Opinion
CASE NO. 01-CV-2238-K (RBB)
November 16, 2003
ORDER GRANTING MOTION FOR CLASS CERTIFICATION
On September 29, 2003, lead plaintiff, Louisiana School Employees' Retirement System ("LSERS"), filed the instant motion for class certification pursuant to Federal Rule of Civil Procedure (" Fed.R.Civ.P.") 23. Defendants' opposition to the motion was filed on November 10, 2003. Plaintiffs' reply was also filed on November 10, 2003. All parties proceed through counsel. This court has jurisdiction because this action was brought pursuant to the Securities Exchange Act of 1933 (the "SEA"), 15 U.S.C. § 77 et seq.
The court notes Defendants' Request for Judicial Notice in Support of its Memorandum of Points and Authorities. The court takes judicial notice that the documents were produced, but does not take judicial notice of the truth of the information contained therein. The court also notes receipt of a letter from defendants, dated November 4, 2003, in which defendants request an oral appearance regarding the pending motion addressed in this order. In it defendants raise three arguments. The first and second are contained in defendants' papers and are addressed by this order accordingly. The third is addressed in this order to the extent it was raised in defendants' papers. Finally, the court notes receipt of a letter from plaintiffs objecting to defendants' letter. The objection is duly noted.
I. Background
The following is based on the parties' pleadings and papers and should not be construed as findings of fact by the court.
Defendant dj Orthopedics, Inc. ("DJO") is an orthopedic sports medicine company headquartered in Vista, California. Defendants' Points Authorities at 3. Defendants Leslie H. Cross, Cyril Talbot, III, and Charles T. Orsatti are officers of DJO and/or high-ranking board members.See Complaint ¶¶ 9-11. Defendants Mitchell J. Blutt, M.D., Damion E. Wicker, M.D., and Kirby L. Cramer, M.D. are also associated with DJO, although it is unclear from the record what their positions or associations with DJO are. Investment banks, Goldman Sachs Co., J.P. Morgan Securities, Inc., UBS Warburg LLC, U.S. Bancorp, First Union Securities, Inc. and Piper Jaffray Inc. (the "underwriter defendants") underwrote the initial public offering ("IPO") at issue in this case and are also defendants to this action. See Plaintiff's Points Authorities at 2. The above-mentioned defendants will be referred to collectively as "defendants."
DJO planned an IPO of nine million shares of common stock to be sold for $17 each, for total proceeds of $153 million. Plaintiffs' Points Authorities at 1-2. The IPO was scheduled for November 15, 2001, and DJO issued a Registration Statement/Prospectus (the "Prospectus") beforehand. Id. Just before the IPO, defendants learned that sales for the current period had declined. Id. On November 14, 2001, the day before the scheduled IPO, the "underwriter sales teams" contacted some of the investors and told them of new (decreased) estimates for the quarter's earnings and 2001 revenues. Defendants' Points Authorities at 6. The IPO went forward as planned on November 15, 2001. Id. Plaintiffs allege that by going forward with the IPO, defendants violated federal securities laws because their Registration Statement/Prospectus was materially false. Id at 3. The Prospectus was false, they contend, because it omitted material and adverse information about the then-current quarter's decline in sales. Id. In their complaint, plaintiffs allege the following four causes of action: (1) violation of the SEA § 11 by defendant DJO, see 15 U.S.C. § 77k; (2) violation of the SEA § 11 by underwriter defendants, see 15 U.S.C. § 77k; (3) violation of the SEA § 12(a)(2) by all defendants, see 15 U.S.C. § 771(a)(2); and (4) violation of § 15 of the SEA by individual defendants, Cross, Talbot, and Orsatti, see 15 U.S.C. § 77o. See Complaint at ¶¶ 35-66.
Presently, named plaintiffs, Larky and LSERS, ask the court to certify a class of plaintiffs, containing two subclasses therein, pursuant to Fed.R.Civ.P. 23. See Plaintiffs' Points Authorities at 1. They also ask the court to appoint Larky and LSERS as class representatives. Plaintiffs' Motion at 1.
II. Legal Standard
All class actions in federal court must meet the prerequisites set forth in Fed.R.Civ.P. 23(a). Rule 23(a) states:
One or more members of a class may sue . . . as representative parties on behalf of all only if (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 representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.Fed.R.Civ.P. 23(a). Moreover, in order to certify a plaintiff class based on common questions of law or fact under Federal Rule of Civil Procedure 23(b)(3), plaintiffs must demonstrate "that the questions of law or fact common to the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3) In other words, a class action can be maintained if there is numerosity, commonality, typicality, adequacy, predominance, and superiority. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998).
Under Federal Rule of Civil Procedure 23, the trial court has broad discretion in determining whether a class should be certified. See Armstrong v. Davis, 275 F.3d 849, 872, n. 28 (9th Cir. 2001). However, plaintiff has the burden of establishing the prerequisites for class certification set forth in Rule 23. See Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citing Mantolete v. Boleer, 767 F.2d 1416, 1424 (9th Cir. 1985)).
III. Discussion
Plaintiffs propose a class, represented by Larky and LSERS, consisting of "all persons and entities who purchased the common stock of DJO in or traceable to its IPO." Plaintiffs' Points Authorities at 1. Within that class, plaintiffs propose a division into two subclasses. The first subclass consists of "all purchasers of DJO common stock in or traceable to the IPO who defendants did not contact on November 14, 2001 regarding information omitted from the Registration Statement/Prospectus and thus are not subject to the affirmative defense of knowledge (the `No Knowledge Subclass')." Plaintiffs' Points Authorities at 2. The second proposed subclass consists of "all purchasers of DJO common stock in or traceable to the EPO who defendants did contact on November 14, 2001 regarding information omitted from the Registration Statement/Prospectus and thus are potentially subject to defendants' affirmative defense of knowledge (the `Putative-Knowledge Subclass')."Plaintiffs' Points Authorities at 2.
A. Numerosity
Rule 23(a) requires that the class for certification be so numerous that joinder of all members individually is impracticable. Fed.R.Civ.P. 23(a)(1). In order to satisfy this requirement, plaintiffs need not show that joinder of all members is impossible. Rather, impracticability is enough. See Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913-14 (9th Cir. 1964). Moreover, plaintiffs argue, the exact size of the class need not be known if general knowledge and common sense indicate that the class is large. Plaintiffs' Points Authorities at 6 (citing Schwartz v. Harp, 108 F.R.D. 279 (C.D.Cal. 1985).
Plaintiffs allege that the class numbers in the tens of thousands. Defendants do not dispute that plaintiffs have established the requisite numerosity. Given the size of the proposed class and subclasses, the court agrees that plaintiffs have established the numerosity prerequisite.
B. Commonality
To establish the commonality prerequisite in accordance with Rule 23(a)(2), there must be "questions of law or fact common to the class,"Fed.R.Civ.P. 23(a)(2). Plaintiffs assert that they satisfy the commonality prerequisite because there are common questions to all plaintiffs in the class with respect to their sections 11, 12, and 15 causes of action. See Plaintiffs' Points Authorities at 8, 13 n. 11.
i. Section 11
With respect to their cause of action brought pursuant to section 11 of the SEA, plaintiffs contend that there are several questions of law and fact common to all plaintiffs in the class, including, among others, whether the Prospectus contained an untrue statement or omitted a fact that made the Prospectus misleading, and whether that fact was material.See Plaintiffs' Points Authorities at 8.
a. Putative-Knowledge Subclass
Defendants do not dispute that the above-mentioned common questions exist. Instead, they argue that members of the Putative-Knowledge Subclass have no claim because defendants contacted them before the IPO regarding the information omitted from the Prospectus. Defendants' Points Authorities at 14. Therefore, they reason, members of this subclass are subject to the affirmative defense of knowledge.Id. at 14-15. The Supreme Court, in Eisen v. Carlisle Jacquelin, quoting the 5th circuit, states: "`In determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met.'"Eisen v. Carlisle Jacquelin, 417 U.S. 156, 178 (1974) (quoting Miller v. Mackey Int'l, 452 F.2d 424, 427 (5th Cir. 1971)). As applied to the instant facts before the court, defendants' claimed defense does not diminish plaintiffs' establishment of the common questions set forth above in accordance with the requirements of Rule 23(a). The court, therefore, finds that the Putative-Knowledge Subclass satisfies the commonality requirement,
b. No-Knowledge Subclass
With respect to the No-Knowledge Subclass, defendants attempt to dispute the fact that the members of this class lacked the relevant information when they purchased their stock in the IPO. See Defendants' Points Authorities at 21. Again, this argument, like that discussed with respect to the Putative-Knowledge Subclass, goes to the likely success of plaintiffs' claims on the merits. More precisely, the argument goes to the merits of defendants' defense. Because the merits should not be considered at the class certification stage, see Eisen, 417 U.S. at 178, the court finds plaintiffs' statement of common questions sufficient to satisfy the commonality requirement for the No-Knowledge Subclass.
ii. Section 12
To establish liability under section 12 of the SEA, plaintiffs must establish that (1) defendants offered or sold securities through the use of interstate commerce; (2) defendants misrepresented or omitted material facts; and (3) plaintiffs had no knowledge of the untruth or omission.See 15 U.S.C. § 771. Plaintiffs argue that the first two elements present common questions to all members of the class.Plaintiffs' Points Authorities at 13 n. 11.
a. Putative-Knowledge Subclass
With respect to the Putative-knowledge subclass, defendants argue only that because plaintiffs bear the burden of proving absence of knowledge to succeed on the merits of a section 12 claim, individualized questions of knowledge predominate. Defendants' Points Authorities at 14. Arguments regarding the predominance of common issues are misplaced in determining the issue of commonality. The court will address the issue of predominance below. See infra at Part HI(E). At this juncture, the appropriate inquiry is merely whether plaintiffs have stated common questions of law and fact sufficient to establish commonality. Several circuits have held that even a single common issue is sufficient. See, e.g., In re American Medical Systems, Inc., 75 F.3d 1069, 1080 (6th Cir. 1996). Although it is unusual that plaintiffs make their entire argument in a footnote, they do state that two of the three elements of their section 12 claim present common questions of law or fact. See Plaintiffs' Points Authorities at 13 n. 11. Rule 23 requires no more of them, and the court, therefore, finds that this subclass satisfies the commonality requirement for a section 12 cause of action,
b. No-Knowledge Subclass
Defendants make the same argument with respect to the No-Knowledge Subclass as they made for this subclass's section 11 claim. See Defendants' Points Authorities at 21 (disputing the subclass members' lack of knowledge). This court applies the same analysis as it did above. See supra at Part HI(B)(i)(b). The court, therefore, concludes that this subclass satisfies the commonality requirement for its section 12 cause of action.
iii. Section 15
In addition to those elements required to establish a section 11 claim, section 15 of the SEA requires that plaintiffs prove that defendants are control persons within the meaning of section 15. See 15 U.S.C. § 77o. Thus, plaintiffs argue that all of the section 11 common questions they set forth are also common with respect to their section 15 claim. Moreover, they argue that this additional element (whether defendants are control persons) is also a common question. See Plaintiffs' Points Authorities at 8. Defendants make no new arguments with respect to plaintiffs' section 15 argument. The court finds that plaintiffs have satisfied their burden of establishing common questions of law and fact sufficient to establish commonality for the class.
C. Typicality
The "claims . . . of the class representative must be typical of the claims . . . of the class." Fed.R.Civ.P. 23(a)(3). The test for typicality is (1) whether other members have the same or similar injury as the representative; (2) whether the action is based on conduct not unique to the representative; and (3) 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).
i. Putative-Knowledge Subclass
According to plaintiffs, the claims of proposed representative for the Putative-Knowledge Subclass, LSERS, are typical of the claims of the class because the information disclosed to LSERS via its investment advisor was the same information disclosed to all subclass members. Plaintiffs' Reply at 6. Such a uniform disclosure, they conclude, makes the issue identical for every member of the subclass, thereby making LSERS's claim typical of the claims of the subclass. Id. Defendants make two arguments in response. First, defendants contend that if defendants made a disclosure to all members of the subclass, then none of the members has a claim. Defendants' Points Authorities at 16. Second they contend that LSERS's claim is atypical of the subclass because LSERS purchased its DJO stockafter the price fell. As a result, they argue, unique defenses apply to LSERS that do not apply to other subclass members. Id.
Defendants' first argument lacks merit because, as discussed above, a determination of plaintiffs' claims on the merits is inappropriate at the class certification stage. Eisen, 417 U.S. at 178. Moreover, this issue is not predetermined. Plaintiffs dispute that the disclosure made to members of the subclass was adequate to immunize defendants from liability. See Plaintiffs' Points Authorities at 12, Determination of this issue is appropriate at a later stage of litigation, but cannot be dispensed with at this point.
Defendants' second argument equally fails. While defendant correctly states that defenses unique to the representative may defeat typicality,see Hanon, 976 F.2d at 508, defendants do not articulate what "unique" defenses might apply to plaintiff LSERS that would not apply to other subclass members. See Defendants' Points Authorities at 16. Based on the information before the court, there is nothing to indicate that LSERS's purchase of stock after the price fell distinguishes it from other Putative-Knowledge Subclass members who, by definition, also had information about DJO's decline in sales before making their purchases. The court concludes that the Putative-Knowledge Subclass satisfies the typicality requirement.
ii. No-Knowledge Subclass
With respect to the No-Knowledge Subclass, plaintiffs contend that the claims of proposed representative Larky are typical of the claims of the subclass because Larky was unaware of the information omitted from the Prospectus before he acquired stock and was exposed to the same rumors afterward. Plaintiffs' Reply at 9. Defendants, however, claim that Larky is atypical because he is subject to the unique defense of knowledge because, despite his purchase of DJO stock on November 14, 2001, he could have cancelled his purchase transaction up until November 20, 2001, at which point rumors of the sales decline had publicly swirled. Defendants' Points Authorities at 22-23. It is not clear to the court that the other members of the subclass did not have the same opportunity that Larky had to cancel their transactions until the transaction finally "settled" a few days after initially acquiring the stock. Further, such time period for finalization of the transaction appears irrelevant. The SEA focuses on the adequacy of the Prospectus at the time of acquisition. 15 U.S.C. § 77k. The Prospectus did not change between November 14 and November 20. Therefore, Larky and all members of the subclass were exposed to the same information (or lack thereof) in the Prospectus and the same rumors whether they acquired their stock on November 14 or November 20. Thus, Larky is not subject to a different or unique defense that the other members of the subclass are not, and the court does not find defendants' argument persuasive.
Defendants also argue that Larky is atypical because he still holds his stock, which he purchased for $17 per share and which, as of October 17, was worth $17 per share. Id. at 23. Thus, they contend, he has no damages and is unsuitable as a representative. Id. The Ninth Circuit states that a determination of damages "is invariably an individual question and does not defeat class action treatment."Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975). Accordingly, the court rejects this argument.
Although plaintiffs' argument is thin on its application of the facts to the law, the court is satisfied that it has sufficiently stated the requisite typicality. First, proposed representative Larky's claim arises from the same or similar injury as other members of the subclass in that he did not know of the information falsified in or omitted from the Prospectus when he acquired his DJO stock. See Plaintiffs' Points Authorities at 14. Second, the conduct on which the action is based, the falsification or omission of information from the Prospectus, is not unique to Larky. Id. Third, all members of the subclass allegedly were injured by the same falsification or omission.Id. The court finds that the No-Knowledge Subclass satisfies the typicality requirement.
D. Adequacy of Representation
Rule 23(a)(4) requires that class representatives "fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23 (a)(4). This prerequisite is satisfied if the named representatives (1) appear able to prosecute the action vigorously through qualified counsel, and (2) have no antagonistic or conflicting interests with the unnamed members of the class. Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978). Plaintiffs contend that both LSERS and Larky are represented by qualified counsel because their counsel are members of a reputable firm with significant expertise in the field of securities litigation. See Plaintiffs' Points Authorities at 16. Moreover, LSERS and Larky, "like the members of their proposed subclasses seek to prove statutory violations of the [SEA] giving rise to damages," and, as such, do not have conflicting interests with their respective subclass members.Id.
i. Putative-Knowledge Subclass
Defendants dispute that LSERS is an adequate representative for this subclass because LSERS is a "professional plaintiff within the meaning of 15 U.S.C. § 77z-1(a)(3)(b)(vi), and because LSERS is not adequately interested in the action. See Defendants' Points Authorities at 17, 19. The "professional plaintiff provision precludes persons (or institutions) from serving as a lead plaintiff in more than five securities class actions in a three year period. 15 U.S.C. § 77z-1(a)(3)(b)(vi). This provision, however, applies only to lead plaintiffs, not to class representatives, See id. Moreover, defendants point to only five actions in which LSERS is or has been the lead plaintiff (including this action) in the last three years.Defendants' Points Authorities at 17. Thus, the professional plaintiff provision does not render LSERS an inadequate class representative.
As to defendants second argument, that LSERS is not adequately interested in this action, the court finds it unpersuasive. In support of their argument, defendants rely only on Berger v. v. Compaq Computer Corp., a Fifth Circuit case that interprets the Private Securities Litigation Reform Act ("PSLRA") as implementing a heightened standard for judging the adequacy of a class representative. 279 F.3d 313 (5th Cir. 2002). Even the Fifth Circuit, however, qualified its heightened standard, stating, "[w]e have not . . . created an additional requirement under rule 23(a)(4)." Berger, 279 F.3d at 313. Further, plaintiffs properly point out that the Ninth Circuit has explicitly rejected any interpretation of the PSLRA requiring more than the explicit requirements set forth in Rule 23(a)(4) to establish adequacy. Plaintiffs' Reply at 7; In re Cavanaugh, 306 F.3d 726, 737 (9th Cir. 2002) ("[W]e do not believe . . . [the PSLRA], in the words of the Fifth Circuit, "raises the standard adequacy threshold."). The PSLRA was intended to encourage plaintiff participation and discourage lawyer-driven lawsuits, but it does not mandate that plaintiffs have at-the-ready the details of each case in which they are involved. See In re Cavanaugh 306 F.3d at 737 ("The Reform Act was intended to `protect[ ] investors who join class actions against lawyer-driven lawsuits by . . . increas[ing] the likelihood that parties . . . whose interests are more strongly aligned with the class . . . will participate in the litigation and exercise control over the selection and actions of plaintiff's counsel.'") (quoting H.R. Conf. Rep. No. 104-369 (1995)). Plaintiffs hired counsel to be responsible for the details of this litigation, and the reliance on such counsel only demonstrates that plaintiffs satisfy the first prong of hiring "qualified counsel."
Finally, plaintiffs have adequately demonstrated that LSERS has no interests that conflict with other members of the subclass. Accordingly, the court finds that this subclass has satisfied the requirement of adequacy.
ii. No-Knowledge Subclass
Defendants dispute Larky's adequacy as representative of the No-Knowledge Subclass based on his lack of resources to finance the actual or potential costs of this litigation. Defendants' Points Authorities at 23. Thus, defendants apparently dispute that Larky satisfies the first prong of adequacy, his ability to "vigorously pursue" the litigation. The authority defendants cite, however, does not support their position. Although In re THO Inc. Sec. Litig does cite to cases in which courts are concerned with plaintiffs financial resources, the court goes on to point out that no such concern exists in the instant case because plaintiffs lawyers have agreed to advance costs.See In re THO Inc. Sec. Litig, 2002 U.S. Dist. LEXIS 7753, *27-28. In fact, this is exactly the argument plaintiffs rely on.See Plaintiffs' Reply at 10 ("[C]ounsel has appropriately agreed to bear any costs assessed if this lawsuit is unsuccessful."). The concern regarding financial resources is that a representative might be forced to settle on terms unfavorable to the class due to a lack of resources. See McGowan v. Faulkner Concrete Pipe Co., 659 F.2d 554, 559-60 (5th Cir. 1981). Because plaintiffs have quieted any doubts this court might have regarding the financial resources to fund this litigation, the court finds that Larky is not likely to be forced into a position antagonistic to the other subclass members. Therefore, the court finds him an adequate representative of the No-Knowledge Subclass.
E. Predominance
Rule 23(b)(3) requires that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members." Fed.R.Civ.P. 23(b)(3). As discussed above in Part IH(B), plaintiffs have satisfied the court that common questions of law or fact exist with respect to the section 11, 12, and 15 causes of action of each subclass. Thus, the remaining issue is whether those common questions predominate over individual questions.
Defendants' contention is that knowledge of the information falsified or omitted from the Prospectus, either as a defense to plaintiffs' section 11 claim or as an element of the section 12 claim, will predominate over the common issues in the case. Defendants' Points Authorities at 14. Plaintiffs dispute this contention, arguing that individualized determinations of knowledge will not predominate over common questions of law or fact. Plaintiffs' Points Authorities at 8-9.
i. Putative-Knowledge Subclass
Defendant relies on Zimmerman v. Bell, a Fourth Circuit opinion, for the proposition that individualized determinations regarding knowledge will predominate over common questions. See Defendants" Points Authorities at 14; Zimmerman v. Bell, 800 F.2d 386, 390. In Zimmerman, the court reasoned that "[b]ecause the extent of knowledge of the omitted facts . . . will vary from shareholder to shareholder," individual issues predominate. Id. The same reasoning, however, does not apply to certification of the Putative-Knowledge Subclass because, by definition and admission, this subclass received a uniform disclosure of information. See Plaintiffs' Points Authorities at 2, 9. Based on plaintiffs' admitted uniform exposure to this information, no individualized knowledge determinations are necessary. Any inquiry into knowledge will be common to the subclass. Therefore, plaintiffs have demonstrated that common questions will predominate over individualized issues, and the court finds that the Putative-Knowledge Subclass satisfies the predominance requirement.
ii. No-Knowledge Subclass
Here, defendants' argument that individual determinations of knowledge will be required is likely accurate. With respect to plaintiffs' section 11 cause of action, defendants propose to prove that each member of the subclass did in fact have knowledge of the information falsified or omitted from the Prospectus before purchasing their shares. Defendants' Points Authorities at 13. Similarly, with respect to plaintiffs' section 12 cause of action, plaintiffs will bear the burden of proving that each sub-class member lacked the relevant information. Because there was no uniform disclosure of information to this subclass, an inquiry into knowledge will necessarily be individualized. Moreover, because defendants proposed knowledge as a defense to section 11 liability and because plaintiffs must prove lack of knowledge as an element of their section 12 claim, knowledge is likely to be a significant issue. The question that remains, however, is whether the individualized determinations of knowledge will predominate over the common questions set forth by plaintiffs. See Plaintiffs' Points Authorities at 8.
There is no binding Ninth Circuit authority addressing this discrete issue. Instead, defendants again rely on Zimmerman, a Fourth Circuit case. The case is now relevant with respect to the No-Knowledge Subclass, because, like in Zimmerman, No-Knowledge Subclass members could potentially have varying degrees of knowledge. For this reason the Fourth Circuit refused to certify the class. See Zimmerman, 800 F.2d at 390. However, plaintiffs rely on directly contradictory authority in which the court found that despite the potential need for individualized knowledge determinations in plaintiffs section 11 and 12 claims, common questions still predominate. See In re First Republic Bank Sec. Litig., 1989 U.S. Dist. LEXIS 11139, at *22 (N.D.Tex. 1991).
This court finds the authority relied upon by plaintiffs more persuasive than that of defendants. First, in Zimmerman, a significant problem with the class to be certified was that the class was overly broad. See 800 F.2d at 388-89. Plaintiffs have remedied this problem by dividing the class into two subclasses, thereby reducing the need for individualized determinations on the issue of knowledge. Second, the weight of Zimmerman is counterbalanced by the directly contradictory case, In re First Republic Bank Sec. Litig., in which the court reached the directly opposite conclusion.See 1989 U.S. District LEXIS 11139 at *22-*23. Third, plaintiffs have set forth six common questions of fact or law and defendants indicate only one question that is individualized. See Plaintiffs' Points Authorities at 8; Defendants' Points Authorities at 13. Fourth, the proof regarding the individualized issue would rely as much on information common to all subclass members (e.g. how widespread was the public dissemination of the information) as it would on individual information (e.g. to what sources of information was each subclass member exposed). Fifth, the trial court has broad discretion in determining whether a class should be certified. See Armstrong, 275 F.3d at 872 n. 28. Finally, the Ninth Circuit states that the issue underlying class certification is "whether a defendant's course of conduct is in its broad outlines actionable, [not whether there are] slight differences in class members' positions." Blackie, 524 F.2d at 92, The court, therefore, finds that the slight differences among the subclass members does not defeat certification in this case, and the No-Knowledge Subclass has established that common questions of law or fact predominate over the individual issue of knowledge.
F. Superiority
Plaintiffs must satisfy a final requirement set forth in Rule 23(b). "Class resolution must be `superior to other available methods for the fair and efficient adjudication of the controversy.'" Hanlon v, Chrysler Corp., 150 F.3d 1011, 1023 (9th Cir. 1998) (quoting Fed.R.Civ.P. 23(b)(3). The inquiry for this prerequisite is whether "the objectives of the particular class action procedure will be achieved in the particular case . . . [and] involves a comparative evaluation of alternative mechanisms of dispute resolution. Id. InHanlon, the court first considered what alternatives existed.Id. Next it weighed the potential burden the alternative would impose on the judiciary and on potential plaintiffs. Id.
Applying this analysis to the instant case, like in Hanlon, individual actions would be the alternative mechanism available to plaintiffs. Next, even if efficacious, tens of thousands of individual claims would certainly unnecessarily burden the judiciary. See Plaintiffs Points Authorities at 6 (estimating the size of the class). Third, litigation costs might dwarf potential recovery for many class members, thereby placing a significant burden on plaintiffs. For these reasons, a class action is clearly the preferred mechanism for adjudicating these cases. The court finds that plaintiffs satisfy the superiority requirement.
IV. Conclusion
For the foregoing reasons the court certifies the class as follows:
• The class consists of all persons and entities who purchased the common stock of DJO in or traceable to its IPO.
• Within that class there are two subclasses:
• The first subclass, the No-Knowledge Subclass, consists of all purchasers of DJO common stock in or traceable to the IPO who defendants did not contact on November 14, 2001 regarding information omitted from the Prospectus.
• The second subclass, the Putative-Knowledge Subclass, consists of all purchasers of DJO common stock in or traceable to the IPO who defendants did contact on November 14, 2001 regarding information omitted from the Prospectus.
Further, the court appoints LSERS representative of the Putative-Knowledge Subclass and Larky representative of the No-Knowledge Subclass.
IT IS SO ORDERED.