Shotwell v. Zillow Group, Inc et al

Western District of Washington, wawd-2:2017-cv-01387

MOTION to Certify Class, filed by Plaintiffs Johanna Choy, Raymond Harris, Jo Ann Offutt. Oral Argument Requested. Noting Date 2/24/2020

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9 The Honorable John C. Coughenour 1 2 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON 3 AT SEATTLE 4 In re Zillow Group, Inc. No. 2:17-cv-01387-JCC Securities Litigation 5 PLAINTIFFS' MOTION FOR CLASS 6 CERTIFICATION 7 NOTE ON MOTION CALENDAR: February 8 24, 2020 9 ORAL ARGUMENT REQUESTED 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 MOTION FOR CLASS CERTIFICATION ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 MOTION FOR CLASS CERTIFICATION ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Table of Contents 1 2 3 I. PRELIMINARY STATEMENT .................................................................... 1 4 II. STATEMENT OF FACTS AND PROCEDURAL HISTORY..................... 2 5 III. ARGUMENT ................................................................................................. 4 6 A. Class Certification is Appropriate under Rule 23 .................................................. 4 7 B. The Proposed Class Meets the Requirements of Rule 23(a).................................. 5 1. Numerosity................................................................................................. 5 8 2. Commonality.............................................................................................. 6 9 3. Typicality ................................................................................................... 7 10 4. Adequacy ................................................................................................... 8 11 C. The Proposed Class Satisfies Rule 23(b)(3) ........................................................ 10 1. Common Questions of Law and Fact Predominate over Individual 12 Questions.................................................................................................. 10 13 2. A Class Action Is Superior to Other Methods for Resolving This Controversy .............................................................................................. 20 14 3. Damages Can be Calculated with a Common Model .............................. 22 15 IV. CONCLUSION ............................................................................................ 22 16 17 18 19 20 21 22 23 24 25 26 MOTION FOR CLASS CERTIFICATION - i ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Table of Authorities 1 Page(s) 2 3 Cases 4 Argent Classic Convertible Arbitrage Fund L.P. v. Countrywide Fin. Corp., No. CV0707097MRPMANX, 2009 WL 10673338 (C.D. Cal. Dec. 9, 2009) ......................... 20 5 Basic Inc. v. Levinson, 6 485 U.S. 224 (1988).............................................................................................................. 2, 13 7 Binder v. Gillespie, 8 184 F.3d 1059 (9th Cir. 1999) ...................................................................................... 12, 13, 16 9 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) .............................................................................................. 2, 5, 7 10 Cammer v. Bloom, 11 711 F. Supp. 1264 (D.N.J. 1989) ....................................................................................... passim 12 Campbell v. Vitran Express Inc, 13 No. CV 11-5029 RGK (SHX), 2015 WL 7176110 (C.D. Cal. Nov. 12, 2015).......................... 8 14 Cheney v. Cyberguard Corp., 213 F.R.D. 484 (S.D. Fla. 2003) ......................................................................................... 15, 18 15 Comcast Corp. v. Behrend, 16 569 U.S. 27 (2013)........................................................................................................ 10, 11, 22 17 Connecticut Ret. Plans & Tr. Funds v. Amgen, Inc., 18 No. CV07-2536PSG, 2009 WL 2633743 (C.D. Cal. Aug. 12, 2009) .................................... 7, 8 19 Fosbre v. Las Vegas Sands Corp., No. 2:10-CV-00765-APG, 2015 WL 3722496 (D. Nev. June 15, 2015) ................................... 5 20 Halliburton Co. v. Erica P. John Fund, Inc., 21 134 S. Ct. 2398 (2014) ........................................................................................................ 12, 13 22 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) .......................................................................................... 6, 7, 10 23 24 Hanon v. Dataproducts Corp., 976 F.2d 497 (9th Cir. 1992) ...................................................................................................... 8 25 Harris v. Palm Springs Alpine Estates, Inc., 26 329 F.2d 909 (9th Cir. 1964) ...................................................................................................... 5 MOTION FOR CLASS CERTIFICATION - ii ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Hatamian v. Advanced Micro Devices, Inc., No. 14-CV-00226 YGR, 2016 WL 1042502 (N.D. Cal. Mar. 16, 2016) ........................... 10, 22 1 2 In re Cooper Companies Inc. Sec. Litig., 254 F.R.D. 628 (C.D. Cal. 2009) ........................................................................................ 5, 6, 8 3 In re Countrywide Fin. Corp. Sec. Litig., 4 273 F.R.D. 586 (C.D. Cal. 2009) .............................................................................................. 21 5 In re Countrywide Fin. Corp. Sec. Litig., 588 F. Supp. 2d 1132 (C.D. Cal. 2008) .................................................................................... 20 6 In re Diamond Foods, Inc., Sec. Litig., 7 295 F.R.D. 240 (N.D. Cal. 2013).............................................................................................. 22 8 In re Emulex Corp. Sec. Litig., 9 210 F.R.D. 717 (C.D. Cal. 2002) ........................................................................................ 10, 11 10 In re HealthSouth Corp. Sec. Litig., 257 F.R.D. 260 (N.D. Ala. 2009) ............................................................................................. 21 11 In re Juniper Networks, Inc. Sec. Litig., 12 264 F.R.D. 584 (N.D. Cal. 2009).............................................................................................. 21 13 In re Silver Wheaton Corp. Sec. Litig., 14 No. 215CV05146CASJEMX, 2017 WL 2039171 (C.D. Cal. May 11, 2017) ................... 5, 6, 8 15 In re THQ, Inc. Sec. Litig., No. CV 00-1783AHM(EX), 2002 WL 1832145 (C.D. Cal. Mar. 22, 2002) .............................. 4 16 In re Valence Tech. Sec. Litig., 17 No. C 95-20459 JW, 1996 WL 119468 (N.D. Cal. Mar. 14, 1996) ......................................... 10 18 Lerwill v. Inflight Motion Pictures, Inc., 19 582 F.2d 507 (9th Cir. 1978) ...................................................................................................... 8 20 Middlesex Cty. Ret. Sys. v. Semtech Corp., No. CV077114CASFMOX, 2010 WL 11507255 (C.D. Cal. Aug. 27, 2010) ............ 5, 8, 10, 12 21 Munoz v. Giumarra Vineyards Corp., 22 No. 109CV00703AWIJLT, 2016 WL 2756425 (E.D. Cal. May 12, 2016) ............................... 5 23 Pace v. Quintanilla, 24 No. SACV 14-2067-DOC, 2014 WL 4180766 (C.D. Cal. Aug. 19, 2014) ................................ 9 25 Petrie v. Elec. Game Card, Inc., 308 F.R.D. 336 (C.D. Cal. 2015) .............................................................................................. 15 26 MOTION FOR CLASS CERTIFICATION - iii ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Takiguchi v. MRI Int'l, Inc., No. 213CV01183HDMVCF, 2016 WL 1091090 (D. Nev. Mar. 21, 2016) ........................... 7, 8 1 2 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).................................................................................................................... 7 3 Zelman v. JDS Uniphase Corp., 4 376 F. Supp. 2d 956 (N.D. Cal. 2005) ...................................................................................... 20 5 Rules 6 Fed. R. Civ. P. 23(a) ................................................................................................................ 8, 11 7 Fed. R. Civ. P. 23(a)(2) .................................................................................................................. 9 8 Fed. R. Civ. P. 23(a)(4) ................................................................................................................ 13 9 Fed. R. Civ. P. 23(b) ...................................................................................................................... 8 10 Fed. R. Civ. P. 23(b)(3).................................................................................................... 13, 23, 24 11 Fed. R. Civ. P. 23(g) .................................................................................................................... 12 12 FEDERAL RULE OF CIVIL PROCEDURE 23................................................................... 4, 5, 7 13 14 15 16 17 18 19 20 21 22 23 24 25 26 MOTION FOR CLASS CERTIFICATION - iv ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 1 Pursuant to Federal Rule of Civil Procedure 23, Lead Plaintiffs Jo Ann Offutt, Raymond 2 Harris, and Johanna Choy ("Plaintiffs") respectfully move this Court to certify this action as a 3 class action, to appoint them as class representatives, and to appoint The Rosen Law Firm, P.A. 4 ("Rosen"), as class counsel. They base this Motion on the following Memorandum of Law and 5 6 the Declaration of Jonathan Stern in Support of Lead Plaintiffs' Motion for Class Certification 7 Pursuant to Fed. R. Civ. P. 23 ("Stern Decl."), the exhibits thereto, the arguments of counsel, 8 and any other evidence and argument that they may present to the Court prior to its decision on 9 this Motion.1 10 I. PRELIMINARY STATEMENT 11 Lead Plaintiffs Jo Ann Offutt, Raymond Harris, and Johanna Choy move to certify this 12 13 securities litigation as a class action. They seek class certification on behalf of a "Class" consisting 14 of all persons other than Defendants who purchased or otherwise acquired Zillow securities 15 between November 17, 2014 and August 8, 2017, both dates inclusive ("Class Period"). 2 16 Plaintiffs also request that the Court appoint each of them as class representatives and appoint 17 Court-appointed Lead Counsel The Rosen Law Firm, P.A. as class counsel. There are three types 18 of securities purchased by Class members during the Class Period: (i) Class A shares, (iii) Class 19 C shares, and (iii) notes convertible into Class C shares. 20 21 Throughout the Class Period, Zillow touted its and its clients' compliance with all relevant 22 23 1 Plaintiffs cite to the Stern Decl. as "Stern Decl., Ex __, at __." Appended to the Stern Decl. as Exhibit 5 is the October 11, 2019 Declaration of Dr. Zachary Nye. Plaintiffs cite to the Nye 24 Declaration as "Nye Decl. ¶__." 25 2 Excluded from the Class are Defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, 26 successors or assigns and any entity in which Defendants have or had a controlling interest. MOTION FOR CLASS CERTIFICATION - 1 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 laws and regulations. However, their co-marketing program, which according to Defendants 1 allowed real estate lenders and real estate agents to share marketing costs, actually served as a 2 vehicle for lenders to pay kickbacks to agents. This practice violated the Real Estate Settlement 3 Procedures Act ("RESPA"), which caused the CFPB to investigate Zillow throughout the Class 4 Period. 5 6 Plaintiffs, on behalf of themselves and other similarly situated investors who purchased 7 or otherwise acquired Zillow securities at inflated prices during the Class Period, seek class 8 certification, permitting the efficient and effective prosecution of this action on behalf of Plaintiffs 9 and thousands of other shareholders. The use of class action procedures to adjudicate claims under 10 federal securities laws has been upheld by the "overwhelming majority" of courts. See Blackie v. 11 Barrack, 524 F.2d 891, 902–03 (9th Cir. 1975); Basic Inc. v. Levinson, 485 U.S. 224 (1988). 12 13 Courts liberally construe the requirements of Federal Rule of Civil Procedure 23 in favor of class 14 certification of securities fraud cases to protect investors. "[T]he ultimate effectiveness of [the 15 anti-fraud provisions of the securities laws] may depend on the applicability of the class action 16 device." Blackie, 524 F.2d at 903 (citations omitted). For the following reasons, this action 17 satisfies the requirements of Rule 23. 18 II. STATEMENT OF FACTS AND PROCEDURAL HISTORY 19 Zillow operates the leading online real estate marketplace in the United States. ¶2. 3 20 21 Through several brands including Zillow, Trulia, HotPads and Naked Apartments, it provides real 22 estate listings to buy or rent for potential customers. Id. Zillow's primary source of revenue is 23 selling advertising to real estate professionals, and its largest customer base is real estate agents. 24 Agents pay to list properties on Zillow's various platforms with their name attached to the listing, 25 26 3 Plaintiffs cite to the Consolidated Second Amended Class Action Complaint (Dkt. No. 47) as "¶__." MOTION FOR CLASS CERTIFICATION - 2 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 and prospective buyers can provide their contact information and ask to be contacted by an agent, 1 providing the agent with a "lead". ¶3. Real estate agents are primarily interested in advertising 2 on Zillow for the purpose of obtaining these leads. ¶4 However, Zillow does not charge per lead. 3 Zillow, instead, charges per "impression" – that is, an advertiser pays each time a customer views 4 a listing, whether or not the customer chooses to submit his information to the agent. Id. 5 6 In 2013 Zillow launched a "co-marketing" program to allow lenders to appear alongside 7 the real estate agent in advertisements, in exchange for the lender making a fixed monthly 8 payment to Zillow, which defrays a fixed percentage of the agent's monthly ad spend. ¶5. Zillow 9 also forwarded the agents' customer leads to the lenders, although a customer who inputs their 10 information could opt out of having their lead provided to a lender by unchecking the box titled 11 "I would like to receive financing information". Id. By bringing the co-marketing concept into 12 13 the online realm, Zillow stepped into perilous legal territory because it is illegal under RESPA 14 for a lender to pay a real estate agent for referrals or leads. ¶6. 15 Longstanding HUD regulations make clear that under RESPA, it is illegal for a lender to 16 pay a real estate agent in exchange for that agent making any sort of personal recommendation of 17 that lender. ¶7. However, RESPA contains a safe harbor provision that states that its ban on 18 payments for referrals is inapplicable to fair market value payments for legitimate services. Id. 19 Thus, Zillow, as the market leader in online real estate advertising, had the ability to ensure that 20 21 their co-marketing program was compliant by requiring that lenders participating in the program 22 pay fair market value for the advertising they purchased. ¶8. Instead, Zillow charged lenders far 23 in excess of the fair market value of those services. ¶9. Moreover, Zillow actively monitored and 24 encouraged lenders and agents to violate RESPA, contacting agents to make sure they were 25 making referrals. Id. Therefore, although the only lawful service the co-marketing program can 26 MOTION FOR CLASS CERTIFICATION - 3 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 provide is the sharing of advertising space, Zillow designed the program with the understanding 1 that agents would nonetheless use it to violate RESPA by making illegal referrals to lenders. 2 Thus, the co-marketing program does not work unless everyone involved violates the law. 3 Because of these egregious RESPA violations, the CFPB launched an investigation into 4 Zillow, centered around the co-marketing program, in April 2015. ¶10. Zillow did not disclose 5 6 this investigation to investors until May of 2017, after receiving a "notice and opportunity to 7 respond and advise" letter, notifying Zillow of the CFPB's belief that the co-marketing program 8 was illegal. Id. Even then, Zillow downplayed the seriousness of the situation, falsely reassuring 9 investors that the program, which was in fact an enormous contributor to Zillow's bottom line, 10 was "small" and falsely claiming that Zillow was still confident that their program was compliant, 11 when in reality Zillow changed the co-marketing program to comply with RESPA in the 12 13 beginning of 2017 in response to CFPB warnings. Id. 14 On August 8, 2017, the Company was forced to admit the seriousness of their legal 15 jeopardy, acknowledging that they had been notified by the CFPB that it intended to charge Zillow 16 with RESPA violations if it did not reach a settlement. ¶12. Following this news, Zillow's share 17 price fell $7.43, or 15.5%, over the following two trading days to close at $40.50 on August 10, 18 2017. Id. 19 III. ARGUMENT 20 21 A. Class Certification is Appropriate under Rule 23 22 The Complaint details misrepresentations and omissions of material fact that damaged 23 thousands of similarly situated shareholders. "The law in the Ninth Circuit is very well established 24 that the requirements of Rule 23 should be liberally construed in favor of class action cases 25 brought under the federal securities laws." In re THQ, Inc. Sec. Litig., No. CV 00-1783AHM(EX), 26 MOTION FOR CLASS CERTIFICATION - 4 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 2002 WL 1832145, at *2 (C.D. Cal. Mar. 22, 2002) (citations omitted). Any doubt as to the 1 propriety of certification should be resolved in favor of certifying the class. Blackie, 524 F.2d at 2 901; accord Munoz v. Giumarra Vineyards Corp., No. 109CV00703AWIJLT, 2016 WL 3 2756425, at *2 (E.D. Cal. May 12, 2016). "The inquiry is not whether the class will prevail on 4 the merits of their claims but whether common questions capable of class-wide resolution exist 5 6 and whether those common questions predominate over individualized ones." Fosbre v. Las 7 Vegas Sands Corp., No. 2:10-CV-00765-APG, 2015 WL 3722496, at *2 (D. Nev. June 15, 2015). 8 B. The Proposed Class Meets the Requirements of Rule 23(a) 9 For a class to be certified, Plaintiffs must satisfy the prerequisites of Rule 23(a) and one 10 requirement of Rule 23(b). Under Rule 23(a) a plaintiff must establish: "(1) the class is so 11 numerous that joinder of all members is impracticable; (2) there are questions of law or fact 12 13 common to the class; (3) the claims or defenses of the representative parties are typical of the 14 claims or defenses of the class; and (4) the representative parties will fairly and adequately protect 15 the interests of the class." In re Cooper Companies Inc. Sec. Litig., 254 F.R.D. 628, 633 (C.D. 16 Cal. 2009). Indeed, courts in this Circuit routinely certify class actions alleging violations of the 17 anti-fraud provisions of the federal securities laws. See, e.g., In re Silver Wheaton Corp. Sec. 18 Litig., No. 215CV05146CASJEMX, 2017 WL 2039171 (C.D. Cal. May 11, 2017); Middlesex 19 Cty. Ret. Sys. v. Semtech Corp., No. CV077114CASFMOX, 2010 WL 11507255 (C.D. Cal. Aug. 20 21 27, 2010). The proposed class easily meets these requirements. 22 1. Numerosity 23 The Court will find numerosity "where the class is so numerous that joinder of all 24 members is 'impracticable'." Cooper, 254 F.R.D. 628 at 633. Impracticable does not mean 25 impossible, only that it would be difficult or inconvenient to join all members of the class. Harris 26 MOTION FOR CLASS CERTIFICATION - 5 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913–14 (9th Cir. 1964). "No exact numerical 1 cut-off is required, rather, the specific facts of each case must be considered." Cooper, 254 F.R.D. 2 at 633. In securities cases, numerosity is presumed when millions of shares are traded during the 3 proposed class period. Id. "[W]here several million shares of stock were purchased during the 4 class period, courts regularly find that class members are sufficiently numerous to render joinder 5 6 impracticable." Silver Wheaton, 2017 WL 2039171 at *6 (citations omitted). 7 Throughout the Class Period, Zillow's stock traded regularly and actively, demonstrating 8 a large class. See Nye Decl. ¶25. During the Class Period, the total number of Class A shares 9 issued and outstanding ranged from approximately 34.4 million to 55.8 million, and the total 10 number of Class C shares issued and outstanding ranged from approximately 118.0 million to 11 125.1 million, Id. and average weekly trading volume was 4.7 million shares and 7.1 million 12 13 shares, respectively. Id. With respect to the Convertible Notes, an average of $23,224,844 par 14 value worth of Notes, or 5% of total par value outstanding, traded each week. ¶26. In Cooper, 15 254 F.R.D. at 634, the court held that that while no "exact numerical cut-off is necessary," 16 "numerosity is presumed where the plaintiff class contains forty or more members," and inferred 17 that since 36 million shares were outstanding, "more than 40 individuals purchased stock over the 18 course of [the Class Period]." This Court should, therefore, find that the Class is sufficiently 19 numerous that joinder is impracticable. 20 21 2. Commonality 22 A proposed class meets the commonality requirement if "there are questions of law or fact 23 common to the class." Cooper, 254 F.R.D. at 634; Fed. R. Civ. P. 23(a)(2). Not all questions of 24 fact and law need be common to satisfy Rule 23(a)(2). Hanlon v. Chrysler Corp., 150 F.3d 1011, 25 1019 (9th Cir. 1998). Courts construe this factor "permissively", and both "shared legal issues 26 MOTION FOR CLASS CERTIFICATION - 6 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 with divergent factual predicates" and "a common core of salient facts coupled with disparate 1 legal remedies" suffice. Id. at 1019; cf. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011) 2 commonality where claims depend on common contention that is capable of class-wide 3 resolution); Takiguchi v. MRI Int'l, Inc., No. 213CV01183HDMVCF, 2016 WL 1091090, at *3 4 (D. Nev. Mar. 21, 2016) (explaining that the Ninth Circuit construes the commonality requirement 5 6 permissively); Connecticut Ret. Plans & Tr. Funds v. Amgen, Inc., No. CV07-2536PSG, 2009 7 WL 2633743, at *5 (C.D. Cal. Aug. 12, 2009) ("existence of only one common legal and factual 8 issue may satisfy the requirement"). The Class satisfies the commonality requirement. 9 The Complaint describes a "common course of conduct." When a company's public 10 statements mislead investors in the same way, through a common course of conduct directed 11 against all of its investors, courts in this district hold that a finding of commonality is appropriate. 12 13 See, e.g., Takiguchi, 2016 WL 1091090, at *4, citing Blackie, 524 F.2d at 902. 14 Here, common questions of fact and law include: (i) whether Defendants misled investors 15 by falsely assuring investors that Zillow and Zillow's co-marketing program were compliant with 16 the law; (iii) whether Defendants acted with the requisite scienter; (iii) whether Defendants' false 17 statements and omissions caused losses to members of the Class; and (iv) to what extent the 18 members of the Class have sustained damages and the proper measure of damages. The crux of 19 this case is that the Defendants misled investors concerning the fact that the co-marketing program 20 21 was designed to and was in fact used to facilitate lenders illegal payments of kickbacks to real 22 estate brokers. The alleged fraud injured all Class Members in the same way. Commonality, 23 therefore exists. See, e.g., Blackie, 524 F.2d at 902–05. 24 3. Typicality 25 "Typicality refers to the nature of the claim or defense of the Class Representative, and 26 MOTION FOR CLASS CERTIFICATION - 7 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 not to the specific facts from which it arose or the relief sought." Connecticut Retirement Plans 1 and Trust Funds, 2009 WL 2633743, at *5. Typicality exists when class "members have the same 2 or similar injury, the action is based on conduct that is not unique to the named plaintiff, and when 3 the wrongdoing injured class member similarly." Hanon v. Dataproducts Corp., 976 F.2d 497, 4 508 (9th Cir. 1992). Rule 23(a)'s typicality requirement ensures that the interests of the 5 6 representative plaintiff align with those of the Class. Silver Wheaton, 2017 WL 2039171 at *7. 7 Where a plaintiff alleges that she purchased the security in question and suffered damages as a 8 result of a defendant's misstatement or omissions, her claims are typical of the Class. Id. 9 Plaintiffs' claims are substantially similar to those of the Class, satisfying the typicality 10 requirement. They purchased Zillow stock or notes during the Class Period, holding through the 11 end of the Class Period, and suffering losses. Dkt. #16-2. The same misrepresentations affected 12 13 each security in the same manner. No evidence exists that render their claims in any way 14 whatsoever atypical of those of the Class and no hint of a unique defense exists that would 15 otherwise defeat the typicality of his claims. See Semtech, 2010 WL 11507255 at *4-5. As such, 16 the Class satisfies the typicality requirement. 17 4. Adequacy 18 A class representative who "will fairly and adequately protect the interests of the class" is 19 adequate. Cooper, 254 F.R.D. at 636. The inquiry focuses on the "ab[ility] to prosecute the action 20 21 vigorously through qualified counsel" and the absence of "antagonistic or conflicting interests 22 with the unnamed members of the class." Campbell v. Vitran Express Inc, No. CV 11-5029 RGK 23 (SHX), 2015 WL 7176110, at *5 (C.D. Cal. Nov. 12, 2015) citing Lerwill v. Inflight Motion 24 Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978); see also Takiguchi, 2016 WL 1091090, at *5 25 ("Adequacy requires considering the competency and any conflicts of interest of class counsel, 26 MOTION FOR CLASS CERTIFICATION - 8 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 as well as whether the named plaintiffs and class counsel will vigorously prosecute the action on 1 behalf of the class."). 2 Plaintiffs meet these requirements. First, Plaintiffs have engaged qualified, experienced 3 and capable attorneys. Proposed Class Counsel are highly experienced in complex class litigation, 4 especially securities fraud actions, and have the ability and willingness to prosecute this action 5 6 vigorously. 4 Pace v. Quintanilla, No. SACV 14-2067-DOC, 2014 WL 4180766, at *3 (C.D. Cal. 7 Aug. 19, 2014) (the Rosen "Firm has appeared before this Court several times before, and the 8 Court is confident that it has the necessary skill and knowledge to effectively prosecute this 9 action"). 10 Second, Plaintiffs are well suited to represent the Class. Plaintiffs' interests are the same 11 as those of the absent Class members, and there are no conflicts between them and the Class. Each 12 13 Plaintiff has been actively involved in this litigation and each is willing to serve as a representative 14 party on behalf of the Class and understands their responsibility as Class Representative to protect 15 and advance the interests of absent class members in the litigation. 5 Not only are Plaintiffs willing 16 and able to prosecute this action on behalf of the Class to a successful conclusion, 6 but their 17 18 4 19 See Rosen Firm Resume, Stern Decl. Ex. 1. Pursuant to the PSLRA, this Court has already appointed the Rosen Firm as Lead Counsel. (Dkt. No. 48). Pursuant to Rule 23(g), the Court must 20 consider four factors in appointing Class counsel and may consider others. Fed. R. Civ. P. 23(g). Rosen has worked diligently and efficiently in identifying the claims of Plaintiffs and the Class, 21 has experience in handing securities class actions, has knowledge of the applicable law, and possesses and will commit the resources necessary to represent the Class. As such, this Court 22 should appoint Rosen as Class Counsel. 23 5 See Declaration of Lead Plaintiff Jo Ann Offutt in Support of Plaintiffs' Motion for Class Certification, Stern Decl. Ex. 2, ¶¶5-14, Declaration of Lead Plaintiff Johanna Choy in Support 24 of Plaintiffs' Motion for Class Certification, Stern Decl. Ex. 3, ¶¶5-14, Declaration of Lead 25 Plaintiff Raymond Harris in Support of Plaintiffs' Motion for Class Certification. Stern Decl. Ex. 4, ¶¶5-14. 26 6 Stern Decl. Ex. 2, ¶¶5-14; Stern Decl. Ex. 3, ¶¶5-14; Stern Decl. Ex. 4, ¶¶5-14. MOTION FOR CLASS CERTIFICATION - 9 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 interests and those of the class are aligned. 7 All Class members have suffered losses due to their 1 transactions in Zillow securities in an artificially inflated market. It is in each Plaintiff's interests, 2 individually and together, to prosecute this action on behalf of the Class vigorously. Accordingly, 3 Plaintiffs "will fairly and adequately protect the interests of the class" and they are adequate class 4 representatives. See Fed. R. Civ. P. 23(a)(4). 5 6 C. The Proposed Class Satisfies Rule 23(b)(3) 7 Where issues common to the Class predominate over other issues, a class satisfies the 8 predominance requirement. Semtech, 2010 WL 11507255 at *7 (citing Rule 23(b)(3)); see also 9 In re Emulex Corp. Sec. Litig., 210 F.R.D. 717, 721 (C.D. Cal. 2002). 10 11 1. Common Questions of Law and Fact Predominate over Individual 12 Questions 13 14 Where a complaint alleges a "common course of conduct," of misleading omissions that 15 affect all members of the class in the same manner, common questions predominate. Comcast 16 Corp. v. Behrend, 569 U.S. 27 (2013). In assessing whether common questions predominate, the 17 Court's inquiry should be directed primarily toward the issue of liability. In re Valence Tech. Sec. 18 Litig.,No. C 95-20459 JW, 1996 WL 119468, at *5 (N.D. Cal. Mar. 14, 1996); see also Hanlon, 19 150 F.3d at 1022 ("'When common questions present a significant aspect of the case and they can 20 be resolved for all members of the class in a single adjudication, there is clear justification for 21 22 handling the dispute on a representative rather than on an individual basis.'"). As to damages, 23 plaintiffs need only show that "damages could feasibly and efficiently be calculated once the 24 common liability questions are adjudicated." Hatamian v. Advanced Micro Devices, Inc., No. 14- 25 26 7 Stern Decl. Ex. 2, ¶12; Stern Decl. Ex. 3, ¶12; Stern Decl. Ex. 4, ¶12. MOTION FOR CLASS CERTIFICATION - 10 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 CV-00226 YGR, 2016 WL 1042502, at *8 (N.D. Cal. Mar. 16, 2016) (interpreting Comcast Corp. 1 v. Behrend, 133 S. Ct. 1426 (2013)). 2 As discussed above, common questions predominate because Defendants' misstatements 3 affected all class members in the same manner, by inflating Zillow's stock and note prices. "The 4 predominant questions of law or fact at issue in this case are the alleged [omissions of material 5 6 fact] Defendants made during the Class Period and are common to the class." Emulex, 210 F.R.D. 7 at 721. Once these questions are resolved, all that remains is the mechanical computation of per 8 share damages suffered by each class member, which will be the lesser of the magnitude of the 9 price decline attributable to Defendants' fraud, and the maximum damages permissible under the 10 PSLRA. Id. It cannot be questioned that issues surrounding Defendants' alleged conduct, such as 11 whether their statements were materially false, whether they acted with requisite scienter, and 12 13 whether their conduct caused damages to Plaintiff and the Class, are common to each member of 14 the Class. Those issues cannot defeat predominance. Id. The predominance issue in this case, as 15 in most securities fraud class actions, is whether Plaintiff can establish reliance on a Class-wide 16 basis. The Complaint does not plead that Plaintiff or any member of the Class directly and 17 individually relied on the allegedly fraudulent information. Instead the Complaint pleads Class- 18 wide reliance pursuant to the fraud-on-the-market theory. 19 20 a. A Presumption of Reliance Exists Because Defendants 21 Committed a Fraud-on-the-Market 22 23 The Supreme Court first recognized the fraud-on-the-market presumption in Basic Inc. v. 24 Levinson, 485 U.S. 224 (1988). The premise of Basic is that in well-developed securities markets 25 a misleading statement or omission of material fact is incorporated in the price of a security. 26 Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2416 (2014) ("Halliburton II"). MOTION FOR CLASS CERTIFICATION - 11 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 To be entitled to the fraud-on-the-market reliance presumption, Plaintiff must show that 1 Zillow securities traded in an "efficient market." That is, during the Class Period, Company 2 information must have been "absorbed into, and [] therefore reflected in," Zillow's securities' 3 prices. Semtech, 2010 WL 11507255 at *7 (citations and internal quotations omitted). The Court 4 determines market efficiency by evaluating the five factors from Cammer v. Bloom, 711 F. Supp. 5 6 1264 (D.N.J. 1989), that assist courts in making "the central determination of efficiency in a 7 particular market. Id. (citing Binder v. Gillespie, 184 F.3d 1059, 1095 (9th Cir. 1999)). Given that 8 Zillow Class A and Class C stock traded on the Nasdaq Global Select Market and Zillow's 9 convertible notes traded on the dealer-based over the counter market for corporate debt, Nye. 10 Decl. ¶65., 8 and because the Cammer factors are present, Plaintiffs have established for purpose 11 of a class certification inquiry "that [Zillow securities] traded in an efficient market and that [they 12 13 are] entitled to the presumption of reliance based on the fraud-on-the-market theory." Id. 14 (citations omitted). 15 The Cammer factors address the characteristics of an efficient market. Id. They are (1) 16 "whether the stock trades at a high weekly volume;" (2) "whether securities analysts follow and 17 report on the stock;" (3) whether the stock has market makers and arbitrageurs;" (4) whether the 18 company is eligible to file SEC registration form S-3, as opposed to form S-1 or S-2;" and (5) 19 "whether there are empirical facts showing a cause and effect relationship between unexpected 20 21 corporate events or financial releases and an immediate response in the stock price." Id. (citation 22 and internal quotation omitted). The Ninth Circuit has approved of the Cammer approach. See 23 Binder, 184 F.3d at 1065. 24 25 8 The Nasdaq Global Select Market is the highest tier of the Nasdaq stock market, with stringent financial and liquidity requirements, as well as corporate government requirements. See Initial 26 Listing Guide, Nasdaq, https://listingcenter.nasdaq.com/assets/initialguide.pdf. MOTION FOR CLASS CERTIFICATION - 12 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 In Halliburton II the Court clarified the standard for fraud on the market. Halliburton II, 1 134 S. Ct. 2398. Halliburton II reaffirmed the efficient market presumption in Basic Inc., 485 2 U.S. 224, but clarified that the prerequisites to the presumption: (i) proof that the 3 misrepresentation or omission of fact was material, (ii) was issued publicly, and (iii) the security 4 traded in an efficient market, were proxies for the fact that underlies the presumption of reliance: 5 6 that the misrepresentation or omission affected the market price of the security (i.e. "price 7 impact"). Halliburton II clarified that a plaintiff can show fraud on the market either by providing 8 evidence that the company's stock generally traded on an efficient market, or by direct evidence 9 that the misleading statement had a price impact. Halliburton II, 134 S. Ct. at 2415. Defendants, 10 by the same token, may rebut the presumption, showing a lack of price impact by direct evidence. 11 Id. Halliburton II also characterized "the presumption of reliance [as based] on the fairly modest 12 13 premise that 'market professionals generally consider most publicly announced material 14 statements about companies, thereby affecting stock market prices.'" Id. at 2408 (quoting Basic, 15 485 U.S., at 247, n. 24, 108 S.Ct. 978.). 16 i. Cammer Factors Demonstrate Market Efficiency 17 18 As noted above, the Ninth Circuit uses the "Cammer" factors to determine whether an 19 efficient market is established. See Binder, 184 F.3d at 1064 (citing Cammer, 711 F. Supp. at 20 1286–87). Dr. Nye's holistic analysis of the Cammer factors and other indicia of market efficiency 21 22 demonstrate that Zillow's common stock and convertible notes traded in an efficient market 23 during the class period. 24 As set forth below, Dr. Nye analyzed three types of securities that Zillow issued and which 25 were outstanding during the class period: Zillow's Class A common stock, Zillow's Class C 26 capital stock, and Zillow's Convertible Notes. MOTION FOR CLASS CERTIFICATION - 13 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Cammer 1, Trading Volume: 9 Cammer set a benchmark of 2% weekly trading volume 1 of the outstanding stock. Average weekly trading volume during the Class Period of Zillow Class 2 A stock was 9.4% as a percentage of total outstanding shares, and the average weekly trading 3 volume of Class C stock during that period was 5.9%. 10 Nye Decl. ¶25. The average weekly 4 trading volume as a percentage of par value of notes outstanding during the Class Period was 5 6 5.0%. Nye Decl. ¶26. That is well above the benchmark of 2% of outstanding shares traded. As 7 such, this factor strongly supports the efficiency of the market for Zillow common stock and 8 notes. 9 Cammer 2, Analyst Coverage: When investment professionals monitor a firm and 10 subsequently make recommendations based on company information, "the market price of the 11 stock would be bid up or down to reflect the [company's] financial information. . . as interpreted 12 13 by securities analysts." 11 The more analysts who cover the stock increases the likelihood of a 14 finding of efficiency. If more than two analysts cover the stock in question, then the presumption 15 of efficiency strengthens. 12 Here, at least 36 analysts covered Zillow, issuing recommendations 16 and/or research reports. Nye Decl. ¶31. 13 These factors strongly support a finding of market 17 efficiency. 18 19 20 9 A large weekly trading volume evidences market efficiency because "it implies significant investor interest" and, in turn, "a likelihood that many investors are executing trades on the basis 21 of newly available or disseminated corporate information." Cammer, 711 F. Supp. 1264. 22 10 During the Class Period, the total number of Class A shares issued and outstanding ranged from approximately 34.4 million to 55.8 million, and the total number of Class C shares issued and 23 outstanding ranged from approximately 118.0 million to 125.1 million. Nye Decl. ¶25. 11 24 Cammer, 711 F. Supp. at 1286. 12 25 Barber, Brad M., et al., "The Fraud-on-the-Market Theory and the Indicators of Common Stocks' Efficiency," Journal of Corporation Law, 1994. 26 13 During the Company's earnings calls, at least two additional firms participated. Nye Decl. ¶31. MOTION FOR CLASS CERTIFICATION - 14 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 The volume of news stories and coverage also supports an efficient market because the 1 flow of material information to the marketplace promotes market efficiency. Nye Decl. ¶32. 2 During the Class Period, at least 5000 news articles and press releases about Zillow were 3 published, and more information emerged throughout the Class Period through SEC filings, 4 conference calls, and investor presentations. Nye Decl. ¶32. This volume of news coverage 5 6 supports an inference that Zillow securities traded in an efficient market. See Cheney v. 7 Cyberguard Corp., 213 F.R.D. 484, 499 (S.D. Fla. 2003) (524 news items over two years showed 8 efficient market). 9 Cammer 3, Market Makers: Market makers establish markets for tradable securities, 10 publicly reporting bid-ask spreads and standing ready to complete transactions at the prices they 11 quote publicly. Petrie v. Elec. Game Card, Inc., 308 F.R.D. 336, 351 (C.D. Cal. 2015) (citation 12 13 omitted). "The more market-makers for a particular security. . . the more reasonable it is to infer 14 that a security is liquid, and, therefore, more likely the market for that security is efficient." Id. 15 (citation and internal quotation omitted). A market with greater than eleven (11) market makers 16 has been found to support efficiency. Id. (citing Cammer, 711, F. Supp. at 1283). During the Class 17 Period, Zillow Class A and C common stock had at least 130 and 160 market makers respectively. 18 Nye Decl. ¶36. In addition, the number of institutional investors and the news articles covering 19 the Company can support a finding of efficiency. 14 At least 215 and 271 institutional investors 20 21 owned Zillow Class A and Class C common stock respectively, and at least 29 held the 22 Convertible Notes. Nye Decl. ¶¶42-43. Thus, the number of market makers and institutional 23 owners supports market efficiency. Nye Decl. ¶43. 24 25 26 14 See Cammer, 711 F. Supp. at 1285. MOTION FOR CLASS CERTIFICATION - 15 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Cammer 4, S-3 Registration Eligibility: Where an issuer has filed 12 months of periodic 1 reports with the Securities Exchange Commission ("SEC"), without delay, and has a market 2 capitalization of at least $75 million of float, it is eligible to file a Form S-3 Registration statement. 3 The availability of this short form registration statement support market efficiency because of the 4 filing requirement, financial data were available to the market while the "public float" 5 6 requirement indicates that a sufficient number of market participants have examined the available 7 information. 15 Nye Decl. ¶49. Zillow Inc., predecessor to Zillow Group, Inc., filed Forms S-3 8 with the SEC prior to the Class Period, and Zillow Group, Inc. filed an automatic shelf registration 9 statement on SEC Form S-3ASR after the Class Period, indicating the Company was eligible to 10 file Form S-3 throughout the Class Period, strongly supporting a presumption of market 11 efficiency. Nye Decl. ¶49. 12 13 Cammer 5, Cause-Effect Relationship of Unexpected Material News and Stock Price: 14 This factor requires evidence of "empirical facts showing a cause and effect relationship 15 between unexpected corporate events or financial releases and an immediate response in stock 16 price." Binder, 184 F.3d at 1065 (quoting Cammer, 711 F. Supp. at 1287). To determine whether 17 a cause and effect relationship exists Dr. Nye conducted an event study to assess whether new, 18 material corporate events or financial releases caused a prompt, measurable reaction, after 19 accounting for contemporaneous market and industry effects. ¶52. 20 21 An event study assesses the response of Zillow's stock price to new information, 22 measuring the relationship between Zillow's returns and those market and industry wide factors 23 which would be expected to affect all stocks in the market, and all stocks in Zillow's industry, 24 respectively. Nye Decl. ¶77. The difference between the expected returns and Zillow's actual 25 26 15 Cammer, 711 F. Supp. at 1284–85. MOTION FOR CLASS CERTIFICATION - 16 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 returns is called a residual return which measures the cause and effect relationship between 1 Zillow-specific news and Zillow's stock price movement. ¶83. A statistically significant residual 2 return indicates that the new information and not market or industry factors likely caused the 3 stock price movement on that day. Dr. Nye focuses on dates where Zillow released quarterly or 4 annual financial results, because such earnings-related announcements are an objective set of 5 6 potentially material events to examine and are reasonably expected to have an effect on the value 7 of the issuer's securities. Nye Decl. ¶54. Dr. Nye selected 12 dates that fit his event selection 8 criteria for Class A stock, 8 for Class C, and 3 for Zillow convertible notes. Nye Decl. ¶¶54-58. 9 Employing a market model, Dr. Nye determined the expected return for Zillow common 10 stock and notes, controlling for market and industry factors, against which to compare the residual 11 returns. Nye Decl. ¶¶77-83. For each event date, Dr. Nye applied a regression analysis to 12 13 determine the statistical significance of the residual returns return for the event dates. Nye Decl. 14 ¶52. A "statistically significant" residual return is one that would only occur by chance on 5% of 15 days. However, with respect to Class A stock, dates on which earnings were announced 16 corresponded with statistically significant returns on eight out of twelve days, which is 13 times 17 as many dates as would be expected from random chance. Nye Decl. ¶54 For class C stock, out 18 of eight events examined, seven were associated with statistically significant residual returns, or 19 more than 17 more frequently than one would be expected by chance. For the Convertible Notes, 20 21 three out of three events corresponded with statistically significant returns in the notes. 22 Dr. Nye also confirmed that Zillow's stock price moved in the direction that one would 23 expect given the positive or negative nature of each earnings announcement. ¶57. Dr. Nye did 24 this by reviewing news and analyst coverage to assess whether each earnings announcement could 25 be considered positive or negative relative to analyst expectations and then determining whether 26 MOTION FOR CLASS CERTIFICATION - 17 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Zillow's stock price moved up in response to positive news and down in response to negative 1 news. Id. Ultimately Dr. Nye was able to conclude that the direction of Zillow's response to 2 earnings announcement corresponded to the positive or negative nature of the news. Nye Decl. 3 ¶58. These results are powerful empirical evidence that Zillow's stock and notes traded in 4 efficient markets during the Class Period. 5 6 ii. Other Indicia of Market Efficiency: the Unger/Krogman 7 Factors 8 9 Bid-ask Spread: The bid-ask spread is "the difference between the price at which current 10 stockholders are willing to buy the stock and the price at which current stockholders are willing 11 to sell their shares." Cheney, 213 F.R.D. at 501. Cheney held that a bid-ask spread of 5.6% 12 suggested inefficiency, but a spread of 2.44% suggested efficiency. Id. The average bid-ask 13 14 spread of Zillow stock during the Class Period was 0.07%, which was below the bid-ask spreads 15 found to suggest efficiency in Cheney, and well below the average month-end bid-ask spread over 16 the course of the Class Period for a random sample of NASDAQ Global Select Market stocks of 17 0.19% Nye Decl. ¶44. Zillow's narrow bid-ask spread supports a conclusion of market efficiency. 18 Nye Decl. ¶61. 19 Market Capitalization: Market capitalization is the total value of all outstanding shares, 20 i.e., the number of shares outstanding times the price per share. The larger the market 21 22 capitalization, the more likely the stock is to attract analyst and news media coverage, and gain 23 the attention of investors, including large institutional investors. All of these characteristics 24 promote market efficiency. Nye Decl. ¶59. During the Class Period, Zillow's market 25 capitalization ranged from $2.91 billion and $9.37 billion, making it larger than at least 74% of 26 New York Stock Exchange traded companies in the United States, and 94.2% of NASDAQ traded MOTION FOR CLASS CERTIFICATION - 18 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 companies. Nye Decl. ¶60. Zillow's sizeable market capitalization is evidence of the efficiency 1 of the market for its stock. Nye Decl. ¶60. 2 Size of the Float: The stock's float is the number of shares outstanding, less shares held 3 by insiders and affiliated corporate entities. It is generally the number of shares available for 4 trading by outside investors in the open market. Float is highly correlated with market 5 6 capitalization, but it focuses on the shares available for trading rather than all outstanding shares. 7 Stocks with large levels of float tend to trade more actively, attract more analyst and news media 8 coverage, and garner the attention of greater numbers of investors, including large institutional 9 investors. All of these characteristics, which accompany a high float level, promote market 10 efficiency. During the Class Period, by number of shares, Zillow had 51.7 million Class A shares 11 and 121.5 Class C shares outstanding with 49.4 million Class A shares and 104.3 million Class C 12 13 shares in the float. The float, therefore, was 95.5 % of Class A shares outstanding and 85.9% of 14 Class C shares outstanding. Nye Decl. ¶62. The size of the float indicates that it satisfies the 15 second Unger/Krogman factor for market efficiency. Nye Decl. ¶64. 16 After considering the factors above, Dr. Nye concluded not only that the market for Zillow 17 common stock satisfies the Cammer and Unger/Krogman factors that indicate market efficiency, 18 but also satisfied the empirical Cammer factor, the cause and effect relationship between new 19 information and price movement, demonstrating the essence of market efficiency, with the event 20 21 study proving that there was a cause and effect relationship between new, Company-specific 22 information, and movements in the price of Zillow stock. Zillow stock traded in an efficient 23 market during the Class Period. Nye Decl. ¶130. 24 25 26 MOTION FOR CLASS CERTIFICATION - 19 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 iii. Prices for Zillow's Convertible Notes Tracked Zillow's 1 Stock Price, Demonstrating the Efficiency of the Notes 2 Market 3 4 On December 12, 2016, Zillow issued a Convertible Note to Qualified Institutional Buyers 5 that may be converted to Zillow Class C Stock on September 1, 2021. Nye Decl. ¶12. Several 6 courts in the Ninth Circuit have recognized that a plaintiff may establish a presumption of reliance 7 with respect to purchases of convertible debt instruments like the Convertible Note by 8 demonstrating that the price of the convertible instrument moved in tandem with that company's 9 10 stock, where the stock itself trades on an efficient market. Argent Classic Convertible Arbitrage 11 Fund L.P. v. Countrywide Fin. Corp., No. CV0707097MRPMANX, 2009 WL 10673338, at *3 12 (C.D. Cal. Dec. 9, 2009); In re Countrywide Fin. Corp. Sec. Litig., 588 F. Supp. 2d 1132, 1159 13 (C.D. Cal. 2008); Zelman v. JDS Uniphase Corp., 376 F. Supp. 2d 956, 968–70 (N.D. Cal. 2005). 14 Dr. Nye examined the relationship between the prices of Zillow's stock and Convertible Notes, 15 and found that there was a 90.6% correlation between the Convertible Notes and Zillow's Class 16 A stock, and a 90.7% correlation between the Convertible Notes and Class C stock. Nye Decl. 17 18 ¶67. Dr. Nye noted that this correlation is consistent with an efficient market in Zillow's 19 Convertible Notes. Id. 20 2. A Class Action Is Superior to Other Methods for Resolving This 21 22 Controversy 23 Rule 23(b)(3) also requires the Court to determine that "a class action is superior to other 24 available methods for the fair and efficient adjudication of the controversy." Fed. R. Civ. P. 25 26 23(b)(3). Courts have recognized that the class action device is superior to other available MOTION FOR CLASS CERTIFICATION - 20 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 methods for managing litigation involving many purchasers of securities injured by violations of 1 the securities laws. "[C]lass action treatment presents a superior method for the fair and efficient 2 resolution of securities fraud cases." In re HealthSouth Corp. Sec. Litig., 257 F.R.D. 260, 284 3 (N.D. Ala. 2009); In re Countrywide Fin. Corp. Sec. Litig., 273 F.R.D. 586, 623–24 (C.D. Cal. 4 2009) (superiority clearly met where parties "need only establish what happened within 5 6 Countrywide, when, and who knew (or should have known)"). In determining the issue of 7 superiority, Rule 23(b)(3) enumerates the following factors that this court should consider the 8 interests of class members controlling maintaining their own cases, and already filed litigation, 9 the benefits on concentrating common litigation in one forum and "the likely difficulties in 10 managing a class action." See Fed. R. Civ. P. 23(b)(3). 11 Each factor is satisfied here. The number of Class members is too numerous and the 12 13 typical claim is too small for each class member to maintain separate actions. Further, this Court 14 is an appropriate forum for a substantial part of the alleged misconduct occurred in this district. 15 Moreover, the nationwide geographical dispersion of the class members, based upon Zillow's 16 sale of the stock on a national exchange, makes it desirable that litigation of the claims involved 17 be concentrated in this forum. See In re Juniper Networks, Inc. Sec. Litig., 264 F.R.D. 584, 593 18 (N.D. Cal. 2009) ("it is almost certain that there will be thousands of class members. Where 19 thousands of identical complaints would have to be filed, it is superior to concentrate claims 20 21 through a class action in a single forum"). Finally, Plaintiffs foresee no management difficulties 22 that would preclude this action from being maintained as a class action and are confident that any 23 potential management problems can be addressed and resolved by the parties or by this Court. 24 For those reasons, a class action is superior for the fair and efficient adjudication of the claims of 25 Plaintiffs and the Class. 26 MOTION FOR CLASS CERTIFICATION - 21 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 3. Damages Can be Calculated with a Common Model 1 Comcast held that an antitrust class could not be certified because the damages model 2 calculated damages that flowed from four theories of antitrust impact, three of which were already 3 rejected by the Court. Comcast, 133 S. Ct. 1426, 1434, 185 L. Ed. 2d 515 (2013). For that reason, 4 there was a mismatch between the method of the class-wide damages calculation, and the theory 5 6 of class-wide proof. In Comcast Corp., 569 U.S. 27, the Court noted, it was possible that some 7 class members were damaged primarily by noncompensable harms, while other class members 8 were damaged primarily by compensable harms. Id. 9 Here, Dr. Nye opines that per-share damages can be measured on a class-wide basis using 10 an event study. Nye Decl. ¶¶69-74. In fact, "[t]he event study method is an accepted method for 11 the evaluation of materiality damages to a class of stockholders in a defendant corporation." In 12 13 re Diamond Foods, Inc., Sec. Litig., 295 F.R.D. 240, 251 (N.D. Cal. 2013). Hatamian, 2016 WL 14 1042502, at *9. At class certification, it is not necessary actually to conduct an event study. 15 Hatamian, 2016 WL 1042502, at *8 (sufficient for plaintiffs to "propose" event study 16 methodology). As such, Plaintiffs have demonstrated that the finder of fact will be able to 17 calculate damages for the entire class using a common model. 18 IV. CONCLUSION 19 For the foregoing reasons, Plaintiffs respectfully request that this Court (1) certify this 20 21 action as a class action on behalf of the Class, (2) appoint Lead Plaintiffs as Class 22 Representatives, (3) appoint The Rosen Law Firm, P.A. as Class Counsel and the Ardent Law 23 Group as Liaison Counsel to the Class, (4) direct the parties to meet and confer on the form and 24 manner of providing notice and require the parties to file their proposal for providing notice for 25 26 MOTION FOR CLASS CERTIFICATION - 22 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665 9 Court approval within sixty days from entry of the Order granting class certification, and (5) 1 grant such other and further relief as is warranted. 2 Dated: October 11, 2019 3 ARDENT LAW GROUP, PLLC 4 By: /s/ Colin M. George 5 Colin M. George 6 Email: cgeorge@ardentlaw.com 2003 Western Ave., Suite 345 7 Seattle, WA 98121 Telephone: (855) 579-9665 8 9 Local Counsel for Lead Plaintiffs 10 THE ROSEN LAW FIRM, P.A. 11 By: /s/ Jonathan Stern Laurence M. Rosen, Esq. (pro hac vice) 12 Email: lrosen@rosenlegal.com 13 Jonathan Stern, Esq. (pro hac vice) Email: jstern@rosenlegal.com 14 275 Madison Avenue, 34th Floor New York, NY 10016 15 Telephone: (212) 686-1060 Facsimile: (213) 226-4684 16 17 Lead Counsel for Lead Plaintiffs 18 19 20 21 22 23 24 25 26 MOTION FOR CLASS CERTIFICATION - 23 ARDENT LAW GROUP PLLC 2003 WESTERN AVE, SUITE 345 SEATTLE, WA 98121 855.579.9665