does explain why mere speculation (or a mere conclusory assertion) is not enough. Id. (citing Vladimir v. Bioenvision, Inc., No. 0-CV- (SHS) (AJP), 00 WL, at * (S.D.N.Y. Dec., 00)); see also In re SemGroup Energy Partners, L.P., Sec. Litig., No. 0CV-GKF-PJC, 00 WL, at * (N.D. Okla. Oct., 00) (citation omitted) ( Moreover, speculative assertions are insufficient to rebut the lead plaintiff presumption.... Mere innuendo and inferences will not suffice to support allegations of atypicality, conflict of interest or unique defenses. ). Whatever the exact burden of proof is, Posson has not satisfied it. He merely speculates that Wolfson s orders were not subject to the UBS routing agreement, but provides no actual evidence for his claim. Speculation in the absence of firm evidence is not sufficient to rebut the presumption that the pair of Wolfson and Pino is the most adequate plaintiff. See Schaffer, 0 WL, at * (citations omitted). Thus, Pino and Wolfson shall jointly be appointed lead plaintiff, see U.S.C. u-(a)()(b)(iii); Cavanaugh, 0 F.d at, to be represented by their designated attorneys at Glancy Prongay & Murray LLP and Bragar Eagel & Squire, P.C., see U.S.C. u-(a)()(b)(v). V. CONCLUSION Robert Wolfson and Frank Pino are hereby appointed lead plaintiff. Their designated attorneys at Glancy Prongay & Murray LLP and Bragar Eagel & Squire, P.C. are hereby appointed lead counsel. IT IS SO ORDERED. Dated: November, 0 RICHARD SEEBORG United States District Judge CASE NO. -cv-0-rs