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holding lead plaintiffs satisfied adequacy requirement even though one did not know the names of six of seven of the defendants and another was unaware of the case's procedural history, because plaintiffs "demonstrated familiarity with the underlying bases for the suit"
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Case No. CV 00-1783 AHM (Ex)
March 22, 2002
ORDER GRANTING PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
INTRODUCTION
This matter is before the Court pursuant to Plaintiffs' Motion for Class Certification. Plaintiffs seek certification of a class defined as follows:
All persons and entities who purchased the common stock of THQ, Inc. (("THQ") or the "Company") between October 26, 1999 and May 24, 2000 (the "Class Period"), inclusive.
Excluded from the class are the following: (1) Defendants, members of their immediate families and any entity in which Defendants have an interest; (2) directors, officers, subsidiaries and affiliates of THQ; and (3) the legal representatives, heirs, successors or assigns of any defendant. (Pl.'s Notice of Mot. at 1).
In addition, Plaintiffs seek to designate as class representatives James Baehler, Anthony Caggiano, David Kuhbler, and Thomas Wiener. Plaintiffs proposed class and class representatives meet the requirements of Rule 23.
In opposition, Defendants do not argue that Plaintiffs' proposed class does not meet the Rule 23(a) requirements of numerosity and commonality. Moreover, Defendants do not contend that the proposed class fails to satisfy the requirements of Rule 23(b)(3) — that the questions of law or fact common to the proposed class predominate over questions affecting individual members and that a class action is superior to other available methods for adjudicating the controversy. Rather, Defendants argue that Plaintiffs' motion must be denied because the claims of the class representatives are not typical of the class as a whole and the class representatives cannot adequately represent the interests of the class.
Defendants also argue that the hearing on Plaintiffs' motion should be continued pending the hearing on their Motion to Compel. However, there is no indication in the docket that Defendants have even filed such a motion. The Court will not defer resolution of this motion because of a far-from-ripe contingency. If Defendants ultimately file a motion to compel and thereby obtain documents establishing a basis to move for reconsideration of this order, they may do so. At that time, the Court would be required to consider their contentions.
Because the Court finds the proposed class and class representatives meet the requirements of Rule 23, Plaintiffs' motion is GRANTED.
FACTUAL ALLEGATIONS
This is a securities action against THQ and certain of its officers and directors. (TAC ¶ 1). "THQ develops, publishes and distributes interactive entertainment software worldwide for a variety of hardware platforms including personal computers ("PC"), CD-ROM and those manufactured by Sega, Nintendo and Sony." (TAC ¶ 2).
Plaintiffs allege Defendants wanted to portray THQ as a growth company to drive up the share price in an effort to sell their own shares and use THQ stock for acquisitions. (TAC ¶ 3). To accomplish this, in September/October 1999 one of the defendants allegedly directed the finance department to prepare a false earnings forecast for fiscal year 2000 ("FY 2000"). (TAC ¶ 3). This false earnings forecast projected THQ's earnings growth for FY 2000 to be about 20% higher than 1999. ( Id.).
While this false earnings forecast was being spread on the market, Defendants did not disclose the true earnings forecast, which showed a loss in the second quarter of FY 2000 and substantially lower total earnings for the year. ( Id.). In addition, during the Class Period, THQ reported false financial results and made false statements as to THQ's PC game sales. (TAC ¶ 5). These false representations caused THQ's stock price to be inflated to as high as $39-1/4 during the Class Period and form the basis for this action. (TAC ¶ 6).
Plaintiffs also allege the Individual Defendants took advantage of the inflated stock price by selling "515,412 shares of their THQ stock for proceeds of $14.5 million during a 28 day span within the Class Period (the "28 Day Sell Off"). (TAC ¶ 7). Thereafter, on May 24, 2000, THQ issued a press release disclosing a loss in the second quarter of FY 2000 and lower earnings projections for the year. (TAC ¶ 15). This disclosure resulted in THQ's stock dropping to as low as $17-3/8 per share. (TAC ¶ 10).
MOTION STANDARD
Before certifying a class, the trial court must conduct a "rigorous analysis" to determine whether the party seeking certification has met the prerequisites of Federal Rule of Civil Procedure 23. Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Rule 23(a) requires that the party seeking certification demonstrate that (1) the class is so numerous that joinder of all members is "impracticable;" (2) there are questions of law or fact common to the class; (3) the claims or defenses of the class representative are typical of the claims or defenses of the class; and (4) the person representing the class is adequately able to protect the interests of all members of the class. FED. R. CIV. P. 23(a). In addition, the case must meet at least one of the requirements of Rule 23(b). FED. R. CIV. P. 23(b); Zinser, 253 F.3d at 1186.
Rule 23(b) may be satisfied in four ways: (1) under subsection (b)(1)(A) if the prosecution of separate actions by (or against) individual members of the class would risk inconsistent or varying adjudications that would establish for the party opposing the class incompatible standards of conduct; (2) if judgments in individual lawsuits would as a practical matter be dispositive of the interests of other class members or substantially impair their ability to protect their interests; (3) under subsection (b)(2) if the party opposing the class has acted or refused to act on grounds applicable to the class generally, thereby making injunctive or declaratory relief appropriate with respect to the class as a whole, or (4) under subsection (b)(3) if the questions of law or fact common to the class "predominate" over questions affecting individual members, and, on balance, a class action is superior to other methods available for adjudicating the controversy. FED. R. CIV. P. 23(b); THE RUTTER GROUP, CALIFORNIA PRACTICE GUIDE: FEDERAL CIVIL PROCEDURE BEFORE TRIAL, 10:385 (1999).
The party seeking certification has the burden of demonstrating that the requirements of Rule 23(a) and Rule 23(b) are met. Zinser, 253 F.3d at 1186. However, to qualify for class certification a plaintiff need not make a prima facie showing that he or she will prevail on the merits. Murray v. Local 2620, 192 F.R.D. 629, 631 (N.D. Cal. 2000). Rather, in reviewing a motion for class certification, a district court generally is bound to take the substantive allegations of the complaint as true. Blackie v. Barrack, 524 F.2d 891, 901 fn. 17 (9th Cir. 1975). (However, this "no merits" rule is not inflexible, and courts may look beyond the pleadings to decide whether the elements of Rule 23 have been met. O'Connor v. Boeing North American, Inc., 197 F.R.D. 404, 410 (C.D. Cal. 2000).) A district court's denial of class certification is reviewed for abuse of discretion. Zinser, 253 F.3d at 1186.
This Order in no manner should suggest to the parties that the Court has concluded that Plaintiffs' substantive claims are meritorious.
DISCUSSION
I. THE USE OF CLASS ACTIONS IN SECURITIES CASES
The Ninth Circuit has noted that class actions have proved useful "where a large number of purchasers or holders of securities claim to have been defrauded by a common course of dealing on the part of the defendants." Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913 (9th Cir. 1964); Blackie v. Barrack, 524 F.2d 891, 902 (9th Cir. 1975), cert. denied 429 U.S. 616 (1976) (noting that the availability of the class action to redress frauds perpetrated on numerous persons by the use of similar misrepresentations has been "consistently upheld."). In addition, lower courts have recognized that "the law in the Ninth Circuit is very well established that the requirements of Rule 23 should be liberally construed in favor of class action cases brought under the federal securities laws." Schneider v. Traweek, 1990 WL 132716 (C.D. Cal.) (citing Blackie, 524 F.2d at 902); Yamner v. Boich, 1994 WL 514035 (N.D. Cal.) ("The Ninth Circuit favors a liberal use of class actions to enforce federal securities laws.") "(citing Arthur Young and Co. v. United States District Ct., 549 F.2d 686 (9th Cir. 1976), cert. denied, 434 U.S. 829 (1977)). With these principles in mind, the Court will address whether Plaintiffs' proposed class and class representatives satisfy the requirements of Rule 23.
II. RULE 23(a) REQUIREMENTS
A. Numerosity
The first requirement of Rule 23(a) is that the class is so numerous that joinder of all members is impracticable." FED. R. CIV. P. 23(a). Although courts have varied as to the number of members sufficient to make joinder impracticable, in general, courts have held that joinder is practicable where there are less than 25 parties, and impracticable where there are more than 35. WRIGHT, MILLER KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2d § 1762; Patrick v. Marshall, 460 F. Supp. 23, 26 (N.D. Cal. 1978).; Town of New Castle v. Yonkers Contracting Co., Inc., 131 F.R.D. 38, 40 (S.D.N.Y. 1990); Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995).
Here, Plaintiffs contend, and Defendants do not dispute, that given the number of shares of THQ traded during the Class Period, the proposed class consists of potentially thousands of shareholders. (Mot. at 6). Although Plaintiffs present no evidence in support of this claim, common sense dictates that the proposed class is surely sufficiently large to make joinder impracticable. Yamner v. Boich, 1994 WL 514035 (N.D. Cal.) (noting that some courts have assumed that the numerosity requirement is satisfied in securities fraud suits involving nationally traded stocks). As a result, the Court finds the proposed class satisfies the numerosity requirement of Rule 23(a).
The TAC alleges THQ's common stock was traded on the NASDAQ National Market System. (TAC ¶ 21).
B. Commonality
Rule 23(a) also requires that there are questions of law and fact common to the class. FED. R. CIV. P. 23(a)(2). The commonality preconditions of Rule 23(a)(2) are less rigorous than the companion requirements of Rule 23(b)(3). Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). Not all questions of fact and law need be common to satisfy the rule. Id. Rather, "[t]he existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class." Id. In fact, several courts have found that a single issue common to the proposed class satisfies Rule 23(a)(2). E.g., Haley v. Medtronic, 169 F.R.D. 643, 648 (C.D. Cal. 1996); In re American Medical Systems, Inc., 75 F.3d 1069, 1080 (6th Cir. 1996).
Here, Plaintiffs argue, and Defendants do not dispute, that the TAC alleges a "common course of conduct" involving a series of misrepresentations of THQ' s projected earnings made by the defendants. (Mot. at 7). In similar cases, the Ninth Circuit has held that repeated misrepresentations of this sort satisfy the "common question" requirement. Blackie, 524 F.2d at 902. Given that Defendants do not dispute this point, the Court sees no reason to depart from that analysis here.
C. Typicality
Rule 23(a)'s typicality requirement is met if the "claims or defenses of the representative parties are typical of the claims or defenses of the class." FED. R. CIV. P. 23(a)(3). Under the rule's permissive standards, "representative claims are typical if they are reasonably co-extensive with those of absent class members; they need not be substantially identical." Hanlon, 150 F.3d at 1019. In the securities context, the fact that the class representatives may have reviewed different documents from other members of the class or purchased different amounts of stock does not mean their claims are not typical of the class. Schlagel v. Learning Tree Int'l., 1999 WL 672306 (C.D. Cal.). Rather, the test of typicality is "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citation omitted).
Plaintiffs have proposed that James Baehler, Anthony Caggiano, David Kuhbler., and Thomas Wiener serve as representative plaintiffs. Plaintiffs contend the claims of these individuals are typical of those of the class. Specifically, Plaintiffs argue that, like all class members, Messrs. Baehler, Caggiano, Kuhbler and Wiener purchased their THQ shares at prices artificially inflated by the materially false and misleading statements of the defendants, without knowledge of the material facts concealed by the defendants. (Mot. at 10).
In opposition, Defendants make three arguments as to typicality: (1) In their opening motion papers, Plaintiffs failed to provide information as to the investment methods of the representative plaintiffs, thus failing to meet their burden under Rule 23(a) (Opp'n. at 6); (2) Messrs. Wiener and Baehler are subject to unique defenses because they relied on non-public information in purchasing THQ stock (Opp'n. at 14); and (3) all proposed class representatives purchased their THQ stock on margin, thus subjecting their claims to unique defenses. (Opp'n. at 15).
As to the first argument — that Plaintiffs failed to provide information as to the investment methods of the putative class representatives — Plaintiffs have attached to the TAC a certification from each individual as to the date each purchased THQ stock and the amount purchased. (TAC, Ex. B). Because the class is made up of other individuals who purchased THQ stock in the designated period, this evidence supports Plaintiffs' position that the claims of the proposed representatives are typical of those of the class. Defendants have produced no authority that this type of information is insufficient to satisfy the typicality requirement of Rule 23(a).
Defendants' second argument — that Messrs. Wiener and Baehler are subject to unique defenses because they relied on non-public information in purchasing THQ stock — is also misguided. Defendants contend, with some evidentiary support, that Mr. Wiener's son is a securities professional who has actively followed THQ. (Maniscalco Decl., Ex. K at 81-82). Mr. Wiener testified that he purchased THQ stock shortly after receiving a positive report on the company from his son and subsequently sold his stock around the same time his son indicated he had lost faith in THQ's management. ( Id. at 83-85). Similarly, Mr. Baehler purchased his stock after receiving a recommendation from a friend who had spoken personally to the Chief Executive Officer ("CEO") of THQ, Brian Farrell. (Maniscalco Decl., Ex. H at 46-49). On the basis of this evidence, Defendants argue Messrs. Baehler and Wiener will be subject to unique defenses on the merits of their claims. Defendants cite no authority in support of their position.
Mr. Wiener's deposition testimony does not explicitly state that his son is a securities professional. However, Plaintiffs have not disputed this point.
Defendants are correct that class certification may be inappropriate where a putative class representative is subject to unique defenses that threaten to become the focus of the litigation. Hanon, 976 F.2d at 508 (finding that the typicality requirement of Rule 23(a) was not met because the putative class representative's reliance on the integrity of the market was subject to serious dispute as he was a professional plaintiff with a practice of buying minimal shares); Koenig v. Benson, 117 F.R.D. 330, 335-36 (E.D.N.Y. 1987) (holding that the claims of the putative class representative were not typical of those of the class where he purchased stock in the defendant-company after the company was forced into bankruptcy, thereby raising doubts about his reliance on the purported omissions in defendant's reports). However, Defendants have failed to cite any authority where courts have held that unique defenses prohibited a finding of typicality on these facts. By contrast, "The fact that a purchaser . . . considered a number of other factors in making his decision to purchase does not render him subject to a unique defense, so long as he substantially or significantly relied upon either the challenged statements or the integrity of the market." In re AM Int'l, Inc. Sec. Litig., 108 F.R.D. 190, 195 (S.D.N.Y. 1985). Here, Mr. Baehler testified that before purchasing shares of THQ, in addition to speaking with his friend, he researched THQ on the internet and paid particular attention to analysts' recommendations. (Rogers Supp. Decl., Ex. C at 34). Moreover, as to Mr. Wiener, there is no indication that the information he received from his son was anything other than public information available on the market. As a result, the evidence does not support a finding he relied on non-public information. For these reasons, Defendants' argument is rejected.
Finally, Defendants argue that the claims of the putative class representatives are not typical of those of the class because there is evidence they participated in unusually speculative investments. (Opp'n. at 15). Thus, Defendants argue, the putative class representatives would be subject to unique arguments and defenses. In support of its claim, Defendants rely on the following facts: (1) each putative class representative purchased his THQ stock on margin; (2) Mr. Baehler sold his THQ stock as the result of a margin call; (3) Mr. Caggiano viewed THQ as a "medium range speculation stock;" and (4) Mr. Baehler invested 90% of his retirement fund in THQ.
The evidence cited by defendants on this point is unclear. Mr. Baehler testified only that some of his "sales" occurred because of a margin call. (Maniscalco Decl., Ex. H at 51). He could not recall which ones. ( Id.).
The evidence cited is plainly insufficient to warrant a finding that the putative class representatives would be subject to unique defenses that would "threaten to become the focus of the litigation." The evidence cited is meant to place in doubt the extent to which the putative class representatives "relied" on the integrity of the market in purchasing shares of THQ. However, in these types of cases, courts have made clear that individual plaintiffs are not required to prove reliance directly. Blackie, 524 F.2d at 907. Rather, it is presumed that the individual plaintiff "relies generally on the supposition that the market price is validly set and that no unsuspected manipulation has artificially inflated the price . . ." Id. That presumption may be overcome, included by a showing that the plaintiff would have traded in the security despite his knowledge of the misrepresentation. Gilbert, 904 F. Supp. at 720, Simpson v. Specialty Retail Concepts, 149 F.R.D. 94, 100 (M.D.N.C. 1993). The evidence cited by the defendants does not directly address the question of whether these class representatives would have traded in THQ despite being aware of the alleged misrepresentations. As such, it surely does not give rise to a unique defense that would "threaten to become the focus of the litigation."
Moreover, most courts interpreting the issue have held that evidence of "stock speculation" by putative class representatives is insufficient to defeat a finding of typicality. Yamner, 1994 WL 514035; Gilbert v. First Alert, Inc., 904 F. Supp. 714, 720 (N.D. Ill. 1995) ("Simply because the individual plaintiffs may be stock speculators does not place them in a different position from other members of the class with respect to the allegation that defendants disseminated false or misleading information."). In those cases where stock speculation has resulted in the denial of class certification, the putative class representative was found to have engaged in a significantly more speculative investment strategy than has been shown here. Koenig, 117 F.R.D. at 336 (holding that the claims of the putative class representative were not typical of the class where the individual purchased the defendant's stock after the alleged undisclosed losses became public knowledge and after the company was placed in bankruptcy). As a result, the evidence cited by Defendants is insufficient to defeat a finding of typicality where the claims of the putative class representatives are otherwise identical to those of the class as a whole.
D. Adequacy of Representation
The final prerequisite to class certification imposed by Rule 23(a) is that "the representative parties will fairly and adequately protect the interests of the class." FED. R. CIV. P. 23(a)(4). The resolution of legal adequacy depends on two questions: (1) whether the named Plaintiffs and their counsel have any conflicts of interest with other class members and (2) whether the named plaintiffs and their counsel will prosecute the action vigorously on behalf of the class. Hanlon, 150 F.3d at 1020. The Ninth Circuit has found representation adequate where (1) counsel for the class is qualified and competent, (2) the representatives' interests are not antagonistic to those of the absent class members, and (3) it is unlikely that the action is collusive. In re Dalkon Shield IUD Products Liability Litigation, 693 F.2d 847, 855 (9th Cir. 1982); Schlagel, 1999 WL 672306 (C.D. Cal.).
Here, Defendants do not challenge the qualifications or competence of Plaintiffs' counsel. However, Defendants argue that Plaintiffs' moving papers fail to show that the putative class representatives can adequately represent the class. (Opp'n. at 4-5).
Despite Defendants' assertion, Plaintiffs' motion does state that the interests of the putative class representatives and those of the class are co-extensive. (Mot. at 11). Moreover, as the Court has found that the class shares common questions of fact and law and that the claims of the class representatives are "typical" of those of the class, there is substantial support for Plaintiffs' assertion. As such, the Court finds Plaintiffs' moving papers are facially sufficient to satisfy the adequacy requirement of Rule 23.
Courts have recognized that the "adequacy" and "typicality" requirements of Rule 23 are closely related and often overlap. A J Deutscher Family Fund, 1986 WL 14903 (C.D. Cal.).
Because Plaintiffs' moving papers are facially sufficient to satisfy the "adequacy" requirement, the Court need not, and does not, address Defendants' objection to any attempt by the plaintiffs to remedy such a failure by inserting such evidence in their reply papers.
Defendants' second challenge to the adequacy of the representation of the putative class representative is more substantive. Defendants argue the proposed class representatives cannot adequately represent the interests of the class because their deposition testimony demonstrates the following facts: (1) the putative class representatives have little knowledge of the case; (2) they have not supervised and are not able to supervise counsel; (3) Messrs. Baehler and Wiener are not credible because they have traded in THQ or affiliated companies during this litigation; and (4) the proposed class representatives do not believe they would be responsible for any costs or fees should their claims fail on the merits. Each argument will be discussed in turn.
1. Knowledge of the Case
Although unfamiliarity with the suit does not itself require denial of class certification, Defendants are correct that it can be a factor considered in determining the adequacy of the proposed representative. Epifano v. Boardroom Business Products, Inc., 130 F.R.D. 295, 301 (S.D.N.Y. 1990). For example, a class representative cannot blindly rely on counsel to the extent he lacks familiarity with the case. Yamner, 1994 WL 514035 (N.D. Cal.). However, courts that have denied class certification on this ground have only done so in flagrant cases, where the putative class representatives display "an alarming unfamiliarity with the suit." In re Frontier Ins. Group Sec. Litig., 172 F.R.D. 31, 46 (E.D.N.Y. 1997); In re CBS Companies, Inc. Collection Letter Litig., 181 F.R.D. 380, 383-84 (N.D. Ill. 1998) (finding that a proposed class representative had sufficient knowledge of the case to proceed even though she had been out of contact with her lawyers for eight months, she did not know what a "defendant" was and did not know who she had sued).
Defendants make much out of such deposition-induced admissions that one representative (Caggiano) was unfamiliar with the term "GAAP;" another (Wiener) was unfamiliar with the names of six of the seven individual defendants; and a third (Kuhlber) was unaware of the results of prior motions to dismiss in the case. That level of unfamiliarity of the proposed class representatives with their suit clearly is not sufficient to defeat class certification. Each individual plaintiff testified that he had several conversations with counsel regarding the suit, many of which lasted longer than twenty minutes. (Rogers Supp. Decl., Ex. D at 53, Ex. C at 26, Ex. F at 97, Ex. E at 78). In addition, each proposed representative demonstrated familiarity with the underlying bases for the suit. (Rogers Supp. Decl., Ex. D at 62, Ex. C at 39-40, Ex. F at 95-96, Ex. E at 75-76). This is sufficient to satisfy the adequacy requirement of Rule 23.
2. Ability to Supervise Counsel
Defendants also argue that the deposition testimony of Messrs. Caggiano and Kuhlber indicate they cannot represent the class adequately because they are unable to supervise counsel. (Opp'n. at 10-11). However, the testimony cited does not support Defendants' argument. ( Id.). Moreover, as the Court has found both Messrs. Caggiano and Kuhlber are sufficiently informed of this litigation to act as representative plaintiffs, there is no reason to believe they will be unable or unwilling to supervise counsel in this action.
3. "Inside Information" and Credibility
Defendants contend Messrs. Baehler and Wiener are inadequate class representatives because of the following: (1) Mr. Baehler traded in THQ stock after being contacted by Plaintiffs' counsel but before becoming a participant in this litigation; and (2) Mr. Wiener currently holds stock in JAAKS Pacific Inc., which is the principal of JAAKS Pacific, LLC, an entity that was involved in a joint venture in THQ. (Opp'n. at 11-12). Defendants contend, without explanation, that these facts indicate both Messrs. Wiener and Baehler had access to "inside information," "thereby making them inadequate class representatives.
Defendants actually contend that Mr. Baehler traded in THQ after he agreed to serve as a class representative in this suit. (Opp'n. at 11). However, the evidence cited indicates Mr. Baehler may have traded in THQ after he had been contacted by Plaintiffs' counsel, but before he had agreed to participate in this lawsuit. (Maniscalco Decl., Ex. H at 52, 85).
The joint venture between THQ and JAAKS Pacific LLC ("JAAKS") is referenced in Plaintiffs' Complaint. (TAC ¶ 65). Plaintiffs allege THQ issued a positive press release as to the sales of one of the products it developed with JAAKS, a game entitled "WWF Wrestlemania 2000." ( Id.).
The Court is unable to determine how either of the alleged facts regarding Mr. Baehler and Mr. Wiener demonstrates that they traded on inside information. As to Mr. Wiener, there is simply no basis to infer that because he has stock in JAAKS Pacific Inc. he necessarily had "inside information" relevant to this suit. Moreover, as to Mr. Baehler, although the facts indicate that he may have traded in THQ after being contacted by Plaintiffs' counsel (see below), that did not give him "inside information" regarding THQ that would bring into question his ability to adequately represent the class.
In addition, Defendants argue that Mr. Baehler testified falsely in his deposition, thereby raising questions as to his credibility. At one point he denied that he had traded in THQ shares after becoming a participant in the suit. But on the same page of the transcript he said that he had no recollection of whether he was contacted by Plaintiffs' counsel before or after he traded in THQ stock between June and August of 2000. (Maniscalco Decl., Ex. H at 52). He later reaffirmed the testimony that he had first been contacted after he sold all his THQ stock, but added that this recollection "may not be a hundred percent accurate." ( Id. at 53-54). The statements may not be entirely consistent, but any inference that there was some misstatement by Mr. Baehler clearly does not rise to the level necessary to find he lacks credibility; to the Court it appears that the witness was trying to remember but having difficulty. Kalodner v. Michaels Stores, Inc., 172 F.R.D. 200, 210 (N.D. Tex. 1997) (finding that two inconsistent statements in the deposition testimony of a putative class representative were not "so widespread and egregious as to suggest a deliberate attempt to mislead").
Kline v. Wolf, 88 F.R.D. 696, 700 (S.D.N.Y. 1981), cited by Defendants, is not to the contrary. In Kline, the testimony of the putative class representative was disputed by her own broker and the court did not base its ruling on a finding the proposed representative was not credible. Id.
4. Costs and Fees
Finally, Defendants argue the putative class representatives are unable to adequately represent the class because their deposition testimony indicates they are unaware that they may be liable for costs and fees if their claim is unsuccessful. (Opp'n. at 13). However, the cases they cite concern the adequacy of the plaintiffs' resources to finance the litigation, and here Plaintiffs' counsel has represented that it is advancing the costs and fees of the litigation on a contingency basis. In such cases, courts have found that a putative class representative's knowledge of the costs of litigation is irrelevant. Neuberger v. Shapiro, 1998 U.S. Dist. LEXIS 18807, *11 fn. 9 (E. D. Pa.); Lonergan v. AJ's Wrecker Service of Dallas, Inc., 1999 U.S. LEXIS 11190, *16-17 (N.D. Tex.); Williams Corp. v. Kaiser Sand Gravel Corp., Inc., 1992 U.S. Dist. LEXIS 16947, *10 (N.D. Cal.).
Defendants rely on Parker v. George Thompson Ford, Inc., 83 F.R.D. 378, 380-81 (N.D. Ga. 1979), and Strong v. Arkansas Blue Cross Blue Shield, Inc., 87 F.R.D. 496, 510-11 (E.D. Ark. 1980). In Parker, the court was concerned only with the ability of the class representatives to assume the costs associated with bringing a class action. Parker, 83 F.R.D. at 380-81. Similarly, in Strong, although the court noted the plaintiffs' ignorance of their liability for taxable costs as a factor weighing against their suitability as class representatives, the court placed greater emphasis on the inability of the named plaintiffs to finance the litigation. Strong, 87 F.R.D. at 510-11.
To the extent Defendants argue the proposed class representatives lack a financial stake in this litigation, that claim is refuted by both the TAC and Plaintiffs' reply papers. (TAC, Ex. B; Reply at 13).
5. Summary
As Plaintiffs' papers demonstrate a sufficient basis for satisfying Rule 23(a)(4) and Defendants' arguments to the contrary lack merit, the Court finds Plaintiffs have demonstrated that the proposed class representatives and their counsel can adequately represent the interests of the class.
III. RULE 23(b)(3)
As stated supra, Plaintiffs also must demonstrate that the case meets at least one of the requirements of Rule 23(b). FED. R. CIV. P. 23(b); Zinser, 253 F.3d at 1186. Here, Plaintiffs contend, without dispute, that the case meets the requirements of Rule 23(b)(3). (Mot. at 11).
Certification is proper under Rule 23(b)(3) if the questions of law or fact common to the class "predominate" over questions affecting individual members, and, on balance, a class action is superior to other methods available for adjudicating the controversy. FED. R. CIV. P. 23 (b); THE RUTTER GROUP, CALIFORNIA PRACTICE GUIDE: FEDERAL CIVIL PROCEDURE BEFORE TRIAL, 10:385 (1999). As Defendants' failure to dispute this point indicates, Plaintiffs' claim — which is based on a series of misrepresentations and market manipulations — clearly satisfies the requirement that common questions predominate over those affecting individual members. In re United Energy Corp. Solar Power Modules Tax Shelter Investments Sec. Litig., 122 F.R.D. 251, 256 (C.D. Cal. 1988) (finding that common questions such as the knowledge of the defendants and the truth or falsity of their representations predominated over individual questions); In re Unioil Sec. Litig., 107 F.R.D. 615, 622 (C.D. Cal. 1985) (holding that common questions predominated where the plaintiffs' claim was based on a "common nucleus of misrepresentations, material omissions and market manipulations . . ."). In addition, given the substantial number of possible class members, a class action is superior to other methods available to adjudicate the claim. In re Union Sec. Litig., 107 F.R.D. at 622. For these reasons, the Court finds the class is properly certifiable under Rule 23(b)(3).
CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiffs' motion and pursuant to Rule 23(b)(3) certifies the proposed class, defined as "All persons and entities who purchased the common stock of THQ, Inc. between October 26, 1999 and May 24, 2000, inclusive." This matter may be resolved without a hearing pursuant to Local Rule 7-15.
Docket No. 69.
This order is not designated for publication.