UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS ) ) ) ) ) ) ) ) ) ) ) )

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1 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 1 of 32 PageID #: 2760 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS CITY OF PONTIAC GENERAL EMPLOYEES RETIREMENT SYSTEM, Individually and on Behalf of All Others Similarly Situated, vs. Plaintiff, WAL-MART STORES, INC., et al., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) No. 5:12-cv SOH CLASS ACTION PLAINTIFF S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS MOTION TO SEQUENCE CLASS AND MERITS DISCOVERY

2 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 2 of 32 PageID #: 2761 TABLE OF CONTENTS Page I. INTRODUCTION... 1 II. ARGUMENT... 3 A. No Court Has Ever Exercised Its Discretion as Defendants Demand There Is Every Reason to Believe that This Case Will Proceed Even if a Class Is Not Certified As PGERS Counsel Has Already Explained to Defense Counsel, Initial Merits Discovery Will Impose No Burden on Defendants Whatsoever Defendants Proposed Bifurcation Would Delay and Complicate This Litigation Because Defendants Concede the Overlap Between Merits and Class-Certification Issues Defendants Cite No Cases that Actually Support Their Position B. Defendants Preview of Their Class Certification Brief Proves Only that Defendants Have No Legitimate Basis to Oppose Class Certification C. Defendants Other Ways of Challenging Reliance Are Based on Unsupportable Speculation D. Defendants Challenges to PGERS Adequacy Are Ill-Timed and Ill- Advised Far from Disqualifying, PGERS Portfolio-Monitoring Agreements Confirms Its Responsibility Typicality Concerns the Nature of a Proposed Representative s Claims Courts Have Repeatedly Recognized PGERS Adequacy as a Class Representative III. CONCLUSION i -

3 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 3 of 32 PageID #: 2762 TABLE OF AUTHORITIES Page CASES Alpern v. UtiliCorp United, Inc., 84 F.3d 1525 (8th Cir. 1996) Antonson v. Robertson, No V, 1990 WL (D. Kan. 1990) Basic Inc. v. Levinson, 485 U.S. 224 (1988)... 13, 16, 18 Beach v. Healthways, Inc., 264 F.R.D. 360 (M.D. Tenn. 2010)... 5 Biben v. Card, No cv-W-6, 1986 U.S. Dist. LEXIS (W.D. Mo. Jan. 6, 1986) Blacktop, Inc. v. Edible Arrangements Int l, Inc., No. 4:14-CV-0005-DGK, 2014 U.S. Dist. LEXIS (W.D. Mo. Apr. 30, 2014)... 3 Chateau de Ville Productions, Inc. v. Tams-Witmark Music Library, Inc., 586 F.2d 962 (2d Cir. 1978) Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978)... 6 Detroit Gen. Ret. Sys. v. MedTronic, Inc., 621 F.3d 800 (8th Cir. 2010)... 8 Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005) Gray v. First Winthrop Corp., 133 F.R.D. 39 (N.D. Cal. 1990)... 5, 11 Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct (2014)... 16, 18, 22, 24 - ii -

4 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 4 of 32 PageID #: 2763 Page IBEW Local 98 Pension Fund v. Best Buy Co., No , 2014 U.S. Dist. LEXIS (D. Minn. Aug. 6, 2014) In re Am. Italian Pasta Co. Sec. Litig., CV-WODS, 2007 U.S. Dist. LEXIS (W.D. Mo. Mar. 26, 2007) In re Groupon Secs. Litig., No. 12 C 2450, 2014 U.S. Dist. LEXIS (N.D. Ill. Feb. 24, 2014)... passim In re Hamilton Bancorp. Inc. Sec. Litig., No. 01-CV-156-Gold, 2002 U.S. Dist. LEXIS (S.D. Fla. Jan. 14, 2002)... 5, 11 In re Northfield Labs. Inc. Secs. Litig., 264 F.R.D. 407 (N.D. Ill. 2009) In re Plastics Additives Antitrust Litig., No , 2004 U.S. Dist. LEXIS (E.D. Pa. Nov. 30, 2004) In re Rail Freight Fuel Surcharge Antitrust Litig., 258 F.R.D. 167 (D.D.C. 2009) In re Red Hat, Inc. Sec. Litig., No. 5:04-cv-473-BR, 2011 WL (E.D. N.C. Sept. 22, 2011)... 13, 14 In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008) In re SemGroup Energy Partners No. 08-MD-1989-GKF, 2010 U.S. Dist. LEXIS (N.D. Okla. Dec. 21, 2010)... 4, 5, 6, 11 In re Tricord Sys. Inc. Sec. Litig., No , 1996 U.S. Dist. LEXIS (D. Minn. Apr. 5, 1996) iii -

5 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 5 of 32 PageID #: 2764 Page In re UTStarcom Secs. Litig., No. C JW, 2010 U.S. Dist. LEXIS (N.D. Cal. May 12, 2010) In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604 (8th Cir. 2011)... 6, 7, 8 Lawrence E. Jaffe Pension Plan v. Household Int l, Inc., No. 02 C 5893, 2004 U.S. Dist. LEXIS 18993, 2004 WL (N.D. Ill. Sept. 21, 2004) Local 703, I.B. of T. Grocery and Food Employees Welfare Fund v. Regions Fin. Corp., No , 2014 U.S. App. LEXIS (11th Cir. Aug. 6, 2014) Local 703, I.B. v. Regions Fin. Corp., No. CV 10-J-2847-S, 282 F.R.D. 607 (N.D. Ala. 2012) McIntire v. China MediaExpress Holdings, Inc., No. 11-CV-0804(VM), 2014 U.S. Dist. LEXIS (S.D.N.Y. Aug. 15, 2014) Minneapolis Firefighters Relief Ass n v. Medtronic, Inc. 0:08-cv-6324-PAM-AJB (D. Minn. Apr. 8, 2010)... 5 Nken v. Holder, 556 U.S. 418, 129 S. Ct. 1749, 173 L. Ed. 2d 550 (2009)... 3 PGERS v. Lockheed Martin Corp., 844 F. Supp. 2d 498 (S.D.N.Y. 2012)... 21, 27 Plumbers & Pipefitters Nat l Pension Fund v. Burns, 292 F.R.D. 515 (N.D. Ohio 2013) Public Pension Fund Group v. KV Pharm., 679 F.3d 972 (8th Cir. 2012)... 8 Rhines v. Weber, 544 U.S. 269, 125 S. Ct. 1528, 161 L. Ed. 2d 440 (2005) iv -

6 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 6 of 32 PageID #: 2765 Page Schleicher v. Wendt, 618 F.3d 679 (7th Cir. 2010) Smith v. Dominion Bridge Corp., No , 2007 U.S. Dist. LEXIS 26903, 2007 WL (E.D. Penn. Apr. 11, 2007) STATUTES, RULES AND REGULATIONS Federal Rules of Civil Procedure Rule Rule , 7, 10 Rule 23(a)... 2 Rule 23(b)... 2 Rule 23(b)(3)... 10, 15, 18 Rule 26(f)(1) SECONDARY AUTHORITIES 1 McLaughlin on Class Actions (10th ed. 2013) 3: , 12 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions (5th ed. 2013) 10: v -

7 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 7 of 32 PageID #: 2766 I. INTRODUCTION Defendants are asking the Court to do something no Court has ever done: enter a discretionary order to postpone merits discovery after the sufficiency of a complaint has been confirmed and a plaintiff has waited over 29 months to commence merits discovery. This unprecedented request confirms that Defendants will stop at nothing to avoid having to answer for their conduct. An honest man or company accused of defrauding others would rush to shine as bright a light as possible on their exemplary behavior. But Defendants want nothing more than to keep the details of their deception shrouded in darkness. Defendants latest shade comes in the form of a $15-per-minute expert they hired to say nothing more than what PGERS alleges in its complaint and what both Judge Setser and this Court have already observed: when bad news about a stock is hidden, its price impact cannot be seen until the truth is revealed. Defendants know their motion is not well taken as was the case with their failed motion to strike PGERS complaint, their failed motions to strike documents from the docket here and in the Middle District of Tennessee, and their failed motion to dismiss PGERS complaint. But Defendants are not fools. Their purpose is not to win these motions. Rather, Defendants purpose is to use these motions to delay these proceedings. Defendants are filing losing motions because doing so wins them more darkness. They know this Court s docket is busy. They know it took nearly a year for them to lose their motions to strike and 18 months to lose their motion to dismiss. Throughout these delays, PGERS has been denied access to the extensive evidence of Defendants fraud. And so, Defendants seek yet another delay under the guise of a motion to sequence discovery

8 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 8 of 32 PageID #: 2767 There are myriad reasons why Defendants present motion is not well taken, but one allows the Court to deny it summarily, without any further delay to PGERS pursuit of justice: PGERS will pursue this case whether or not it is certified as a class action. This Court has determined the sufficiency and legitimacy of PGERS allegations and PGERS means to prove them. Period. Add to PGERS, hundreds of other institutional investors and the billions of dollars of losses Defendants caused, and it is apparent that there is nothing to be gained, just more money and time to be lost, by delaying merits discovery until after the Court s class-certification determination because the parties will be taking the same merits discovery no matter how the Court rules on a motion that has not even been filed. In addition, much of the merits discovery in this case will overlap with classcertification issues. Defendants motion expressly acknowledges, but refuses to concede, the class-certification issues of numerosity, commonality, typicality, predominance, or superiority that Plaintiff must prove under Rule 23(a) and (b). See Dkt. 151 at 6. In fact, Defendants state that the merits of Plaintiff s claim have no or little bearing on the[se] class certification-specific issues.... Id. 1 While PGERS believes there is a larger overlap, Defendants concede that the merits of PGERS claims may have at least some bearing on class-certification issues. This concession ends any debate about bifurcating discovery because it would be objectively unfair to force PGERS to litigate class-certification issues while it is being denied access to the merits discovery that has at least some bearing on those class-certification issues. 1 All citations and footnotes are omitted and emphasis is added unless otherwise noted

9 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 9 of 32 PageID #: 2768 Far from being more efficient, Defendants request for bifurcation would unnecessarily create another issue for the parties to litigate and for the Court to be forced to decide: whether any particular question or discovery request pertains to class certification, merits, or both. For example, PGERS intends to help satisfy the commonality, predominance, and superiority factors by showing the Court the common evidence (documents and testimony) that will provide common answers to the common questions this case raises. In order to do so, however, PGERS plainly would need access to the documents and witnesses related to the elements of PGERS claims. PGERS has cleared the high, and solitary, hurdle Congress created for this type of litigation, and in doing so, PGERS has earned the right to proceed as the Federal Rules of Civil Procedure mandate: to secure the just, speedy, and inexpensive determination of every action and proceeding. Fed. R. Civ. P. 1. Accordingly, PGERS respectfully requests that the Court deny Defendants motion. II. ARGUMENT A. No Court Has Ever Exercised Its Discretion as Defendants Demand PGERS embraces the considerable discretion that the Court enjoys over the timing of this and all other proceedings before it, but [a] stay [of discovery] should be entered only where it is a proper exercise of the court s discretion, Rhines v. Weber, 544 U.S. 269, 276, 125 S. Ct. 1528, 161 L. Ed. 2d 440 (2005), and the proponent of the stay bears the burden of establishing the need for a stay. Nken v. Holder, 556 U.S. 418, , 129 S. Ct. 1749, 173 L. Ed. 2d 550 (2009). Blacktop, Inc. v. Edible Arrangements Int l, Inc., No. 4:14-CV DGK, 2014 U.S. Dist. LEXIS 59845, at *2-*3 (W.D. Mo. Apr. 30, 2014). No Court has ever found this burden to be satisfied under the circumstances presented here: after the - 3 -

10 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 10 of 32 PageID #: 2769 sufficiency of a complaint has been confirmed and a plaintiff has already waited over 29 months to commence merits discovery due to the automatic stay under the PSLRA. In fact, Courts have found just the opposite: that it is inappropriate to impose an additional stay of discovery once a plaintiff has satisfied the PSLRA s prerequisite to merits discovery by defeating a defendant s motion to dismiss. In In re SemGroup Energy Partners, the Court denied a defendant s motion to bifurcate discovery, explaining that, this case has been pending for more than two years, and discovery has already been stayed for most of that period under the PSLRA. Bifurcation will almost certainly lead to further delay in the resolution of plaintiffs claims. No. 08-MD-1989-GKF, 2010 U.S. Dist. LEXIS , at *13 (N.D. Okla. Dec. 21, 2010). Earlier this year, the District Court for the Northern District of Illinois employed similar reasoning when it rejected a request to bifurcate discovery: [U]nder the Private Securities Litigation Reform Act (PSLRA), Plaintiff was precluded from conducting discovery prior to the [pendency of the] motions to dismiss. Since that time, Defendants have objected to the production of any merits discovery. By the time the class certification motion is fully briefed, over two years will have passed since the case was filed. Defendants assert that this fact is irrelevant. The Court acknowledges that this factor is not dispositive. However, securities litigation is unique in this regard and the [c]ourt, in its discretion, is free to consider this fact when weighing the expediency (or lack thereof) of bifurcation. In re Groupon Secs. Litig., No. 12 C 2450, 2014 U.S. Dist. LEXIS 26212, at *10-*11 (N.D. Ill. Feb. 24, 2014). This is not a generic situation where Congress could have enacted legislation regarding stays of discovery for private securities litigation, but simply did not. Rather, Congress did enact legislation regarding stays of discovery for private securities litigation, and Congress expressly decided that discovery stays under the PSLRA last only - 4 -

11 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 11 of 32 PageID #: 2770 until a motion to dismiss has been decided. This explains why so many courts throughout the country, including in the Eighth Circuit, have denied stays of merits discovery in securities fraud class actions. See, e.g., Minneapolis Firefighters Relief Ass n v. Medtronic, Inc., 0:08-cv-6324-PAM-AJB, slip op. at 1 (D. Minn. Apr. 8, 2010); In re Hamilton Bancorp. Inc. Sec. Litig., No. 01-CV-156-Gold, 2002 U.S. Dist. LEXIS 29139, at *5 (S.D. Fla. Jan. 14, 2002); Beach v. Healthways, Inc., 264 F.R.D. 360, 363 (M.D. Tenn. 2010); Gray v. First Winthrop Corp., 133 F.R.D. 39, 41 (N.D. Cal. 1990) There Is Every Reason to Believe that This Case Will Proceed Even if a Class Is Not Certified Defendants entire motion is based on the following premise: that the questions to be resolved at the class certification stage that could be case-dispositive.... Dkt. 151 at 1. This is a false premise and for that reason, the Court should summarily deny Defendants motion. As other Courts have recognized, because of the number of investors and the enormity of losses they allege to have incurred, this case is likely to continue even if Lead Plaintiff is not found to be an adequate class representative or class certification is otherwise denied. SemGroup Energy Partners, 2010 U.S. Dist. LEXIS , at *13; See also 1 McLaughlin on Class Actions 3:10, at 453 (10th ed. 2013) ( Courts are more likely to decline requests to stay pure merits discovery when the nature of the putative representative s claims suggests that it would continue to prosecute individual claims if 2 Defendants claim that courts that have rejected formal bifurcation have frequently prioritized class discovery and directed that the parties defer purely merits-related discovery until after certification. Dkt. 151 at 9 n.4. The two opinions Defendants cite mention nothing about this being a common approach. Nor do they speak to deferring merits discovery until after certification. Also, it is unclear what prioritizing would entail here and how the Court could define purely merits-related discovery, where Defendants have not conceded any of the Rule 23 factors

12 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 12 of 32 PageID #: 2771 certification is denied, or a substantial delay has preceded the class certification motion. ). Here, there are indisputably hundreds of large institutional investors and PGERS has alleged [b]illions of dollars of shareholder value was erased immediately after the Times revelation of the facts defendants had theretofore concealed Not only does PGERS have no intention of walking away from this case, but as in SemGroup Energy, because of the number of investors and the enormity of losses they allege to have incurred, this case is likely to continue even if Lead Plaintiff is not found to be an adequate class representative or class certification is otherwise denied U.S. Dist. LEXIS , at *13. Also, far from dispositive, [c]lass certification is inherently tentative. In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 613 (8th Cir. 2011) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 n.11 (1978)). Merits discovery, therefore, is inevitable and because putting off the inevitable would simply prolong this case and increase expenses, the Court should deny Defendants motion on this basis alone. 2. As PGERS Counsel Has Already Explained to Defense Counsel, Initial Merits Discovery Will Impose No Burden on Defendants Whatsoever Defendants represent to the Court that, PGERS made clear in a recent telephone call with defense counsel (see Declaration of Jonathan C. Dickey 5) that it intends to demand sweeping discovery that would unnecessarily impose substantial expenditures of time and resources on the parties and the Court, bogging down these proceedings and unduly delaying the potentially case-dispositive question of whether PGERS can satisfy its burdens under 3 Unless noted otherwise, all references are to the Amended Complaint for Violation of Federal Securities Laws (Dkt. 86)

13 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 13 of 32 PageID #: 2772 Federal Rule of Civil Procedure 23. Dkt. 151 at 3. PGERS counsel now knows how Judge Setser must have felt when reading Defendants mischaracterization of her Report and Recommendation. Far from expressing an intention to impose substantial expenditures of time and resources on the parties, PGERS counsel expressly represented just the opposite: that PGERS initial document request would impose on Defendants no expenditure of time, resources, or money. As PGERS counsel explained, and PGERS confirms here, PGERS initial document request will be limited to the following: all of the documents and information that Defendants have already gathered and provided to third parties relating to the corruption that was the subject of the disclosures at issue in this case. See Declaration of Jason A. Forge 2. Such a production will entail no more than simply copying whatever media were used to transmit such documents and information to the third parties. No searching. No gathering. No privilege review (because the documents have already been produced to third parties). Just copy CDs, DVDs, and/or hard drives, and PGERS will need at least two months to go through these materials before taking depositions. During this time, PGERS would be happy to satisfy any proper discovery requests from Defendants. 3. Defendants Proposed Bifurcation Would Delay and Complicate This Litigation Because Defendants Concede the Overlap Between Merits and Class-Certification Issues The Eighth Circuit has observed that bifurcating discovery as Defendants urge can actually complicate the task of deciding class certification. The district court in Zurn bifurcated class and merits discovery. In re Zurn, 644 F.3d at 612. This bifurcation, however, led to evidentiary deficiencies related to the defendants challenge of the plaintiffs class-certification expert. The Eighth Circuit observed that, [i]t was after all [defendants] - 7 -

14 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 14 of 32 PageID #: 2773 which sought bifurcated discovery which resulted in a limited record at the class certification stage, preventing the kind of full and conclusive Daubert inquiry Zurn later requested. While there is little doubt that bifurcated discovery may increase efficiency in a complex case such as this, it also means there may be gaps in the available evidence. Id Though Defendants brief plucks a portion from the second sentence of this quote from Zurn, it omits the entire first sentence and the balance of the second in which the Eighth Circuit warned of just one of the downsides of bifurcating discovery: bifurcated discovery [] resulted in a limited record at the class certification stage, preventing the kind of full and conclusive Daubert inquiry Zurn later requested and it also means there may be gaps in the available evidence. Id. Defendants omission of the Eighth Circuit s Daubert reference is particularly telling because they have already introduced experts into the class-certification discussion before the discussion has even begun. Dkt. 151 at 7 ( class certification discovery is likely to focus largely on expert reports and testimony ). Plus, a proper price-impact analysis (unlike the one Defendants submitted, which did not acknowledge the undisputed dramatic price-impact from the revelation of Defendants omitted information), will be closely related to the materiality element of PGERS claim. See, e.g., Dkt. 146 at 4 ( A significant change in stock price upon disclosure of withheld information is strong evidence that the information was material. Public Pension Fund Group v. KV Pharm., 679 F.3d 972, 983 (8th Cir. 2012) (quoting Detroit Gen. Ret. Sys. v. MedTronic, Inc., 621 F.3d 800, 805 (8th Cir. 2010)) )

15 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 15 of 32 PageID #: 2774 Also, the drivers of the price-impact of Defendants omissions (e.g., the massive costs and significantly higher likelihood of many other devastating repercussions of a vastly different investigation than the one Defendants described) also directly relate to damages in this case. The Court should not allow Defendants to force upon everyone three rounds of interrelated expert discovery. Nor should it allow Defendants to compromise the integrity of the experts analyses in this case by directing that they be done in piecemeal and before PGERS has had the opportunity to gather other evidence that bears on these issues (e.g., contemporaneous reactions to the revelation by analysts, journalists, market commentators, and academics). The Eighth Circuit is far from alone in recognizing the real risk that bifurcation will complicate a case. District Courts, treatise authors, and the Supreme Court all recognize the likely overlap between class and merits issues and facts: Courts increasingly find that class certification and merits issues overlap. See Newberg on Class Actions, 10:7 (5th ed. 2013). In Dukes, the Supreme Court found that class certification analysis will entail some overlap with the merits of the plaintiff s underlying claim. That cannot be helped. The class determination generally involves considerations that are en-meshed in the factual and legal issues comprising the plaintiff s cause of action. 131 S. Ct. at (citations and footnote omitted). Groupon, 2014 U.S. Dist. LEXIS 26212, at *14-*15. Indeed, even Defendants acknowledge the possibility of overlap: the merits of Plaintiff s claim have no or little bearing on the[se] class certification-specific issues.... Dkt. 151 at 6. PGERS knows that the overlap will be more significant inasmuch as it will lay out its approach to proving the elements of its claims in order to demonstrate with actual documents and actual witness testimony that the evidence of these elements and the satisfaction of them will be the same on a class-wide - 9 -

16 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 16 of 32 PageID #: 2775 basis as they would be on an individual basis. In other words, PGERS will use actual documents and testimony to demonstrate that questions of law or fact common to class members predominate over any questions affecting only individual members. Fed. R. Civ. P. 23(b)(3). Documents and testimony regarding the details of Defendants bribery program, their knowledge of it, their concealment of it, their internal communications about their fear of its revelation and about the phrasing of their misleading statements concerning it are just a few examples of the types of evidence PGERS intends to obtain and present to the Court to establish a predominance of common questions, evidence, and answers here. Whether this overlap between merit and class-certification discovery is as extensive as PGERS anticipates, as modest as Defendants concede, or somewhere in between, does not matter. It would be inherently prejudicial to force PGERS to litigate a class-certification motion with a finger, let alone a hand, tied behind its back. See, e.g., Chateau de Ville Productions, Inc. v. Tams-Witmark Music Library, Inc., 586 F.2d 962, 966 (2d Cir. 1978) ( Failure to allow discovery, where there are substantial factual issues relevant to certification of the class, makes it impossible for the party seeking discovery to make an adequate presentation either in its memoranda of law or at the hearing on the motion if one is held. ). While there may be cases where a defendant concedes so many of the Rule 23 factors, that class certification is limited to an issue that is wholly separate from the merits, this is not such a case as Defendants have not conceded a single factor. Because of this overlap, class-certification and merits discovery must proceed simultaneously to at least some extent, so, again, there is nothing to be saved by bifurcating the two. Moreover, disputes regarding the overlap will demand far more time, money,

17 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 17 of 32 PageID #: 2776 litigation, and judicial supervision than would proceeding according to the presumptive nonbifurcated process under the Federal Rules of Civil Procedure. This is one of the reasons why the Federal Rules do not automatically stay discovery pending class certification: [T]he Federal Rules could easily have provided for a stay pending class certification, but they do not. It is also important to bear in mind the nature of class action discovery. Discovery relating to class certification is closely enmeshed with merits discovery, and in fact cannot be meaningfully developed without inquiry into basic issues of the litigation. See Manual for Complex Litigation 2d (1985). An order staying discovery pending class certification would be unworkable, since plaintiffs must be able to develop facts in support of their class certification motion. An order restricting discovery to class issues would be impracticable because of the closely linked issues, and inefficient because it would be certain to require ongoing supervision of discovery. Gray, 133 F.R.D. at There are legions of cases recognizing that [a]n order restricting discovery to class issues would be impracticable because of the closely linked issues, and inefficient because it would be certain to require ongoing supervision of discovery. SemGroup Energy, 2010 U.S. Dist. LEXIS , at *13. See also In re Plastics Additives Antitrust Litig., No , 2004 U.S. Dist. LEXIS 23989, at *9 (E.D. Pa. Nov. 30, 2004) ( Bifurcation would also belie principles of judicial economy, as the Court may be forced to spend time and resources resolving discovery disputes over what is merit discovery as compared to class discovery. ); Hamilton Bancorp, 2002 U.S. Dist. LEXIS 29139, at *5 (noting that bifurcation of discovery may well-increase litigation expenses by protracting the completion of discovery, coupled with endless disputes over what is merit versus class discovery ); Gray, 133 F.R.D. at 41 ( An order restricting discovery to class issues would be impracticable because of the closely linked issues, and inefficient because it would be certain

18 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 18 of 32 PageID #: 2777 to require ongoing supervision of discovery. ); In re Rail Freight Fuel Surcharge Antitrust Litig., 258 F.R.D. 167, 174 (D.D.C. 2009) ( [T]he continued need for supervision and the increased number of disputes would further delay the case proceedings. Such prevention of the expeditious resolution of the lawsuit would prejudice plaintiffs. ); 1 McLaughlin on Class Actions 3:10, at 454 ( Even if a stay of merits discovery is granted, the frequent overlap between merits and class certification inquiries may make its enforcement fraught with difficult line-drawing disputes. ). 4. Defendants Cite No Cases that Actually Support Their Position Whether criticizing Judge Setser s Report and Recommendation or citing other Courts opinions, Defendants seem to have little regard for what any given judicial opinion actually says. Defendants cite six cases in an attempt to create the impression that bifurcating discovery is routine in fraud-on-the-market cases. Dkt. 151 at 6 n.1. Far from supporting this erroneous contention, the cases Defendants cite do not explain why discovery was bifurcated (or whether bifurcation was even contested), do not concern bifurcation, or involved bifurcation after a plaintiff had already been granted substantial merits discovery. The court in Groupon denied bifurcation and recognized the unhelpfulness of three of the very cases on which Defendants rely (Dkt. 151 at 6 n.1): The securities cases cited by the Defendants are wholly unpersuasive since they have no discussion about why discovery was bifurcated. See In re Northfield Labs. Inc. Secs. Litig., 264 F.R.D. 407 (N.D. Ill. 2009) (ruling on motion to compel); Smith v. Dominion Bridge Corp., No , 2007 U.S. Dist. LEXIS 26903, 2007 WL (E.D. Penn. Apr. 11, 2007) (approving class action settlement).... Lawrence E. Jaffe Pension Plan v. Household Int l, Inc., No. 02 C 5893, 2004 U.S. Dist. LEXIS 18993, 2004 WL (N.D. Ill. Sept. 21, 2004) (denying motion to compel plaintiff to provide a detailed calculation of damages sought))

19 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 19 of 32 PageID #: U.S. Dist. LEXIS 26212, at *9-*10 n.1. The three other cases Defendants cite are similarly inapt. Defendants cite In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008) three times in their brief. Dkt. 151 at 6 n.1, 12, 16. Despite their repeated citations, Defendants neglect to mention that there was no issue in In re Salomon regarding discovery bifurcation. Indeed, the opinion does not even mention the word bifurcation. Instead, the only issue on appeal in that case was whether the defendants should have had the opportunity to rebut the Basic presumption prior to class certification. Id. at 486. There is no indication that merits discovery had been stayed, and the Second Circuit neither ordered merits discovery stayed nor embraced any of the defendants arguments as to how they would rebut the Basic presumption. In fact, the only discovery limitation the Court discussed was in regard to the District Court s discretion to limit class-certification discovery. Id. Defendants also cite In re Red Hat, Inc. Sec. Litig., No. 5:04-cv-473-BR, 2011 WL (E.D. N.C. Sept. 22, 2011). Dkt. 151 at 6 n.1. But Red Hat was simply an order granting a motion for certain law firms to share the attorneys fees and expenses allowed by the Court in conjunction with its final approval of a settlement WL , at *1. In fact, the case is a perfect example of how protracted class-certification issues can be, as well as how often an initial denial of class certification is not case-dispositive. There, the parties proceeded with some merits[] discovery on September 19, 2006 (pursuant to the parties discovery schedule, merits document production proceeded along with class certification). Id. at *2, *10. On May 11, 2007, the Court denied a motion for class certification. Id. at *3. On November 13, 2007, the Court appointed a new lead plaintiff and a new lead counsel, and

20 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 20 of 32 PageID #: 2779 the parties proceeded with more merits discovery. Id. On August 29, 2009, the Court granted a second motion for class certification. Id. at *4. The case settled over a year later. Id. As this Court s own review of Red Hat will confirm, the case does not support Defendants motion. Defendants save the least for last with their citation to Antonson v. Robertson, No V, 1990 WL (D. Kan. 1990). Dkt. 151 at 6 n.1. Defendants reached back a quarter-century for this case before the enactment of the PSLRA and its automatic discovery stay. In fact, in Antonson, there was absolutely no stay of merits discovery throughout the time during which the plaintiffs had filed an initial class-certification motion and a renewed class-certification motion. Id. at *3. It was only after the plaintiffs had already received or were allowed to receive substantial merits discovery, including interrogatory answers and a Court-ordered production of approximately 40,000 documents, that the Court ordered a temporary stay of discovery so the defendants could respond to the plaintiffs renewed motion for class certification. Id. As the Court explained, [a]lthough we ordinarily might not stay discovery relating to the merits of the action pending class determination, we find it necessary to relieve the burden on defendants in consideration of our decision to grant plaintiffs motion to compel discovery. Id. In other words, this is yet another case that does not support Defendants request for a stay of merits discovery following a stay of over 29 months and PGERS defeat of Defendants motion to dismiss

21 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 21 of 32 PageID #: 2780 B. Defendants Preview of Their Class Certification Brief Proves Only that Defendants Have No Legitimate Basis to Oppose Class Certification Defendants contend that they will defeat the fraud-on-the-market presumption at class certification by showing that there was no significant share-price movement following their December 8, 2011 misleadingly incomplete statement, rather than following the New York Times April 21, 2012 revelation of the facts that Defendants had concealed and distorted. See Dkt. 151 at 14. They claim that if they successfully make this showing, PGERS cannot meet its burden under Rule 23(b)(3), and a class cannot be certified because individualized issues would predominate. Id. Defendants approach makes about as much sense as would that of a defendant who uses a photograph from Christmas morning to show that a gymnast suffered no injuries, despite losing an arm and a leg after being struck by a drunk driver on New Year s Eve. Here, as is true for all securities cases, there is no actual harm until the truth is revealed. In other words, investors did not lose an arm and a leg until the Times revealed what Defendants had concealed and distorted. See, e.g., Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 344 (2005) ( a person who misrepresents the financial condition of a corporation in order to sell its stock becomes liable to a relying purchaser for the loss the purchaser sustains when the facts... become generally known and as a result share value depreciate[s] ); see also Schleicher v. Wendt, 618 F.3d 679, (7th Cir. 2010) ( [Defendants are liable for securities fraud regardless of whether their] false statements (or... material omissions) propel the stock s price upward... [or] were designed to slow

22 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 22 of 32 PageID #: 2781 the rate of fall. ); IBEW Local 98 Pension Fund v. Best Buy Co., No (DWF/FLN), 2014 U.S. Dist. LEXIS , at *18 (D. Minn. Aug. 6, 2014) (same). Defendants deliberately obfuscate the Supreme Court s analysis in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct (2014) ( Halliburton II ) when they contend that it supports their argument that they could successfully rebut the fraud-on-the-market presumption if Wal-Mart s stock price did not change significantly when Defendants concealed and distorted the facts and circumstances concerning their corruption. Dkt. 151 at 14. Post-Halliburton II decisions have explicitly rejected this very argument: The Supreme Court only said that defendants may seek to defeat the Basic presumption with evidence that the misrepresentations did not impact the price. Id. at 2417 (emphasis added). Halliburton II by no means holds that in every case in which such evidence is presented, the presumption will always be defeated. Indeed, this Court has recognized the distinct role that confirmatory information may have in this analysis. See FindWhat, 658 F.3d at 1310 ( A corollary of the efficient market hypothesis is that disclosure of confirmatory information or information already known by the market will not cause a change in the stock price. This is so because the market has already digested that information and incorporated it into the price. ). Local 703, I.B. of T. Grocery and Food Employees Welfare Fund v. Regions Fin. Corp., No , 2014 U.S. App. LEXIS 15106, at *24 (11th Cir. Aug. 6, 2014). In another post- Halliburton II opinion, the Court in McIntire v. China MediaExpress Holdings, Inc., No. 11- CV-0804(VM), 2014 U.S. Dist. LEXIS , at *40 (S.D.N.Y. Aug. 15, 2014) observed that, [a] material misstatement can impact a stock s value either by improperly causing the value to increase or by improperly maintaining the existing stock price (emphasis in original). Naturally, given the nature of this case, PGERS alleged and this Court observed, that there was no significant price movement following Defendants concealment and distortion

23 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 23 of 32 PageID #: 2782 of material information. 31; Dkt. 146 at 4. Indeed, that was Defendants entire purpose: to deceive investors so they would not know they were buying damaged goods. Thus, the only relevant inquiry is whether the later revelation of this information demonstrated a price impact. Defendants own $15/minute expert does not dispute that the Times revelation of the facts that Defendants had concealed and distorted caused the April 24 and 25, 2012 collapse in Wal-Mart s share price. This is what PGERS alleges ( 31), what Judge Setser observed (Dkt. 133 at 4 and 10), what this Court observed (Dkt. 146 at 4), and what the numbers prove. This is also precisely what every Court expects to see in a case such as this, as demonstrated above. The fact that Defendants and their expert do not dispute this obvious demonstration of price-impact confirms that Defendants entire promised rebuttal is just a bluff. C. Defendants Other Ways of Challenging Reliance Are Based on Unsupportable Speculation Defendants other basis for challenging reliance, aptly titled Defendants Are Entitled To Rebut The Basic Presumption In Other Ways, is a kitchen-sink argument that substitutes rank speculation for actual facts and evidence. 4 Put simply, every defendant in every case could make the exact same arguments as Defendants make here, so accepting these arguments would be tantamount to holding that merits discovery in all cases brought under the PSLRA must be stayed until a class is certified. Once again, what Defendants demand of this Court is completely contrary to the law. 4 In order to establish good cause, courts have insisted on a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements. Groupon, 2014 U.S. Dist. LEXIS 26212, at *

24 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 24 of 32 PageID #: 2783 Defendants misleadingly invoke Halliburton II in purported support of the following other way : More commonly, the defendant may rebut the presumption of reliance with respect to an individual plaintiff by showing that he did not rely on the integrity of the market price in trading stock. Dkt. 151 at 16 (citing Halliburton II, 134 S. Ct. at 2412). Defendants citation suggests that rebutting the presumption with respect to an individual investor would somehow defeat predominance. In truth, however, Halliburton II held just the opposite: Basic does afford defendants an opportunity to rebut the presumption of reliance with respect to an individual plaintiff by showing that he did not rely on the integrity of the market price in trading stock. While this has the effect of leav[ing] individualized questions of reliance in the case, post, at 12, there is no reason to think that these questions will overwhelm common ones and render class certification inappropriate under Rule 23(b)(3). That the defendant might attempt to pick off the occasional class member here or there through individualized rebuttal does not cause individual questions to predominate. Halliburton II, 134 S. Ct. at Defendants then proceed to argue that Wal-Mart expects class discovery to show that the issue of reliance is inherently individualized in this case, but such speculation is meaningless in light of the Supreme Court s statements in Halliburton II (above) and in Basic Inc. v. Levinson, 485 U.S. 224, (1988): It has been noted that it is hard to imagine that there ever is a buyer or seller who does not rely on market integrity. Who would knowingly roll the dice in a crooked crap game? Defendants contention that most 5 Defendants citation to Biben v. Card, No cv-W-6, 1986 U.S. Dist. LEXIS 30808, at *34-*35 (W.D. Mo. Jan. 6, 1986) (Dkt. 151 at 16) raises yet another eyebrow inasmuch as Biben predates the PSLRA, predates Basic, predates Halliburton II, and still did not hold that a defendant could ever defeat a fraud-on-the-market presumption by simply picking off individual class members

25 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 25 of 32 PageID #: 2784 investors purchase decisions would have been unaffected had they known the facts that Defendants had concealed and distorted is also objectively disproved by the massive drop in Wal-Mart s share price after the Times revelations revelations of far more omitted facts and circumstances than the watered-down description in Defendants brief. Dkt. 151 at Accordingly, Defendants kitchen-sink arguments belong in the garbage disposal as they are unsupported, unsupportable, and they conflict with both common sense and case law. D. Defendants Challenges to PGERS Adequacy Are Ill-Timed and Ill-Advised Defendants motion concludes with a shift from speculating to mud-slinging. Defendants misguided attacks are never appropriate, but they are even more misplaced here, where Defendants offered no opposition to PGERS appointment as Lead Plaintiff and where there is no pending motion for class certification. Nevertheless, PGERS will point out just a few of the many fundamental flaws in Defendants erroneous criticism. 1. Far from Disqualifying, PGERS Portfolio-Monitoring Agreements Confirms Its Responsibility Defendants take issue with the possibility of a monitoring agreement between PGERS and their counsel, which Defendants contend somehow undermines PGERS adequacy. Dkt. 151 at Courts across the country, including within the Eighth Circuit, have not only repeatedly rejected such attacks, but have openly wondered whether it would be breach of duty for a fund not to enter into such monitoring agreements. For example, in In re Am. Italian Pasta Co. Sec. Litig., CV-WODS, 2007 U.S. Dist. LEXIS 21365, at *22 (W.D. Mo. Mar. 26, 2007), the Court rejected an adequacy challenge that was based on a monitoring agreement between the lead plaintiff and class counsel: The existence of a

26 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 26 of 32 PageID #: 2785 prior relationship between Lead Plaintiff and Class Counsel is not a problem; in fact, given the extensive investments inherent in the operation of a pension fund, the Court is not surprised Lead Plaintiff has arranged for a law firm to keep it apprised of events (including lawsuits) that might be of interest. Arguably, a pension fund s failure to take steps to be aware of existing or prospective litigation that affects its investments would be an abdication of duty. See also Local 703, I.B. v. Regions Fin. Corp., No. CV 10-J-2847-S, 282 F.R.D. 607, 616 (N.D. Ala. 2012) ( [T]he nature of the ongoing relationship between lead plaintiffs and [Robbins Geller] carries with it that [Robbins Geller] will pursue the claims with vigor, as their future relationship with named plaintiffs depends on the same. ); In re UTStarcom Secs. Litig., No. C JW, 2010 U.S. Dist. LEXIS 48122, at *28 (N.D. Cal. May 12, 2010) ( [T]he Court has previously rejected the contention that a portfolio monitoring agreement renders a plaintiff inadequate to represent a class. ); Plumbers & Pipefitters Nat l Pension Fund v. Burns, 292 F.R.D. 515, 523 (N.D. Ohio 2013) ( Courts have routinely rejected attacks on the propriety of portfolio monitoring agreements such as the one between P&P and Robbins Geller. ). 2. Typicality Concerns the Nature of a Proposed Representative s Claims Defendants unwarranted attacks on PGERS as to typicality (Dkt. 151 at 23) ignore the larger issue that typicality refers to the nature of a putative class representative s claims, rather than the representative s individual characteristics. See Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1540 (8th Cir. 1996) ( [Typicality] is fairly easily met so long as other class members have claims similar to the named plaintiff. ); see also In re Tricord Sys. Inc. Sec. Litig., No , 1996 U.S. Dist. LEXIS 20943, at *24 (D. Minn. Apr. 5, 1996)

27 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 27 of 32 PageID #: 2786 ( So long as plaintiffs rely upon the same legal theory and their claims arise from the same course of conduct, the typicality requirement is satisfied. ). To determine whether the nature of PGERS claims are typical of those of the class, a look at the underlying merits of the action may be necessary at the class certification stage. See Federal Judicial Center s Manual for Complex Litigation (Third) 30.12, at (1995) ( Discovery relating to class issues may overlap substantially with merits discovery. A key question in class certification may be the similarity or dissimilarity between the claims of the representative parties and those of the class members an inquiry that may require discovery on the merits and development of basic issues. ). At the appropriate time, PGERS will show that its complaint satisfies the typicality factor. If Defendants persist in contesting this factor, however, the next step, if any, would entail some exploration of the merits of PGERS claim. Either way, the typicality factor plainly does not support bifurcation. 3. Courts Have Repeatedly Recognized PGERS Adequacy as a Class Representative At bottom, Defendants attacks on PGERS are facially self-contradictory inasmuch as Defendants assert that PGERS has been a plaintiff in a large number of securities class actions over the past several years. Dkt. 151 at 20. Yet, every Court that has considered PGERS adequacy, has confirmed PGERS adequacy to serve as a class representative. In fact, this is true of the very case Defendants cite. Dkt. 151 at (citing PGERS v. Lockheed Martin Corp., 844 F. Supp. 2d 498 (S.D.N.Y. 2012) (confirming PGERS adequacy as a class representative and the typicality of its claims in reaffirming its appointment as class representative)). At the appropriate time, the Court will see what other Courts have

28 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 28 of 32 PageID #: 2787 seen: PGERS is a highly responsible fund run by conscientious, capable, and independent individuals. III. CONCLUSION For all the foregoing reasons, PGERS respectfully requests that the Court deny Defendants motion and order Defendants to comply with Federal Rule of Civil Procedure 26(f)(1), which mandates that the parties must confer as soon as practicable.... DATED: October 27, 2014 Respectfully submitted, ROBBINS GELLER RUDMAN & DOWD LLP JASON A. FORGE DEBRA J. WYMAN s/ JASON A. FORGE JASON A. FORGE 655 West Broadway, Suite 1900 San Diego, CA Telephone: 619/ / (fax) Lead Counsel for Plaintiff PATTON TIDWELL SCHROEDER & CULBERTSON, LLP NICHOLAS H. PATTON GEOFFREY P. CULBERTSON 2800 Texas Blvd. Texarkana, TX Telephone: 903/ / (fax) nickpatton@texarkanalaw.com gpc@texarkanalaw.com Liaison Counsel

29 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 29 of 32 PageID #: 2788 BARRETT JOHNSTON MARTIN & GARRISON, LLC DOUGLAS S. JOHNSTON, JR. TIMOTHY L. MILES Bank of America Plaza 414 Union Street, Suite 900 Nashville, TN Telephone: 615/ / (fax) Additional Counsel for Plaintiff

30 Case 5:12-cv SOH Document 153 Filed 10/27/14 Page 30 of 32 PageID #: 2789 CERTIFICATE OF SERVICE I hereby certify that on October 27, 2014, I authorized the electronic filing of the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I caused to be mailed the foregoing document or paper via the United States Postal Service to the non-cm/ecf participants indicated on the attached Manual Notice List. I certify under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on October 27, s/ JASON A. FORGE JASON A. FORGE ROBBINS GELLER RUDMAN & DOWD LLP 655 West Broadway, Suite 1900 San Diego, CA Telephone: 619/ / (fax) jforge@rgrdlaw.com