1

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

LEONARD HOWARD, individually and on 

behalf of all others situated,

Plaintiff,

v.

LIQUIDITY SERVICES INC., WILLIAM P. 

ANGRICK III, and JAMES M. RALLO,

Defendants.

Civil Action No. 14-1183 (BAH)

Chief Judge Beryl A. Howell

MEMORANDUM OPINION

In this putative shareholder class action, the plaintiffs allege that Liquidity Services, Inc. 

(“LSI”) publicly touted its retail division as a driver of the company’s overall growth despite 

internal knowledge that the retail division was troubled and suffering from deteriorating margins 

due to heightened competition. The plaintiffs assert claims under section 10(b) and of the 

Securities Exchange Act of 1934 (the “Exchange Act”), and the Security Exchange 

Commission’s Rule 10b-5, promulgated thereunder, see 17 C.F.R. § 240.10b–5, as well as 

section 20(a) of the Exchange Act, alleging that the defendants disseminated “materially false 

and misleading information” and omitted “other material information that artificially inflated 

Liquidity’s stock price.” Amended Compl. (“Am. Compl.”) ¶ 1, ECF No. 35. When the truth 

emerged, LSI’s stock price plummeted, resulting in financial losses to investors who purchased 

the stock at inflated prices. 

The co-lead plaintiffs, Caisse de dépôt et placement du Québec (“Caisse”) and the 

Newport News Employees’ Retirement Fund (“NNERF”), now seek to certify a class consisting 

of purchasers of common stock of LSI from February 1, 2012, to May 7, 2014, (the “class 
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period”) against the defendants: LSI; the company’s Chief Executive Officer, William Angrick;

and the company’s Chief Financial Officer, James Rallo.1 Presently before the Court are the 

plaintiffs’ motion for class certification and appointment of class representatives and class 

counsel, and the defendants’ related motion for summary judgment on the issue of the co-lead 

plaintiffs’ reliance on alleged misrepresentations and omissions. For the reasons set forth below, 

the plaintiffs’ motion for class certification and appointment of class representatives and class 

counsel is granted. The defendants’ motion for partial summary judgment is denied.

I. BACKGROUND

The plaintiffs’ allegations are detailed in the Court’s prior opinion in this action. See 

Howard v. Liquidity Servs.,Inc., 177 F. Supp. 3d 289, 295–303 (D.D.C. 2016). The factual 

background and procedural history relevant to understanding the pending motion for class 

certification and motion for summary judgment are set out below.

A. Factual Background2

The factual background proceeds in four parts. Following an overview of LSI’s business 

model, and LSI’s Department of Defense business, the alleged misrepresentations concerning the 

retail division are set out. This section concludes with an overview of the plaintiffs’ investment 

advisories, since the defendants’ opposition to class certification focuses in large part on 

purported distinctions between these advisories and other putative class members.

 1 The Proposed Class is defined in the plaintiffs’ motion for class certification as “all persons and entities 

who purchased or otherwise acquired the publicly traded common stock of Liquidity Services, Inc. (‘Liquidity’ or 

the ‘Company’) during the period of February 1, 2012 through May 7, 2014, inclusive (the ‘Class Period’), and who 

were damaged thereby (the ‘Class’).” Pls.’ Mem. Supp. Mot. Class Cert. (“Pls.’ Mem. Supp. Class Cert.”) at 1, ECF 

No. 64.

2 Many of the relevant filings and exhibits thereto were filed under sealand are quoted in this Memorandum 

Opinion. The documents are unsealed to the extent of the quoted material since the Court finds such unsealing 

necessary to explain the reasoning in ruling on the pending motions.
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1. Liquidity Services, Inc.

LSI, founded in 1999, provides online auction marketplaces for “surplus and salvage 

assets”—also known as a “reverse supply chain”—for which service the company retains a 

percentage of the sale proceeds. Defs.’ Mot. Summ. J., Ex. 1, LSI Form 10-K for Fiscal Year 

Ended Sept. 30, 2014 at 1, ECF No. 83-2. LSI is comprised of three business divisions: (1) the 

retail division, sometimes referred to as the commercial division, which sells consumer goods; 

(2) the capital assets division, which sells large items including material-handling equipment, 

rolling stock such as trucks and military tanks, heavy machinery, and scrap metal; and (3) the

public sector division, which sells surplus and salvage assets on behalf of local and state 

governments. See Defs.’ Opp’n Pls.’ Mot. Class Cert., Ex. 42, LSI Corporate Structure Chart, 

ECF No. 81-43; Defs.’ Mem. Supp. Mot. Protective Order at 3, ECF No. 65. The capital assets 

division is further divided by type of seller into the “commercial capital assets division” and 

Department of Defense (“DoD”) business. See LSI Corporate Structure Chart; Defs.’ Mem. 

Supp. Mot. Protective Order at 3. The commercial capital assets division consists of three online 

marketplaces, each with a particular focus: Truck Center, Network International, and 

GoIndustry. Defs.’ Mem. Supp. Mot. Protective Order at 3; Disc. Hr’g Tr. dated Oct. 14, 2016 

(“Disc. Hr’g Tr.”) at 5:2–8, ECF No. 72. Network International enables energy sector clients to 

sell equipment in the oil, gas, and petrochemical industries. GoIndustry provides surplus asset 

management, auction, and valuation services largely to Asian and European clients in the 

manufacturing sector. Truck Center sells trucks and trailers through online auctions. See Defs.’ 

Mem. Supp. Mot. Dismiss at 7, ECF No. 40; Am Compl. ¶ 49.

The Court previously dismissed claims based on alleged misrepresentations regarding 

“inorganic growth” in the commercial capital assets division, i.e., growth by the acquisition of 
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Network International and GoIndustry. Howard, 177 F. Supp. 3d at 317; Disc. Hr’g Tr. at 9:1–3. 

The Court has also clarified that, based on the plaintiffs’ evidence, the allegations of material 

misrepresentations about “organic growth”—growth through sustained margins and 

improvements in sales—concern only the retail division, and has limited discovery accordingly. 

Disc. Hr’g Tr. at 9:5–16, 14:18–20. Consequently, of LSI’s three business divisions, the capital 

assets and the public sector divisions are not at issue. Id. at 11:5–8, 8:10–18, 10:15–18. Thus, 

the only remaining allegations concern misrepresentations and omissions regarding organic 

growth in the retail division.

2. Department of Defense Contracts

Prior to and during the class period, a large portion of LSI’s revenue came from exclusive 

rights to sell DoD surplus and scrap property. LSI had two contracts with DoD: a non-rolling 

surplus goods contract, which granted LSI the exclusive right to sell surplus property turned in to 

the Defense Logistics Agency (“DLA”), and an exclusive scrap material contract, which granted 

LSI the right to sell substantially all DoD scrap property turned into the DLA, such as metals, 

alloys, and building materials. Defs.’ Mot. Dismiss, Ex. 1, LSI Form 10-K for Fiscal Year

Ended Sept. 30, 2012 at 6, ECF No. 40-2 (“The Surplus Contract accounted for 29.9%, 30.3%, 

and 27.2% of [LSI] revenue . . . for the fiscal years ended September 30, 2010, 2011 and 2012, 

respectively. . . . the Scrap Contract . . . accounted for 25.0%, 25.5%, and 16.1% of [LSI]

revenue . . . for the fiscal years 2010, 2011 and 2012, respectively.”). LSI entered into the 

surplus contract in 2001 and renewed the contract in 2008; LSI entered into the scrap goods 

contract in 2005. Id. In late November of 2012, LSI acknowledged: if “we are not awarded new 

DoD contracts when our current contracts expire, [if] any of our DoD contracts are terminated[,] 
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or [if] the supply of assets under the contracts is significantly decreased, we would experience a 

significant decrease in revenue and have difficulty generating income.” Id. at 8.

After the scrap goods contract expired in June 2012, DoD extended the contract for two 

additional one-year terms, through June 2014. Id. at 6. The surplus contract expired in February 

2012, at which time DoD exercised two one-year renewal options, extending the contract until

February 2014. Id. The plaintiffs allege that as the 2014 contract expiration dates approached, 

“[f]ear was mounting . . . within all levels of the Company” that the contracts with DoD, which 

were “subject to a competitive bidding process,” would not “be renewed on the same favorable 

terms, or even renewed at all.” Am. Compl. ¶ 3. 

Around this time, LSI “sought to expand into the larger and more lucrative retail and 

commercial markets” because “it could not count on maintaining an exclusive relationship with 

the federal government indefinitely.” Pls.’ Mem. Supp. Mot. for Class Cert. (“Pls.’ Mem. Supp. 

Class Cert.”) at 3, ECF No. 64. This expansion entailed increased efforts and acquisitions in the 

retail reverse supply chain market and the commercial capital assets market, including expanding 

its distribution center in Dallas, Texas, which opened in 2005 to sell excess goods for major 

commercial retailers. Specifically, LSI aimed to have deeper client engagement with existing 

clients, and to expand its geographic reach and client base. See id.; see also Am. Compl. ¶¶ 8,

53. In October 2011, LSI acquired Jacob’s Trading, which sells bulk returns from well-known 

retailers. LSI Form 10-K for Fiscal Year Ended Sept. 30, 2012 at 3, 8.

In April 2014, LSI lost the DoD surplus contract to a competitor, at the same time LSI’s 

DoD scrap contract was renewed on new and less favorable terms.
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3. Alleged Misrepresentations and Omissions

Based in part on information supplied by twenty confidential witnesses (“CWs”), 

including a vice-president, directors, and other senior managers of LSI components, the plaintiffs 

allege that, from February 1, 2012, to May 7, 2014, the defendants constructed a story of 

sustained growth and expansion of LSI’s business outside of the DoD contracts. See Am. 

Compl. ¶¶ 1–20. In particular, the plaintiffs contend that the defendants issued fraudulent and 

misleading public statements on fifteen separate days over nine consecutive fiscal quarters

regarding the growth of its non-DoD business—particularly emphasizing the “two pillars of 

growth: (1) ‘organic’ growth through sustained margins and improvements in client 

penetration and services; and (2) ‘inorganic growth through Liquidity’s acquisition strategy.” 

Am. Compl. ¶ 5 (emphasis in original). The plaintiffs allege that misrepresentations artificially 

inflated stock prices throughout the class period, Am. Compl. ¶ 60, and that LSI’s CEO, Mr. 

Angrick, exploited this “wave of artificial stock inflation” with “strategically timed stock sales 

during the Class Period” that “paid him $68.2 million,” id. ¶ 18 (emphasis in original).

As noted above, only those allegations concerning misrepresentations about the organic 

growth of LSI’s retail division remain. Howard, 177 F. Supp. 3d at 317; Disc. Hr’g Tr. at 14:18–

20. On two of the fifteen days originally at issue, the defendants made statements concerning 

only inorganic growth (in particular about the acquisition of GoIndustry), and no statements 

concerning organic growth in the retail division. Thus, the statements issued on those two days 

are no longer relevant because the plaintiffs’ claims concerning inorganic growth through 

acquisition have been dismissed.3 

 3 The plaintiffs claim that defendants made fraudulent or misleading statements about the acquisition of 

GoIndustry on May 9, 2013, and July 5, 2013. Am. Compl. ¶¶ 122–24, 126–27. Regarding the statements issued on 

August 7, 2013, the plaintiffs’ allegations largely concern the defendants’ discussion of inorganic growth through 

the acquisition of GoIndustry, but the plaintiffs also allege that the defendants made misleading statements about 
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The plaintiffs quote extensively from public statements made in press releases, earnings 

calls, and filings with the U.S. Securities and Exchange Commission (“SEC”) during each of the 

nine fiscal quarters that fall in the class period. The plaintiffs allege that the defendants’ public 

statements about LSI’s financial performance through the February 7, 2014 release were 

materially misleading and led investors to believe that the company was growing its retail 

division business and maintaining margins. According to the plaintiffs, contrary to LSI’s public 

statements, the retail division was suffering from deteriorating margins due to heightened 

competition. Am. Compl. ¶¶ 65, 67–73. As detailed in the Court’s previous opinion, the 

plaintiffs have made no allegation that the released financial results were inaccurate. Howard, 

177 F. Supp. 3d at 306–07. Rather, the plaintiffs allege that the defendants misrepresented the 

underlying health of the retail division by making statements attributing “strong results” for the 

fiscal quarters to “record volumes in both [LSI’s] commercial capital assets and retail supply 

chain verticals.” Am. Compl. ¶ 106; Defs.’ Mot. Dismiss, Ex. 1, LSI Earnings Conference Call 

Transcript (dated Feb. 1, 2012) at 3, ECF No. 48-2 (emphasis in original).

Indeed, LSI and its executives made many statements touting the strength of the retail 

division. Beginning on February 1, 2012, and throughout the class period, LSI maintained that 

“[r]ecord GMV [gross merchandise volume 4

] results were primarily driven by growth in the 

volume of goods sold in [LSI’s] retail supply chain and municipal government marketplaces 

by existing and new clients.” Am. Compl. ¶ 111 (quoting a May 3, 2012 press release) 

(emphasis in original). In the third quarter of 2012, LSI continued to report that the company’s 

 

organic growth within LSI generally. Am. Compl. ¶¶ 208–11. The remaining dates at issue are February 1, 2012; 

May 3, 2012; July 31, 2012; November 29, 2012; December 12, 2012; January 16, 2013; January 31, 2013; March 

5, 2013; May 2, 2013; August 6, 2013; August 7, 2013; November 21, 2013; and February 7, 2014. See Am. 

Compl. ¶¶ 46–111. 4 “GMV” is “a metric often provided by online sellers and which Liquidity defines as a measurement of the 

total sales value of all merchandise sold through [its]marketplaces during a given period.” Am. Compl. ¶ 38 

(internal quotation marks omitted).
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“strong results for the quarter were driven by record volumes in both our retail supply chain 

group, which did not slow down from its seasonal high in the second quarter as we continued 

to add new clients and further penetrate existing clients, and continued growth in our public 

sector verticals,” id. ¶ 135 (emphasis in the original). During the earnings call discussing results 

for the fourth quarter of 2012, Mr. Angrick repeated that LSI “enjoyed broad-based organic 

growth” due to market share expansion within the commercial, non-DoD, market. Id. ¶ 146. 

LSI also publicly claimed that competition was not seriously affecting the health of its retail 

division. On December 12, 2012, during LSI’s Investor Day presentation, Mr. Rallo stated that 

“when you look to the competition, there is a lot of it, but it’s not very formidable.” Id. ¶ 165 

(emphasis in original); see also id. ¶ 185 (citing Mr. Rallo’s statement during the March 5, 2013 

earnings call discussing second quarter 2013 financial results).

LSI continued to proclaim that its retail division was a source of growth throughout 2013. 

On January 31, 2013, the defendants released first quarter results for fiscal year 2013. Id. ¶ 172. 

During the earnings call with analysts, Mr. Rallo lauded the “retail business” for “perform[ing] 

extremely well during the first quarter.” Id. ¶ 179. On May 2, 2013, LSI released the second 

quarter 2013 financial results. Id. ¶ 187. During the earnings call, Mr. Rallo again attributed the 

increase in GMV to the “nice growth in the retail side of our business, driving efficiencies 

there.” Id. ¶ 192 (emphasis in original). While LSI’s third quarter earnings fell below previous 

guidance, fourth quarter earnings met or exceeded guidance, which Mr. Angrick attributed to 

“strong sequential growth in our retail supply chain marketplaces driven primarily from new 

consumer electronic programs with existing clients.” Id. ¶ 220 (emphasis in original).

The defendants’ laudatory statements about the retail division persisted into early 2014. 

On February 7, 2014, the defendants released the first quarter financial results for fiscal year 
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2014 and Mr. Angrick stated that the “better than expected financial results” were “driven by 

strong topline performance in our retail supply chain and municipal government businesses,” 

and that the “retail supply chain business saw sequential growth in GMV.” Id. ¶¶ 226–27 

(emphasis in original). 

On May 8, 2014, the defendants announced financial results for the second quarter of 

fiscal year 2014, which fell below guidance. Id. ¶ 233. GMV had decreased by 12 percent, 

while adjusted EBITDA (earnings before interest, tax, depreciation and amortization) and 

adjusted diluted EPS (earnings per share) suffered 43 percent and 46 percent declines, 

respectively, as compared to the same period in the previous year. Id. In the statement 

accompanying LSI’s Form 8-K, filed with the SEC, Mr. Angrick attributed these results to

several factors, including the loss of the DoD surplus contract; the restructured, less profitable 

DoD scrap contract; “mix changes in our . . . retail businesses and delayed capital asset projects 

in both the U.S. and Europe;” and “unusual softness in our energy vertical due to an industry 

wide decline in line pipe and related equipment.” Id. ¶ 234; Merrill Lynch Analyst Report (dated 

Apr. 3, 2014) at 2–3. On this news, LSI’s stock price plummeted nearly 30 percent. Id. ¶ 239. 

The plaintiffs allege that the defendants’ public statements about the financial performance of 

LSI through the February 7, 2014 release were materially misleading and caused investors to 

believe that the company was growing its non-DoD business. Contrary to LSI’s public 

statements, the plaintiffs allege that the LSI’s components that were publicly touted as driving 

the organic and inorganic growth were internally known as drags on performance. Am. Compl. 

¶¶ 5–10.

The plaintiffs further assert that, “[b]etween June 20, 2012, and May 7, 2014, selective 

information was revealed about Liquidity’s financial performance and outlook, which had a 
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material adverse impact upon Liquidity’s stock price without revealing the full extent of the 

known risks and challenges facing the Company.” Id. ¶ 283. According to the plaintiffs, 

“[a]nalysts following the company downplayed the significance of these partial disclosures, 

accepting Defendants’ efforts to mitigate and blunt the truth.” Id. These partial disclosures 

include, inter alia, (1) a June 22, 2012 statement by Mr. Rallo to investors attending a conference 

sponsored by Stifel Nicolaus that “margins may not continue to grow as in the past,” id. ¶ 283(a); 

(2) a July 1, 2012 report from a short-selling research firm, Off Wall Street Consulting Group, 

indicating, among other things, that non-DoD business is “unlikely to drive the earnings growth 

that investors expect,” and that “competition is increasing,” id. ¶ 283(b); and (3) a September 12, 

2012 “reduction in price target by Stifel Nicolaus, citing a decline in GMV in August compared 

to July and sales that were lower than forecast[ed],” id. ¶ 283(c). The plaintiffs claim that, 

“[w]hile all of these partial disclosures revealed pieces of information that cast some doubt on 

Defendants’ bullish claims that Liquidity would continue to grow and achieve guided profit 

levels, none of them provided investors with anything close to the full picture of the known risks 

and challenges facing the Company and its ability to achieve the guidance levels Defendants 

provided the market.” Id. ¶ 284.

4. The Plaintiffs’ Investment Advisors

Co-lead plaintiffs Caisse, an institutional investor headquartered in Montreal, Canada, id.

¶ 25, and NNERF, a public pension fund established and administered by the city of Newport 

News, Virginia, id. ¶ 26, invested in LSI through “professional investment managers to whom 

they extended discretionary trading authority,” Pls.’ Omnibus Reply Mem. Supp. Mot. Class 

Cert. & Opp’n Defs.’ Mot. Summ. J. (“Pls.’ Omnibus Reply”) at 2 n.5, ECF No. 89. Caisse 

invested in LSI common stock through Van Berkom and Associates, Inc. (“Van Berkom”). Id.; 
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see also Pls.’ SMF Opp’n Defs.’ Mot. Summ. J. (“Pls.’ SMF”) at 6–10, ECF No. 89-1. Mathieu 

Sirois, a portfolio manager at Van Berkom, made investment decisions on behalf of Caisse 

concerning LSI, and served as Van Berkom’s Rule 30(b)(6) designee. Defs.’ Opp’n Pls.’ Mot. 

Class Cert. at vi; see also generally Defs.’ Opp’n Pls.’ Mot. Class Cert., Ex. 1, Deposition of 

Mathieu Sirois (“Sirois Dep.”), ECF No. 81-2. The NNERF used two investment managers who 

invested in LSI common stock: Pier Capital, LLC (“Pier Capital”) and NewSouth Capital 

Management, Inc. (“NewSouth”). Pls.’ Omnibus Reply at 2 n.5; see also Pls.’ SMF at 54, 71. 

Alexander Yakirevich, a portfolio manager at Pier Capital, made investment decisions on behalf 

of NNERF concerning LSI, and served as Pier Capital’s Rule 30(b)(6) designee. Defs.’ Opp’n 

Pls.’ Mot. Class Cert. at vi, ECF No. 81; see also generally Defs.’ Mot. Summ. J., Ex. 17, 

Deposition of Alexander Yakirevich (“Yakirevich Dep.”), ECF No. 83-19. Alexander McLean, 

a portfolio manager at New South, made investment decisions on behalf of NNERF concerning 

LSI, and served as New South’s Rule 30(b)(6) designee. See generally Defs.’ Opp’n Pls.’ Mot. 

Class Cert., Ex. 3, Deposition of Alexander McLean (“McLean Dep.”), ECF. No. 81-4.

B. Procedural History

The original lead plaintiff, Leonard Howard, an individual investor, filed this putative 

class action against LSI and Messrs. Angrick and Rallo on July 14, 2014. Compl. at 1, ECF No. 

1. Several other shareholders entered appearances to move for appointment as lead plaintiff. See 

Mots. Appoint Counsel & Appointment as Lead Pl., ECF. Nos. 25, 26, 29, 31. On October 14, 

2014, institutional investors Caisse and NNERF were appointed as co-lead plaintiffs pursuant to

the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4(a)(3), given

that these two institutional investors had “‘the largest financial interest in the relief sought by the 

class’” and “(b) otherwise satisf[ied] the requirements of Rule 23 of the Federal Rules of Civil 
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Procedure, which, as set forth in the PSLRA, establishes the presumption that the Institutional 

Investors are the plaintiffs ‘most capable of adequately representing the interests of class 

members.’” Order Appointing Lead Pl. & Approving Selection of Counsel at 1, ECF No. 32. 

The co-lead plaintiffs filed an amended complaint on December 15, 2014. See generally Am. 

Compl.

Thereafter, the defendants filed a motion to dismiss pursuant to Federal Rules of Civil 

Procedure 12(b)(6) and 9(b), and the PSLRA. See generally Defs.’ Mot. Dismiss. The Court 

dismissed part of the plaintiffs’ Count I, which alleged violations of Section 10(b) of the 

Securities Exchange Act of 1934 based on misrepresentations regarding the acquisitions of 

Network International and GoIndustry in the commercial capital assets division. Howard, 177 F. 

Supp. 3d at 311. The Court denied the motion to dismiss the portion of Count I based on

“alleged misrepresentations regarding the financial performance of Liquidity Services, Inc.’s 

retail and commercial capital assets divisions.” Id. Further, the Court denied the defendants’ 

motion to dismiss plaintiffs’ Count II, which alleges that Messrs. Angrick and Rallo are jointly 

and severally liable for LSI’s alleged 10(b) violation. Id. at 316–17. As explained above, during 

a subsequent hearing addressing a discovery dispute, the Court clarified that the allegations of 

material misrepresentations about “organic growth” through sustained margins concern only the 

retail division, based on the evidence proffered by the plaintiffs thus far. Disc. Hr’g Tr. at 

14:18–20.5 Following the discovery hearing, the defendants moved for reconsideration of the 

 5 The parties’ discovery dispute concerned whether the defendants had to produce discovery concerning 

LSI’s business divisions other than the retail division. The plaintiffs had filed a motion to compel such discovery, 

see generally Pls.’ Mot. Compel Discovery, ECF No. 66, and the defendants had filed a motion for a protective 

order concerning that same discovery, see generally Defs.’ Mot. Protective Order, ECF No. 65. In this context, and 

more than six months after the defendants’ motion to dismiss had been decided, see Minute Entry (dated Oct. 14, 

2016), the defendants explained for the first time LSI’s structure and its various business components.
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Court’s previous opinion denying their motion to dismiss, Defs.’ Mot. Recons., ECF No. 73, 

which was denied, see Minute Order (dated Dec. 21, 2016).

The plaintiffs have now moved to certify a class consisting of “all persons and entities 

who purchased or otherwise acquired the publicly traded common stock” of LSI “during the 

period of February 1, 2012 through May 7, 2014, inclusive,” and “who were damaged thereby.” 

Pls.’ Mem. Supp. Class Cert. at 1. Shortly after filing their opposition to class certification, the 

defendants moved for partial summary judgment on the issue of reliance by the co-lead 

plaintiffs. See generally Defs.’ Mot. Summ. J., ECF No. 83. The defendants’ opposition to the 

plaintiffs’ motion for class certification and the defendants’ motion for summary judgment 

advance similar arguments and, thus, both motions are addressed in this Memorandum Opinion.6

II. LEGAL STANDARD

The legal standards governing the plaintiffs’ motion for class certification and the 

defendants’ motion for summary judgment are set out in turn.

A. Class Certification

Class certification is governed by Federal Rule of Civil Procedure 23, which requires two 

separate inquiries set out in Rule 23(a) and Rule 23(b). See In re Rail Freight Fuel Surcharge 

Antitrust Litig., 725 F.3d 244, 249 (D.C. Cir. 2013); Richards v. Delta Air Lines, Inc., 453 F.3d 

525, 529 (D.C. Cir. 2006). First, pursuant to Rule 23(a), the plaintiff must show 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 representative parties are typical of the 

 6 Upon granting the defendants leave to file their motion for summary judgment,the Court expressly 

instructed that “[t]he Lead Plaintiffs may seek leave to file a sur-reply.” See Minute Order (dated Apr. 11, 2017). 

Accordingly, the plaintiffs’ motion for leave to file a sur-reply, ECF No. 94, is granted, over the defendants’ 

objections, see Defs.’ Opp’n to Lead Pltfs.’ Mot. for Leave to File Sur-Reply, ECF No. 96 (arguing that the 

plaintiffs’ motion for leave to file a sur-reply should be denied because it contains additional arguments about facts 

that were raised in the parties’ opening and opposition briefs, rather than arguments about new factual matters).
14

claims or defenses of the class; and (4) the representative parties will fairly and adequately 

protect the interests of the class. These four requirements are referred to as numerosity, 

commonality, typicality, and adequacy of representation, respectively. See generally Wal–Mart 

Stores, Inc. v. Dukes, 564 U.S. 338 (2011). “In addition to satisfying Rule 23(a)’s prerequisites, 

parties seeking class certification must show that the action is maintainable under Rule 23(b)(1), 

(2), or (3).” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997). Here, the plaintiffs 

point to Rule 23(b)(3) as the basis for this putative class action. Accordingly, the plaintiffs must 

demonstrate (1) that questions of law and fact common to the entire class predominate, and (2) 

the superiority of the class action method to other methods of adjudication. FED. R. CIV. P.

23(b)(3).

The D.C. Circuit has cautioned that class certification “is far from automatic.” In re Rail 

Freight Fuel Surcharge Antitrust Litig., 725 F.3d at 249. Indeed, “Rule 23 does not set forth a 

mere pleading standard. A party seeking class certification must affirmatively demonstrate his 

compliance with the Rule—that is, he must be prepared to prove that there are in factsufficiently 

numerous parties, common questions of law or fact, etc.” Id. (quoting Wal–Mart, 564 U.S. at 

350) (emphasis in original) (internal quotation marks omitted). Determining whether the class 

proponent has satisfied its Rule 23 burden often “resembles an appraisal of the merits, for ‘it may 

be necessary for the court to probe behind the pleadings before coming to rest on the certification 

question.’” Id. (quoting Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160 (1982)); see 

also Wal–Mart, 564 U.S. at 350. Still, “Rule 23 grants courts no license to engage in freeranging merits inquiries at the certification stage. Merits questions may be considered to the 

extent—but only to the extent—that they are relevant to determining whether the Rule 23

prerequisites for class certification are satisfied.” DL v. District of Columbia, 713 F.3d 120, 125 
15

(D.C. Cir. 2013) (quoting Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455, 466

(2013) (internal quotation marks omitted)). 

B. Summary Judgment

Federal Rule of Civil Procedure 56 provides that summary judgment shall be granted “if 

the movant shows that there is no genuine dispute as to any material fact and the movant is 

entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). The moving party bears the 

burden to demonstrate the “absence of a genuine issue of material fact” in dispute, Celotex Corp. 

v. Catrett, 477 U.S. 317, 323 (1986), while the nonmoving party must present specific facts 

supported by materials in the record that would be admissible at trial and that could enable a 

reasonable jury to find in its favor, see Anderson v. Liberty Lobby, Inc. (“Liberty Lobby”), 477 

U.S. 242, 256–57 (1986); Allen v. Johnson, 795 F.3d 34, 38 (D.C. Cir. 2015) (noting that, on 

summary judgment, the appropriate inquiry is “whether, on the evidence so viewed, a reasonable 

jury could return a verdict for the nonmoving party”) (internal quotation marks omitted)); see 

also FED. R.CIV. P. 56(c), (e)(2)–(3).

“Evaluating whether evidence offered at summary judgment is sufficient to send a case to 

the jury is as much art as science.” Estate of Parsons v. Palestinian Auth., 651 F.3d 118, 123 

(D.C. Cir. 2011). This evaluation is guided by the related principles that “courts may not resolve 

genuine disputes of fact in favor of the party seeking summary judgment,” Tolan v. Cotton, 134 

S. Ct. 1861, 1866 (2014) (per curiam), and “[t]he evidence of the nonmovant is to be believed, 

and all justifiable inferences are to be drawn in his favor,” id. at 1863 (alteration in original) 

(quoting Liberty Lobby, 477 U.S. at 255). Courts must avoid making “credibility determinations 

or weigh[ing] the evidence,” since “[c]redibility determinations, the weighing of the evidence, 

and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” 
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Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150-51 (2000) (internal quotation 

marks omitted); see also Burley v. Nat’l Passenger Rail Corp., 801 F.3d 290, 295–96 (D.C. Cir. 

2015). In addition, for a factual dispute to be “genuine,” the nonmoving party must establish 

more than “[t]he mere existence of a scintilla of evidence in support of [its] position,” Liberty 

Lobby, 477 U.S. at 252, and cannot rely on “mere allegations” or conclusory statements, see 

Equal Rights Ctr. v. Post Props., 633 F.3d 1136, 1141 n.3 (D.C. Cir. 2011); Veitch v. England, 

471 F.3d 124, 134 (D.C. Cir. 2006); Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999); 

Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993); accord FED.R.CIV. P. 56(e). If “opposing 

parties tell two different stories, one of which is blatantly contradicted by the record, so that no 

reasonable jury could believe it, a court should not adopt that version of the facts for purposes of 

ruling on a motion for summary judgment.” Lash v. Lemke, 786 F.3d 1, 6 (D.C. Cir. 2015) 

(quoting Scott v. Harris, 550 U.S. 372, 380 (2007)). The Court is only required to consider the 

materials explicitly cited by the parties, but may on its own accord consider “other materials in 

the record.” FED. R. CIV. P. 56(c)(3).

III. DISCUSSION

In this lawsuit, the plaintiffs allege violations of sections 10(b) and 20(a) of the Securities 

Exchange Act of 1934. Section 10(b) makes it illegal to “use or employ, in connection with the 

purchase or sale of any security . . . any manipulative or deceptive device or contrivance in 

contravention of such rules and regulations as the Commission may prescribe . . . .” 15 U.S.C. 

§ 78j(b). Rule 10b–5, in turn, prohibits “mak[ing] any untrue statement of a material fact . . . in 

connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b–5. The elements of a 

securities fraud claim brought under § 10(b) and Rule 10b–5 are “(1) a material 

misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the 
17

misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the 

misrepresentation or omission; (5) economic loss; and (6) loss causation.” In re Harman Intern. 

Indus., Inc. Sec. Litig., 791 F.3d 90, 99 (D.C. Cir. 2015) (quoting Janus Capital Grp., Inc. v. 

First Derivative Traders, 564 U.S. 135, 140 n.3 (2011)). Section 20(a) of the Securities 

Exchange Act provides that individuals who are in “control of the primary violator” of other 

provisions of the Act, including section 10(b), maybe be held jointly and severally liable. In re 

Harman, 791 F.3d at 111. The elements of a section 20(a) claim are (1) that “there is a viable 

claim against the corporation,” under section 10(b), and (2) that the section 20(a) defendants 

qualify as “controlling persons.” Id.

The plaintiffs have moved for class certification, and the defendants, in addition to 

opposing class certification, have moved for summary judgment. The defendants oppose class 

certification primarily on the ground that the proposed lead plaintiffs are subject to unique 

defenses regarding the reliance element of their claims. Similarly, the defendants’ motion for 

summary judgment contends that there are no genuine issues of material fact with respect to the 

proposed lead plaintiffs’ non-reliance on the alleged misrepresentations and omissions. These 

two motions are addressed in turn after setting out the applicable standard provided in Basic v. 

Levinson, 485 U.S. 224, 245 (1988), for invoking the presumption of reliance, on which the 

plaintiffs rely to establish their reliance on the alleged misrepresentations and omissions. See

Am. Compl. ¶ 291 (“Co-Lead Plaintiffs are entitled to a presumption of reliance on Defendants’ 

material misrepresentations and omissions pursuant to the fraud-on-the-market theory.”).

A. The Basic Presumption

A plaintiff asserting security fraud claims under section 10(b) and Rule 10b–5 must 

prove, inter alia, reliance upon the alleged misrepresentations or omissions in question. In re 
18

Harman, 791 F.3d at 99. As the Supreme Court has explained, “[t]he reliance element [of a 

§ 10(b) and Rule 10b–5 securities fraud claim] ‘ensures that there is a proper connection between 

a defendant’s misrepresentation and a plaintiff’s injury.’” Halliburton Co. v. Erica P. John 

Fund, Inc., 134 S. Ct. 2398, 2407 (2014) (Halliburton II) (quoting Amgen, 568 U.S. at 461). 

“The traditional (and most direct) way a plaintiff can demonstrate reliance is by showing that he 

was aware of a company’s statement and engaged in a relevant transaction—e.g., purchasing 

common stock—based on that specific misrepresentation.” Erica P. John Fund, Inc. v. 

Halliburton Co., 563 U.S. 804, 810 (2011) (Halliburton I). In Basic v. Levinson, the Supreme 

Court recognized, however, that “requiring such direct proof of reliance . . . place[s] an 

unnecessarily unrealistic evidentiary burden on the Rule 10b–5 plaintiff who has traded on an 

impersonal market.” Halliburton II, 134 S. Ct. at 2407 (citing Basic, 485 U.S. 224, 245 (1988)). 

Even if a plaintiff could show awareness of the alleged misrepresentation, he would also have to 

“show a speculative state of facts, i.e., how he would have acted . . . if the misrepresentation had 

not been made.” Basic, 485 U.S. at 245. The Supreme Court further acknowledged that, 

requiring individualized proof of reliance would essentially prevent security fraud suits from 

proceeding as class actions, as individual issues of reliance would predominate over common 

issues, foreclosing class certification under Rule 23(b). Halliburton II, 134 S. Ct. at 2407–08 

(citing Basic, 485 U.S. at 242).

To avoid this outcome, the Basic Court established a rebuttable presumption of reliance, 

predicated on the notion that “[a]n investor who buys or sells stock at the price set by the market 

does so in reliance on the integrity of that price. Because most publicly available information is 

reflected in market price, an investor’s reliance on any public material misrepresentations 

. . . may be presumed for purposes of a Rule 10b–5 action.” Basic, 485 U.S. at 247; accord 
19

Halliburton II 134 S. Ct. at 2408. To invoke Basic’s presumption of reliance, “a plaintiff must 

prove that: (1) the alleged misrepresentations were publicly known, (2) they were material, 

(3) the stock traded in an efficient market, and (4) the plaintiff traded the stock between when the 

misrepresentations were made and when the truth was revealed.” Halliburton II, 134 S. Ct. at 

2413 (citing Basic, 485 U.S. at 248; Amgen, 133 S. Ct. at 1198). 

That said, the Basic presumption of reliance is “rebuttable rather than conclusive.” 

Halliburton II, 134 S. Ct. at 2408. A defendant may rebut the Basic presumption with “[a]ny 

showing that severs the link between the alleged misrepresentation and either the price received 

(or paid) by the plaintiff, or [its] decision to trade at a fair market price.” Basic, 485 U.S. at 248.

Thus, a defendant can rebut the Basic presumption, for example, by establishing that the plaintiff 

“would have bought or sold the stock even had he been aware that the stock’s price was tainted 

by fraud.” Halliburton II, 134 S. Ct. at 2408; see also Basic, 485 U.S. at 249 (“For example, a 

plaintiff who believed that Basic’s statements [falsely disclaiming the possibility of a merger] 

were false and that Basic was indeed engaged in merger discussions, and who consequently 

believed that that Basic stock was artificially underpriced, but sold his shares nevertheless 

because of other unrelated concerns, e.g., potential antitrust problems, or political pressures to 

divest from shares of certain businesses, could not be said to have relied on the integrity of a 

price he knew had been manipulated.”).

The defendants do not dispute that the plaintiffs have properly invoked Basic’s rebuttable 

presumption.7 Rather, the defendants contend that the presumption has been rebutted. As the 

 7 In short, the plaintiffs have established that the alleged misrepresentations were “publicly known” and 

“material,” and that the plaintiffs “traded the stock between when the misrepresentations were made and when the 

truth was revealed.” Halliburton II, 134 S. Ct. at 2413 (citing Basic, 485 U.S. at 248; Amgen, 568 U.S. at 460–61). 

As for market efficiency, the defendants do not dispute the plaintiffs’ expert’s determination that “the market for 

Liquidity Services Common Stock was efficient throughout the class period.” Pls.’ Mot. Class Cert., Abramowitz 

Decl., Ex. 2, Expert Report of Chad Coffman, CFA (dated Sept. 2, 2016) (“Coffman Rep.”) ¶ 6, ECF No. 64-4. The 

expert, Chad Coffman, analyzed the so-called Cammerfactors, see generally Cammer v. Bloom, 711 F. Supp. 1264 
20

defendants acknowledge, they bear the burden of rebutting the Basic presumption. Defs.’ Mot. 

Summ. J. at 15 (“Basic thus shifted the burden so that defendants must show ‘by a 

preponderance of the evidence’ that the presumption of reliance is rebutted.” (quoting In re 

Moody’s Corp. Sec. Litig., 274 F.R.D. 480, 490 (S.D.N.Y. 2011))); see also Erica P. John Fund, 

Inc. v. Halliburton Co., 309 F.R.D. 251, 258 (N.D. Tex. 2015) (the defendant bears the burden of 

production and persuasion as to rebutting the Basic presumption).8

B. The Plaintiffs’ Motion for Class Certification 

The defendants do not dispute that the plaintiffs in this case satisfy Rule 23(a)’s 

requirements of numerosity and commonality, and the 23(b)(3) requirement of superiority of the 

class action mechanism. See generally Defs.’ Opp’n Pls.’ Mot. Class Cert.; see also Pls.’ 

Omnibus Reply at 1 n.2. Nevertheless, “certification is proper only if ‘the trial court is satisfied, 

after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied,’” Wal–Mart 

Stores, Inc., 564 U.S. at 350–51 (quoting General Telephone Co. of Sw. v. Falcon, 457 U.S. 147, 

161 (1982); see also General Telephone Co., 457 U.S. at 160 (“[A]ctual, not presumed, 

conformance with Rule 23(a) remains . . . indispensable.”). Thus, each applicable Rule 23(a) 

and relevant Rule 23(b) requirement is addressed seriatim.

 

(D. N.J. 1989) (identifying as relevant factors (1) average weekly trading volume, (2) analyst coverage, (3) market 

makers, (4) SEC Form S-3 eligibility, and (5) price reaction to unexpected information), in addition to other factors 

courts consider in addressing efficiency, in opining that the market for LSI stock was efficient. See Coffman Rep.

¶¶ 21, 24. 8 The plaintiffs also contend that they are entitled to the so-called Affiliated Ute presumption, which applies 

in the case of an alleged omission or “failure to disclose” (as compared to an alleged misrepresentation). Affiliated 

Ute Citizens of Utah v. United States, 406 U.S. 128, 153 (1972). Given that the “gravamen” of the plaintiffs’ claims 

is that the defendants issued statements containing misrepresentations as to the retail division, the Affiliated Ute

presumption is inapplicable here. In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 215 (D.C. Cir. 2010) 

(finding that the Affiliated Ute presumption did not apply where the defendant allegedly took part in a Ponzi scheme 

and “the gravamen of the appellants’ complaint [was] that, by certifying Interbank’s materially false financial 

statements, Radin affirmatively misrepresented Interbank’s financial situation”).
21

1. Rule 23(a) Requirements

As noted, Rule 23(a) requires the plaintiff to demonstrate that the putative class meets the 

numerosity, commonality, typicality, and adequacy of representation prerequisites for 

certification.

a. Numerosity

Rule 23(a)(1) permits members of a class to sue as representative parties if “the class is 

so numerous that joinder of all members is impractical.” “Absent unique circumstances, 

‘numerosity is satisfied when a proposed class has at least forty members.’” Coleman ex rel. 

Bunn v. District of Columbia, 306 F.R.D. 68, 76 (D.D.C. 2015) (quoting Richardson v. L’Oreal 

USA, Inc., 991 F. Supp. 2d 181, 196 (D.D.C. 2013)). “In assessing the number of potential class 

members, the Court need only find an approximation of the size of the class, not ‘an exact 

number of putative class members.’” Bunn, 306 F.R.D. at 76 (quoting Pigford v. Glickman, 182 

F.R.D. 341, 347 (D.D.C. 1998)). It is undisputed that there were more than 1,000 purchasers of 

LSI stock during the class period. See Pls.’ Mem. Supp. Class Cert., Ex. 1, Defs.’ Resps. and 

Objs. to Pls.’ First Set of Reqs. for Admis. (“Defs.’ RFA Responses”) at 4, ECF No. 64-3. While 

the exact number of class members will not be ascertained until official notice is given, the 

putative class likely numbers over 1,000, and certainly well over 40. Thus, the numerosity 

requirement is satisfied.

b. Commonality

Rule 23(a)(2) requires the plaintiffs to show the existence of “questions of law or fact 

common to the class.” In addressing this requirement, the Supreme Court has explained that the 

class’s “claims must depend upon a common contention” that is “capable of classwide 

resolution—which means that determination of its truth or falsity will resolve an issue that is 
22

central to the validity of each one of the claims in one stroke.” Wal–Mart, 564 U.S. at 350 

(2011); accord DL, 713 F.3d at 125 (discussing Wal–Mart). “The touchstone of the 

commonality inquiry is ‘the capacity of a classwide proceeding to generate common answers apt 

to drive the resolution of the litigation.’” Bunn, 306 F.R.D. at 82 (emphasis in original) (quoting 

Wal–Mart, 564 U.S. at 350). “Depending upon the circumstances, this may involve many 

common issues that together provide a resolution, but ‘even a single common question will do.’” 

Id. (quoting Wal–Mart, 564 U.S. at 359); see also In re District of Columbia, 792 F.3d 96, 100 

(D.C. Cir. 2015) (“[T]he Supreme Court explained in Wal–Mart that ‘for purposes of Rule 

23(a)(2) even a single common question will do.’” (quoting Wal–Mart, 564 U.S. at 359)). “A 

class may satisfy the commonality requirement even if factual distinctions exist among the 

claims of putative class members.” Bunn, 306 F.R.D. at 82. “Ultimately, ‘[w]hen the party 

opposing the class has engaged in some course of conduct that affects a group of persons and 

gives rise to a cause of action, one or more of the elements of that cause of action will be 

common to all of the persons affected.’” Id. (quoting NEWBERG ON CLASS ACTIONS § 3:20 (5th 

ed. 2014)). Commonality often exists in securities class actions where investors sue for 

misrepresentations or omissions that had an impact on stock price. See In re Newbridge 

Networks Securities Litig., 926 F. Supp. 1163, 1176 (D.D.C. 1996) (“[W]here members of a class 

are subject to the same misrepresentations and omissions, and where alleged misrepresentations 

fit within a common course of conduct, common questions exist and a class action is 

appropriate.”); In re VeriSign, Inc. Sec. Litig., No. 02-cv-2270, 2005 WL 7877645, at *5 (N.D. 

Cal. Jan. 13, 2005) (“Commonality is easily met in cases where class members all bought or sold 

the same stock in reliance on the same disclosures made by the same parties, even when damages 

may vary.” (internal quotation marks omitted)).
23

While the defendants contest other 23(a) requirements that might overlap with the 

commonality inquiry, the defendants do not explicitly dispute that the plaintiffs satisfy Rule 

23(a)(2)’s commonality requirement. Here, common questions emerge from the defendants’ 

common course of conduct: allegedly issuing misrepresentations and omissions to the investing 

public. As the plaintiffs contend in their motion for class certification, “the common questions 

of law and fact at issue here include: (a) whether Defendants violated the Exchange Act; 

(b) whether Defendants misrepresented and/or omitted material facts in their public statements; 

(c) whether Defendants knowingly or recklessly disregarded that their statements were false and 

misleading; (d) whether the price of Liquidity’s stock was artificially inflated as a result of 

Defendants’ misrepresentations and/or omissions; and (e) whether and to what extent disclosure 

of the truth regarding Defendants’ misrepresentations and/or omissions of material facts caused 

Class members to suffer economic harm.” Pls.’ Mem. Supp. Class Cert. at 8. Accordingly, Rule 

23(a)(2)’s commonality requirement is satisfied.

c. Typicality

Under Rule 23(a)(3), the representative parties’ claims or defenses must be “typical of the 

claims or defenses of the class.” “‘Typicality’ is satisfied ‘if each class member’s claim arises 

from the same course of events that led to the claims of the representative parties and each class 

member makes similar legal arguments to prove the defendant’s liability.’” In re APA

Assessment Fee Litig., 311 F.R.D. 8, 15 (D.D.C. 2015) (quoting Trombley v. Nat’l City Bank, 

826 F. Supp. 2d 179, 192 (D.D.C. 2011) (internal quotation marks omitted)). While “the class 

representatives should have ‘suffered injuries in the same general fashion as absent class 

members,’” id. (quoting In re Vitamins Antitrust Litig., 209 F.R.D. 251, 260 (D.D.C. 2002) 

(internal quotation marks omitted)), “[t]he facts and claims of each member of the class need not 
24

be identical,” id. (citing Daskalea v. Wash. Human Soc’y, 275 F.R.D. 346, 358 (D.D.C. 2011)). 

Typicality “is not destroyed merely by ‘factual variations.’” Wagner v. Taylor, 836 F.2d 578, 

591 (D.C. Cir. 1987). Instead, the typicality requirement calls for “‘sufficient factual and legal 

similarity between the class representative’s claims and those of the class to ensure that the 

representative’s interests are in fact aligned with those of the absent class members.’” In re Navy 

Chaplaincy, 306 F.R.D. 33, 53 (D.D.C. 2014) (quoting WILLIAM B. RUBENSTEIN,NEWBERG ON 

CLASS ACTIONS § 3:31 (5th ed. 2013)). 

While factual variations are acceptable, “class certification is inappropriate where a 

putative class representative is subject to unique defenses which threaten to become the focus of 

the litigation.” Baffa v. Donaldson, Lufkin & Jenrette Secs. Corp., 222 F.3d 52, 59 (2d Cir. 

2000) (internal quotation marks and citation omitted); see also Kas v. Fin. Gen. Bankshares, Inc., 

105 F.R.D. 453, 461 (D.D.C. 1984). The “presence of a unique defense will not . . . destroy 

typicality,” however, unless it “will ‘skew the focus of the litigation’ and create ‘a danger that 

absent class members will suffer if their representative is preoccupied with defenses unique to 

it.’” Meijer, Inc. v. Warner Chilcott Holdings Co. III, 246 F.R.D. 293, 302 (D.D.C. 2007)

(quoting In re Cardizem CD Antitrust Litig., 200 F.R.D. 297, 304–05 (E.D. Mich. 2001)).

Here, the defendants do not dispute that the class members’ claims are based on the same 

legal theory—that the defendants violated sections 10(b) and 20(a) of the Securities Exchange 

Act by making the same alleged misrepresentations and omissions. Nor do the defendants 

dispute that, like the rest of the putative class members, Caisse and NNERF each purchased 

shares of LSI’s stock during the class period, and contend that they relied on LSI’s alleged

misrepresentations and omissions through Basic’s fraud-on-the-market theory and suffered 

damages when LSI’s stock price came to reflect the truth about the retail division’s margins and 
25

organic growth. Instead, the defendants argue that Caisse and NNERF are atypical because they 

are subject to the unique defense of non-reliance on alleged misrepresentations and omissions, or 

on the market price of LSI stock. According to the defendants, “the mere fact that Plaintiffs will 

be subject to such defenses renders their claims atypical,” because those defenses threaten to 

become the focus of the litigation, even if they are ultimately not viable. Defs.’ Opp’n Pls.’ Mot. 

Class Cert. at 16. The defendants further contend that NNERF is atypical because Pier Capital, 

one of the two investment advisories that purchased shares of LSI on behalf of NNERF, earned a 

profit on its LSI investment. These two elements—reliance and loss—are addressed in turn.

i. Reliance

According to the defendants, Caisse and NNERF are subject to unique defenses as to the 

element of reliance, and therefore are atypical of other putative class members. Specifically, the 

defendants contend that plaintiffs are variously susceptible to three defenses concerning the issue 

of reliance: (1) the plaintiffs’ “investment advisors testified that they were not misled about the 

very subjects of the purported fraud,” and in any event the health of the retail division was 

irrelevant to their investment decisions, id. at 2; (2) the plaintiffs’ “investment advisors admitted 

that they believed the market for LSI stock was inefficient and did not reflect LSI’s intrinsic 

value,” id. at 4 (emphasis in original); and (3) “both New South and Van Berkom (and, by 

extension, Plaintiffs) are subject to atypical defenses due to their close relationship and frequent 

private meetings with LSI senior management,” id. As the defendants’ rebuttal rests on specific 

facts related to each investment advisory of Caisse and NNERF, the defendants’ arguments with 

respect to each investment advisory is addressed in turn.

1. Van Berkom

On February 25, 2013, Van Berkom acquired 16,630 shares of LSI stock for a fund in 

which Caisse invested. Pls.’ SMF ¶¶ 17, 19. The defendants argue that Caisse is not typical
26

because Van Berkom (1) was not misled about LSI’s retail division, Defs.’ Opp’n Pls.’ Mot.

Class Cert. at 18; (2) understood that the market had undervalued LSI shares and invested to 

exploit markets inefficiencies instead of relying on the integrity of the market price, id. at 21; and 

(3) had private interactions with LSI management, id. at 22. These three arguments are

addressed seriatim.

(a) Van Berkom, and, by Extension, 

Caisse, Was Misled by the Alleged 

Misrepresentations

The defendants contend that Caisse is subject to unique defenses involving the Basic 

presumption because Van Berkom was not misled about the health of LSI’s retail division. In 

particular, the defendants maintain that LSI’s DoD business was Van Berkom’s primary 

consideration in deciding to invest in LSI and that the health of the retail division was irrelevant. 

According to the defendants, Van Berkom “would still be invested in LSI but for the loss of the 

DoD contract—regardless of any supposed fraud regarding the Retail Division.” Id. at 17. For 

support, the defendants cite testimony from Van Berkom’s portfolio manager, Mathieu Sirois, as 

well as Van Berkom’s review of its small-cap investments to argue that “the reason for Van 

Berkom’s early exit was that its entire investment thesis was defeated by the loss of the DoD 

contract—a ‘binary event’ that ‘broke’ its model and ‘destroyed the economics of the business.’” 

Id. at 18; see also Defs.’ Opp’n Pls.’ Mot. Class Cert., Ex. 10, Van Berkom & Assoc., Review 

and Outlook of U.S. Small-Cap Stocks at VAN-BERKOM_000072, ECF No. 81-11

(characterizing LSI’s loss of the DoD surplus contract as a “binary event[]” and explaining that 

“the news about the loss of the contract was . . . hard . . . to swallow”). 

The defendants rely heavily on Sirois’s response to the deposition question: “Would you 

think if that DoD contract had been renewed on the same terms you would be in the stock 

today?” Id. (quoting Sirois Dep. at 78:20–22). Sirois answered, “Yes, most likely. I mean, that 
27

broke the model.” Id. (quoting Sirois Dep. at 78:23–24). Although in a vacuum this testimony 

might suggest that Van Berkom was concerned only with the DoD business, and that the retail 

division was irrelevant to Van Berkom’s investment decision, the totality of Sirois’s testimony 

indicates that Van Berkom considered non-DoD components of the company. In addition to 

saying that Van Berkom “most likely” would still be invested in LSI stock had DoD renewed its 

contracts, Sirois immediately clarified that LSI “went from pretty good margins to making 

almost nothing. And therefore, when that happened, the stock no longer fit with our criteria and 

that’s why we sold it.” Sirois Dep. at 78:20-79:2. Thus, Van Berkom was concerned with LSI’s 

margins, and, as explained by Sirois, when LSI “lost part of the surplus contract with the DOD, 

this was when the weak margins on the commercial side really came to light, and that was the 

big thing.” Id. at 25:12–26:14 (emphasis added). Sirois’s testimony thus supports the plaintiffs’ 

contention that “the loss of a portion of the DoD contract caused Van Berkom to reevaluate its 

investment in LSI not merely because it meant losing DoD revenues, but because this revealed 

that a fundamental premise of Van Berkom’s investment thesis—that LSI had the potential to 

realize organic growth and profits in the Retail Division—was entirely false.” Pls.’ Omnibus 

Reply at 12. Even if the plaintiffs have overstated the extent to which organic growth in the 

retail division was a “fundamental premise” of Van Berkom’s investment thesis, the record 

demonstrates that Van Berkom cared about margins within the retail division. See, e.g., Sirois 

Dep. at 52:10–12 (noting that if Van Berkom “thought [organic growth] was going down to that 

level [Van Berkom] would have never made the investment”).

To be sure, Van Berkom viewed the loss of the DoD contract as the “biggest letdown,” 

and stated that “what broke the model altogether was not the retail trends.” Id. at 77:18–78:6. 

Yet even these statements do not prove that Van Berkom’s choice to invest was unrelated to the 
28

supposed strength of the retail division. As Sirois testified, “[i]t was all about the money they 

were not making on the commercial side and all this money they were making on the DOD that 

was taken away on the renewal.” Id. When asked point blank whether Van Berkom invested in 

LSI “based on the expectation that DOD would be renewed,” Sirois responded, “[y]es, but also 

on the expectation that commercial business would be more profitable.” Id. at 32:4–14. Thus, 

the defendants have not established that Van Berkom cared only about the DoD contract, and 

that the subject of the purported fraud—the health of the retail division—was “irrelevant to [Van 

Berkom’s] decision to purchase” shares of LSI. GAMCO Inv’rs, Inc. v. Vivendi, S.A., 927 F. 

Supp. 2d 88, 100 (S.D.N.Y. 2013) (holding that the Basic presumption was rebutted with respect 

to a particular plaintiff, after the class certification decision, because the subject of the fraud was 

irrelevant as to that plaintiff).

Nevertheless, to bolster their argument, the defendants cite a string of out-of-Circuit 

district court decisions, each of which concerns the same allegedly fraudulent statements, in 

which the defendants succeeded in rebutting the Basic presumption with respect to particular 

plaintiffs. See Defs.’ Opp’n Pls.’ Mot. Class Cert. at 18–19 (citing In re Vivendi Universal S.A. 

Securities Litig., 183 F. Supp. 3d 458, 466 (S.D.N.Y. 2016) (“Capital Guardian”); In re Vivendi 

Universal S.A. Securities Litig., 123 F. Supp. 3d 424, 426–27 (S.D.N.Y. 2015) (“Southeastern 

Asset Management” or “SAM”); and GAMCO, 927 F. Supp. 2d at 100 (collectively, “the Vivendi

cases”). By way of background, the Vivendi litigation arose out of alleged misstatements and 

omissions by Vivendi, a French multimedia firm trading American Depository Shares on the 

New York Stock Exchange. GAMCO, 927 F. Supp. 2d at 92. Beginning in the late 1990s, 

Vivendi “engaged in a series of mergers and acquisitions,” and, “[a]s a result of this activity, . . . 

took on a significant debt, and eventually faced a liquidity crisis.” Id. The alleged 
29

misstatements and omissions concerned Vivendi’s alleged attempts to conceal the liquidity crisis. 

Id. Following a jury verdict in favor of the class plaintiffs, “the . . . core disputes remaining . . . 

address[ed] whether certain, sophisticated members of the class actually relied on defendant 

Vivendi[’s] . . . misstatements in trading its stock.” SAM, 123 F. Supp. 3d at 425.9 The Vivendi

cases are distinguishable from the instant case on their facts and ultimately undercut the 

defendants’ argument. For example, in GAMCO, the court held that the Basic presumption was 

rebutted where the subject of the fraud was “irrelevant” to the investors’ decision to purchase 

shares of the defendant company. GAMCO, 927 F. Supp. 2d at 97, 100. Here, although the 

defendants have shown that the DoD contract was a significant driver of Van Berkom’s decision 

to invest in LSI, and, later, to sell LSI shares, Sirois’s testimony amply demonstrates that Van 

Berkom also decided to invest based on growth prospects in other LSI divisions. Those divisions 

were not “irrelevant” to Van Berkom’s purchasing decision.

The defendants further contend that even if the performance of the retail division was 

relevant, Van Berkom was not actually misled about LSI’s competition or retail division

margins. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 19–21. Regarding competition, the plaintiffs 

allege that LSI’s statement that “when you look at the competition, there is a lot of it, but it’s not 

very formidable” was misleading. Am. Compl. ¶¶ 11, 165, 185. The defendants argue that Van 

 9 As noted, the Vivendi cases were decided after class certification, raising the question whether the 

defendants’ reliance arguments are appropriate at the class certification stage. See, e.g.,Willis v. Big Lots, Inc., Civ. 

No. 2:12-604, 2017 WL 1063479, at *7 (S.D. Ohio Mar. 17, 2017) (distinguishing the Vivendi decisions when

addressing a motion for class certification because, inter alia, the Vivendicases were “made in the course of posttrial proceedings wherein the defendant attempted to rebut the presumption of reliance with respect to individual 

plaintiffs”); see also Todd v. STAAR Surgical Co., Civ. No. 14-05263, 2017 WL 821662, at *5 (C.D. Cal. Jan. 5, 

2017) (collecting cases for the proposition that “[d]istrict courts generally find that where plaintiffs have bought and 

sold stock for investment purposes, subject to the same information and representations as the market at large those 

plaintiffs are typical and not subject to a unique defense” (internal quotation marks omitted)); Loritz v. Exide Techs., 

Civ. No. 2:13-02607, 2015 WL 6790247, at *5 (C.D. Cal. July 21, 2015) (“[T]he defense of nonreliance is not itself 

a basis for denial of class certification.” (citing Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992))); 

In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512, 584–85 (S.D.N.Y. 2011) (collecting cases for the 

proposition that “courts in securities fraud actions have consistently recognized that issues of individual reliance can 

and should be addressed after a class-wide trial, through separate jury trials if necessary”).
30

Berkom was not misled by this statement because Sirois had identified LSI’s competitors 

through his own due diligence, Sirois Dep. at 109:5–24, and agreed that competitors were not 

“all on equal footing” with LSI, id. at 19:2–12. The plaintiffs are “baffl[ed]” by the defendants’ 

assertion, since, “as reflected in a memorandum to clients, Van Berkom believed that LSI’s 

‘strong competitive position and its large scale’ enabled it to ‘generate[] good profit margins, 

high returns on capital (over 25%) and equity and steady free cash flows.’” Pls.’ Omnibus Reply 

at 12 (quoting Abramowitz Decl., Ex. 6, March 2013 Memo. to Clients at 8, ECF No. 88-3

(explaining that due to LSI’s “significant[]” growth, “huge barriers to entry” were created “for 

any competitor” (emphasis added))). Furthermore, although Sirois testified that he had identified 

LSI’s competitors and determined that they were not as “sophisticated” as LSI, Sirois Dep. at 

19:4, Sirois later testified that Van Berkom “knew [the competitors] could create some noise and 

some slow-down in [LSI’s] business, but we felt that at the end of the day that [LSI’s]

competitive advantages were strong enough that they should be able to grow at a decent clip,” id.

at 116:11–15. Thus, the totality of the evidence suggests that although Van Berkom researched 

and was able to identify LSI’s competitors, Van Berkom ultimately believed that LSI had a 

“strong competitive position.” March 2013 Memo to Clients at 8 (emphasis added); see also

Sirois Dep. at 12:4–5 (stating that Van Berkom invests in companies that it identifies as having a 

“sustainable competitive advantage”). Accordingly, the defendants are incorrect in asserting that 

Van Berkom was “fully capable of sizing up the competition,” and “agreed with [Mr.] Rallo” 

that competition was not very formidable, as the defendants maintain. Defs.’ Opp’n Mot. Class 

Cert. at 19 (emphasis in original).

The defendants have likewise failed to show that Van Berkom “kn[ew] of the purportedly 

concealed facts as to . . . organic growth” in the retail division. Defs.’ Opp’n Pls.’ Mot. Class 
31

Cert. at 21. The defendants point to Sirois’s testimony that Van Berkom “knew [DoD margins] 

were higher. [LSI] [m]anagement had said the DoD margins were higher, and it made sense for 

a couple of reasons.” Sirois Dep. at 26:19–21. Again, these cherry-picked sound bites do not 

accurately reflect the totality of Sirois’s testimony with respect to margins. Sirois testified that 

Van Berkom had no way of ascertaining margins in particular divisions, and was unaware that 

the margins in the retail division were so low until the loss of the DoD contract exposed the truth 

about the margins in the non-government divisions. Id. at 25:12–26:21 (“The only thing I will 

say is the key in the economic model of the business were the margins they were generating on 

the commercial business versus the government business, and they never disclosed that to 

anyone. . . . So we did all the research we could do in the world to try to find out what the margin 

structure could be of each of these businesses.”); id. at 26:18–27:10 (“We just didn’t know how 

weak the commercial margins were, and I don’t think there is any research in the world that 

would have shown that.”); id. at 27:18–22 (“[W]e knew that retail margins were weaker. We 

know they were lower. We just didn’t know they were that bad. And when the lost the [DoD] 

surplus contract that proved to be the case.”). Van Berkom’s understanding that retail margins 

were lower than DoD margins does not establish that Van Berkom was not misled about the 

strength of margins in the retail division, or the extent to which the DoD business propped up 

failing units.

Similarly, the defendants claim that Van Berkom “invested in 2013 knowing full well 

that LSI’s ‘organic growth’ had slowed, and would not return for one or two years—i.e., well 

after the end of the Class Period—and that LSI’s Retail Division’s margins would not be 

expanding during this time, either.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 20 (citing Sirois Dep. 

at 42:20–43:19) (emphasis in original). The defendants are correct that Van Berkom did not 
32

expect any margins to increase from around 2013 to 2015—an “investment period” for LSI. See

Sirois Dep. at 44:7–9 (“Q: You understood in 2013 margins weren’t going up for the next two 

years? A: Yes.”); id. at 42:11–15 (“Q: So you are telling us that Ammar’s takeaway from this 

meeting is that margins are not expanding? . . . A: In the short term, because they were going 

into an investment period.”). Yet, when pressed further by the defendants’ attorney as to 

whether Van Berkom “underst[ood] that in 2013 there was not margin expansion in the next two 

years,” Sirois clarified: “Probably not a whole lot, but the whole point was more that the 

commercial business just wasn’t making any money, and we thought it was.” Id. at 44:10–16. 

Thus, Van Berkom may have known that there would not be much margin growth from 2013 to 

2015, but Sirois’s testimony does not establish that Van Berkom knew that any margins, 

including retail margins in particular, would constrict to the extent they did. The defendants also 

cite an internal investment memorandum written before Van Berkom first purchased LSI shares, 

which memorandum indicates that LSI’s “management recently lowered organic growth 

expectations for the full year 2013.” See id. at 110:22–24. Similarly, the defendants cite a call 

between Van Berkom and Mr. Angrick in 2013, during which Mr. Angrick confirmed that LSI 

would see “slower organic growth,” id. at 51:3–24. Much like Sirois’s testimony, these 

statements disclose only that margins were not expected to expand during the period—the 

statements do not reveal the full extent of the margin trouble LSI faced.10

 10 The defendants also cite notes taken by Sirois’s colleague, AmmarAli, during a call with Mr. Angrick on 

May 6, 2013, and highlight that the notesstate “zero growth @ existing client progs: not going to change.” Defs.’ 

Opp’n Pls.’ Mot. Class Cert. at 20–21; id., Ex. 2, Handwritten Notes re LQDT at VAN-BERKOM_000250, ECF 

No. 81-3; see also Sirois Dep. at 54:24–25. Yet, this cherry-picked line is not as persuasive as the defendants urge 

for several reasons. First, it is unclear from Ammar’s notes to which “clients”these notes refer, whether thenotes

refer to the retail division at all, or the time period covered by the notes and thus how long the zero growth status 

would persist. Second, the notes also contain the sentence “[w]e are a growth co[mpany]—every Q is better than 

last.” Handwritten Notes re LQDT at VAN-BERKOM_000250. Finally, the defendants rely upon Sirois to interpret 

Ammar’s handwritten notes, and Sirois testified that he did not know whether “zero growth” statement was 

something that Mr. Angrick said, or where it came from. Sirois Dep. at 54:21–55:3. Considered with Sirois’s 

statements that Van Berkom did not know the extent of the retail margin constriction, and that Van Berkom did care 
33

The defendants again cite the Vivendi cases in support of their position that Van 

Berkom’s decision to invest in LSI even though it knew the declines in retail margins renders 

Van Berkom subject to unique defenses. The Vivendi cases, however, do not support the 

defendants’ position. For example, in SAM, the investment analyst who made the decision to 

purchase shares of Vivendi testified that, due to his own independent analysis, he was aware of 

the subject of the alleged fraud—the liquidity crisis—when he made the purchasing decision. 

123 F. Supp. 3d at 436 (citing the analyst’s testimony that “he was ‘right the whole time’ about 

his calculations and assessments and ‘was not misled’ about Vivendi’s debt”). On this record, 

the court concluded that “[e]ven had [the analyst] known about the fraud, it would not have 

mattered to him.” Id. (noting the analyst’s testimony that none of the nine corrective disclosures 

corrected anything he believed about Vivendi’s liquidity). Likewise, in Capital Guardian, the 

investment analyst invested in Vivendi with an “understanding and acceptance of Vivendi’s 

liquidity risks.” 183 F. Supp. 3d at 466–67 (noting that, prior to any of the corrective 

disclosures, Capital Guardian’s analyst projected that Vivendi’s debt would increase from 

approximately €23 billion to €29.8 billion in a short period of time and that the company “would 

need to sell assets in order to address its liquidity needs”). Accordingly, the court in Capital 

Guardian concluded that Vivendi had rebutted the Basic presumption because Capital Guardian 

was “indifferent to the fraud.” Id. at 466 (emphasis added). Here, in contrast, the evidence 

shows that Van Berkom did not know the extent of the issues allegedly concealed by LSI and 

was not indifferent to the fraud. For all the foregoing reasons, the defendants’ argument that Van 

Berkom knew the truth about the retail division margins fails.

 

about margins and growth in the retail division, these scrawled notes are insufficient to show that Van Berkom knew 

that retail margins would stagnate.
34

(b) Van Berkom’s Sophisticated 

Investment Strategy Does Not Rebut the 

Basic Presumption

The defendants next argue that Van Berkom is subject to unique defenses involving the

Basic presumption, rendering Caisse atypical, because Van Berkom “did not regard the market 

price of LSI’s shares as a proxy for the Company’s intrinsic value at the time it acquired LSI 

shares.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 21. Instead, according to the defendants, Van 

Berkom, a so-called “value investor,” 11 believed based on its own sophisticated models and 

analysis that the market for LSI stock was inefficient and invested to exploit that inefficiency. 

Id. at 21–22. The defendants emphasize that Van Berkom assessed LSI’s value using a 

discounted cash flow model, which did not include stock price as a direct input, id. at 21–22 

(citing Sirois Tr. at 11:23-13:18), and that Van Berkom invested only in companies it deemed to 

be “‘mispriced or undervalued by the market,’” id. at 22 (quoting Sirois Dep. at 11:8) (emphasis 

omitted). The plaintiffs respond that being a value investor or otherwise employing a 

sophisticated investment strategy does not negate typicality “[a]s long as the investment decision 

rests to some degree on public information.” Pls.’ Omnibus Reply at 5. 

Sirois described Van Berkom’s investment model as follows: “Our goal is to be invested 

in the very best and highest quality companies that we can find across our universe. So we 

define such companies as companies that generate a significant return on capital over time, very 

strong free cash flows, that maintain a very strong balance sheet that has sustainable competitive 

advantages and that are run by a very, very strong management team. And we only buy these

companies when they are mispriced or undervalued by the market.” Sirois Dep. at 1123–12:8. 

 11 Value investors “believe[] that certain stocks are undervalued or overvalued and attempt[] to beat the 

market by buying the undervalued stocks and selling the overvalued ones.” Halliburton II, 134 S. Ct. at 2410 

(internal quotation marks omitted).
35

When asked what he meant by “mispriced or undervalued by the market,” Sirois explained: 

“[F]or each investment candidate we go through a very extensive research process that involves 

several steps, but . . . one of them is the building of a detailed financial model on Excel where we 

will put several years of historical financial statements in the numbers that we restate according 

to what we think are some adjustments required in any . . . of the financial statements released by 

companies, and then we put forward between five and [ten] years of forecasts for the income 

statement, cash flow statement and balance sheet, and from that we derive a discounted cash 

flow evaluation to help us assess whether the company is fairly valued, overvalued, or 

undervalued, using a variety of assumptions and inputs that we generate from the knowledge that 

we acquire as we go through out research process.” Id. at 12:13–13:5.

As the Supreme Court noted in Halliburton II, in response to Halliburton’s argument that 

price integrity is “marginal or irrelevant” for value investors, “there is no reason to suppose that 

. . . the value investor . . . is as indifferent to the integrity of market prices.” Halliburton II, 134 

S. Ct. at 2410–11. “Such an investor implicitly relies on the fact that a stock’s market price will 

eventually reflect material information—how else could the market correction on which his 

profit depends occur?” Id. at 2411. Recognizing that a value investor necessarily believes that 

the market price does not accurately reflect public information at the time he transacts, the 

Supreme Court held that Basic reliance requires only that the investor “trade stock based on the 

belief that the market price will incorporate public information within a reasonable period of 

time.” Id. The Court noted, moreover, that a value investor relies on the market price of an asset 

insofar as he “presumably tries to estimate how undervalued or overvalued a particular stock is.” 

Id. (emphasis in original). Thus, the mere fact that Van Berkom is a value investor does not 

rebut the Basic presumption. See Willis v. Big Lots, Inc., Civ. No. 2:12-604, 2017 WL 1063479, 
36

at *7 (S.D. Ohio Mar. 17, 2017) (“[N]o cases hold[] that the mere fact that a class member is a 

value investor is, alone, enough to defeat Basic’s presumption of reliance.”); Saddle Rock 

Partners v. Hiatt, Civ. No. 96 9474, 2000 WL 1182793, at *4 (S.D.N.Y. Aug. 21, 2000) (finding 

a class representative typical even though he was a “sophisticated stockbroker” and a “gambler” 

who purchased “stock based upon its trading history which he thought revealed short term 

market inefficiencies”); In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 369, 376 

(S.D.N.Y. 2000) (“All of the usual smoke and mirrors and computer programs to rank stocks, 

relied on by professionals, have at their foundation an assumption that there is an efficient public 

market.”).

In arguing that Van Berkom’s investment strategy renders Caisse atypical, the defendants 

continue to cite the Vivendi cases, but those cases, again, are distinguishable. In the first case, 

GAMCO, the record demonstrated that the plaintiff–investor, GAMCO, “would have seen 

Vivendi as a more attractive investment” had the liquidity situation been fully disclosed, 927 F. 

Supp. 2d at 102 (emphasis in original), in light of GAMCO’s proprietary methodology used to 

determine when to invest in a company, which was “completely independent of liquidity 

concerns and market price,” id at 101. In other words, the Basic presumption was rebutted not 

only because GAMCO employed a sophisticated, proprietary methodology in making its 

investment decisions, but also because the fraud would have made Vivendi’s ADSs “more 

attractive,” and because GAMCO “would have purchased Vivendi securities even had it known 

of Vivendi’s alleged fraud.” GAMCO Inv’rs, Inc. v. Vivendi Universal, S.A., 838 F.3d 214, 218 

(2nd Cir. 2016), cert. denied, 137 S. Ct. 1104 (2017); accord Todd v. STAAR Surgical Co., Civ. 

No. 14-05263, 2017 WL 821662, at *5 (C.D. Cal. Jan. 5, 2017) (“Although Lead Plaintiff’s 

decision-making may have been idiosyncratic, his testimony indicates that he relied on 
37

information publicly available on the internet when deciding whether to purchase STAAR’s 

stock. As the court in Diamond Foods explained, ‘[m]ost investors think they are a little smarter 

than average and see opportunities others have missed. Still, they all rely on publicly available 

data.’” (quoting In re Diamond Foods, Inc., Sec. Litig., 295 F.R.D. 240, 253 (N.D. Cal. 2013))).

Indeed, the GAMCO court was careful to emphasize that its holding “should not be taken 

to suggest that sophisticated institutional investors or value-based investors are not entitled to the 

[Basic] presumption,” and that it is easy to imagine a case in which an investor “used the market 

price of a security merely as a comparator with a private method of valuation, but in which the 

[Basic] presumption could not be fairly rebutted, because, but for the material misstatements, 

that investor would not have transacted in the securities at issue. 927 F. Supp. 2d at 102. On 

appeal, the Second Circuit affirmed, explaining that, “whereas one can imagine situations in the 

abstract where a sophisticated investor, apprised of a fraud, would necessarily conclude that a 

security was no longer a logical purchase, the district court did not clearly err in concluding, on 

this record, that in this case, and with regard to this particular fraud, GAMCO would still have 

viewed Vivendi’s securities as a profitable investment—even if it might have been concerned 

about the hidden liquidity risks.” GAMCO, 838 F. 3d at 221 (emphasis in original). Here, there 

is no evidence to suggest that if Van Berkom had known of the issues in the retail division, LSI 

stock would have been a more attractive investment (or even that Van Berkom would have been 

indifferent to the alleged fraud). To the contrary, Sirois testified that Van Berkom invested in 

LSI on the expectation that the DoD contract would be renewed, “but also on the expectation that 

commercial business would be more profitable[,] . . . that it was one of the major growth 

drivers,” and that although the DoD business was “the cash cow,” “the retail and commercial 

business is where you are going to get the growth.” Sirois Dep. at 32:9–24.
38

SAM and Capital Guardian, both of which involved post-certification motions for 

summary judgment on the issue of reliance, are likewise distinguishable. First, in SAM, the court 

found that Vivendi had rebutted the Basic presumption with respect to SAM because its analyst

both testified that “Vivendi’s declining stock price made investing in the company ‘more 

attractive,’” and “admitted that . . . none of the nine corrective disclosures . . . ‘corrected’ any 

misunderstanding by [him] concerning the value of Vivendi.” 123 F. Supp. 3d at 428 (emphasis 

in original). In other words, the analyst testified that he was not misled about the subject of the 

fraud and none of the corrective disclosures were corrective to him. See id. at 429 (citing 

deposition testimony by the analyst that he “had it right the whole time . . . [and] was not misled 

on the level of debt”). Like SAM, Capital Guardian understood and accepted Vivendi’s liquidity 

risks and chose to invest anyway. Capital Guardian, 183 F. Supp. 3d at 461, 466–67 (noting 

that, prior to any of the corrective disclosures, Capital Guardian’s analyst projected that 

Vivendi’s debt would increase from approximately €23 billion to €29.8 billion in a short period 

of time and that the company “would need to sell assets in order to address its liquidity needs”). 

On these facts, the court concluded that Vivendi had rebutted the Basic presumption because 

Capital Guardian was “indifferent to the fraud.” Id. at 466 (emphasis added). These facts are 

plainly distinguishable from the facts in the instant case, where Sirois’s testimony demonstrates 

that Van Berkom did not invest with full knowledge of the troubles facing the retail division. 

See Sirois Dep. at 27:18–22 (“[W]e knew that the retail margins were weaker. We know they 

were lower. We just didn’t know they were that bad. And when [LSI] lost the surplus contract 

that proved to be the case.”).
39

(c) Van Berkom’s Private Meetings with 

LSI Management Do Not Defeat Caisse’s 

Typicality

The defendants’ final argument as to Caisse’s atypicality is that Van Berkom made its 

investment decisions based on information obtained during private meetings with LSI 

management. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 22. The defendants point out that Sirois had 

at least nine private meetings and calls with LSI management, including phone calls with Mr. 

Angrick that lasted up to 45 minutes, and face-to-face meetings that lasted at least an hour. Id. at 

23 (citing Sirois Dep. at 53:15–25). Moreover, many of Van Berkom’s stock purchases and sales 

occurred immediately following these meetings, see Defs.’ Opp’n Pls.’ Mot. Class Cert at 23–24 

(documenting Van Berkom contact with LSI and Van Berkom purchases of LSI stock), and 

Sirois testified that it would be “logical” to conclude that shares were purchased “after [he] had a 

meeting or a call with [LSI] management,” id. at 24 (quoting Sirois Dep. at 117:6–11). Caisse 

contends that “‘[m]ere communication with corporate insiders will not render a class 

representative atypical for class certification purposes absent the exchange of non-public 

information.’” Pls.’ Omnibus Reply at 18 (quoting In re DVI, Inc. Sec. Litig., 249 F.R.D. 196, 

202–03 (E.D. Pa. 2008)); accord In re Providian, Civ. No. 01-03952, 2004 WL 5684494, at *3

(N.D. Cal. Jan. 15, 2004); In re Intuitive Surgical,Civ. No. 5:13-01920, 2016 WL 7425926, at 

*6 (N.D. Cal. Dec. 22, 2016); Beaver Cty. Emp. Ret. Fund v. Tile Shop Holdings, Inc., Civ. No. 

14-786, 2016 WL 4098741, at *5 (D. Minn. July 28, 2016); Wallace v. IntraLinks, 302 F.R.D. 

310, 316 (S.D.N.Y. 2014). The defendants respond that “[i]t does not matter whether plaintiffs 

actually received inside information” because “‘the fact remains that [Caisse] will be required to 

devote considerable time to rebut the unique defense.’” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 

22–23 (quoting Shiring v. Tier Tech., Inc., 244 F.R.D. 307, 314 (E.D. Va. 2007)).
40

Yet, clearly, private meetings conceivably threaten to become a focus of the litigation

only if a party could plausibly argue that insider information was exchanged. See, e.g., Shiring, 

244 F.R.D. at 314 (“[T]he presence of an arguable defense is sufficient to find atypicality. 

(emphasis added)). Here, however, even after extensive discovery, the defendants do not so 

much as assert that Van Berkom received insider information not publicly available, and the 

evidence refutes any such ideation. See Sirois Dep. at 54:8–19 (defense counsel questioning 

Sirois about his visits to LSI, and moving on to a different subject after Sirois testified that, 

during a meeting at LSI, he “[saw] [s]taffers and sales people, people on the collection side, 

things like that. There wasn’t anything, frankly, too impressive to see. It was just a business 

office.”). Thus, the defendants’ concern that the private meetings would become the focus of the 

litigation appears entirely unfounded. See In re Intuitive Surgical Sec. Litig., 2016 WL 7425926, 

at *6 (“Courts have consistently certified classes where there was no evidence that the named 

plaintiff received non-public information from a corporate officer. In general, the cases hold that 

if the plaintiff has received information from company insiders that confirms, reflects, repeats, or 

even digests publicly available market information, that plaintiff is an appropriate class 

representative.” (internal quotation marks omitted)). 

Moreover, finding atypicality under these circumstances would frustrate the purpose of 

the PSLRA. As other courts have recognized, “institutional investors, especially those with large 

holdings, [commonly] communicate directly with corporate officials.” In re DVI, Inc. Sec. Litig., 

249 F.R.D. at 203. “Since the PSLRA clearly contemplates that institutional investors—who are 

generally understood to communicate with corporate officers—will serve as class 

representatives,” courts have “decline[d] to find that an investor will be precluded from serving 
41

as class representative merely because of his private communications with corporate insiders 

about publicly available information.” Id.

2. Pier Capital

Pier Capital, one of NNERF’s investment advisories, acquired its first shares of LSI in 

January 2012, and purchased additional shares between February and July 2012. Pls.’ SMF 

¶¶ 100–01. Pier Capital sold all its shares in LSI on November 28, 2012, for a profit of over $1.6 

million, yielding a $69,270 profit for NNERF. Id. ¶¶ 102–04.12 The defendants argue that 

NNERF is subject to unique defenses and therefore atypical because Pier Capital was not misled

about the health of the retail division. Specifically, the defendants contend that Pier Capital’s 

portfolio manager, Alexander Yakirevich, decided to invest in LSI on the “underst[anding] that 

LSI retail margins were not going to grow,” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 25 (emphasis 

in original), and that Pier Capital’s decision to liquidate its position in LSI was due solely to 

factor unrelated to retail division margins, id. at 27–28; Defs.’ Reply Supp. Mot. Summ. J. at 16.

(a) Pier Capital Did Not Know the Truth

About the Subject of the Fraud

The defendants’ argument that Pier Capital knew the truth about the retail margins is 

belied by the record. Pier’s investor letter addressing performance in the second quarter of 2012, 

issued on July 13, 2012, indicates that Pier knew about the problems with LSI’s DoD business 

but was unaware of the issues in the retail division. The investor letter reports that “20% of 

[LSI’s] business is from the government and recently this segment has stopped growing, which 

together with lower prices for scrap metals has lowered their still high growth rate,” “knock[ing] 

the stock down by about 15%” in early June 2012.” Abramowitz Decl., Pier Capital Q2 Investor 

 12 As the plaintiffs point out, NNERF was invested in LSI after November 28, 2012, through its investment 

advisor NewSouth, and NNERF “suffered a loss based on its investment in LSI during the Class Period.” Id.
42

Letter, Ex. 32 at PIER_000053, ECF No. 88-5. Further, Pier Capital’s “take” on the stock price 

drop “[wa]s that with commercial growth rates still very strong (and a very large market 

opportunity), it simply does matter if their government business remains unchanged and becomes 

an event smaller piece of the pie.” Id. (emphasis added). Indeed, as Pier communicated to its 

clients, “[o]n the recent dip,” Pier Capital “added to [its] holdings so that this is now our largest 

position at around 2.3%.” Id. (emphasis added). Thus, at least as of July 2012, Pier Capital

evinced no understanding that the retail margins were in decline. That conclusion is reinforced 

by the deposition testimony of Alexander Yakirevich, Pier Capital’s analyst who made the 

decision to invest in LSI. When questioned by defense counsel, Yakirevich acknowledged that 

the he “understood that the government business had stopped growing in 2012” and then stated

that, “[a]s a story, we expected both—obviously you want both businesses—retail and 

government business—to contribute and not, you know, slow down.” Yakirevich Dep. at 

120:10–13 (emphasis added). 

In support of their argument that Pier Capital knew that retail margins would not grow, 

the defendants point to several of the alleged partial corrective disclosures, with which

Yakirevich was familiar. First, the defendants cite Mr. Rallo’s statement at a conference on June

22, 2012, “suggesting that margins—the pace of margin expansion would not be as robust going 

forward.” Yakirevich Dep. at 143:13–16. In testifying about Mr. Rallo’s statement, Yakirevich 

stated that he “understood” from Mr. Rallo’s statements that “‘the pace of margin expansion 

would not be as robust,” but that he did not believe “that it was going to stop.” Id. at 143:14–15, 

152:15–16. Thus, as the plaintiffs allege, Mr. Rallo’s statement conveyed a generalized 
43

possibility of margin decline, but no particulars, and nothing about the retail division, which in 

other statements was touted by the defendants.13 

The defendants also point to Yakirevich’s testimony about an email his colleague

received from an outside analyst and forwarded to Yakirevich concerning a June 2012 report by 

Off Wall Street Consulting Group. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 26. The email stated, 

inter alia, that “margins in [the] commercial business are lower than people realize, therefore 

they are unlikely to drive results.” Id. Yakirevich responded to the email by noting that it “d[id]

not appear to be raising any new issues with the story,” and that “the original investment thesis 

still appears to be intact,” Defs.’ Opp’n Pls.’ Mot. Class Cert., Ex. 33, Yakirevich Email (dated 

July 2, 2012), ECF No. 82-5. Yet, the fact that Pier Capital was aware to some extent that retail 

margins would not continue to grow does not distinguish NNERF from other putative class 

members. Indeed, NNERF fits neatly within the putative class, since the operative complaint in 

this case acknowledges that “[a]lthough Defendants periodically disclosed the fact that, over 

time, they expected margin growth to slow, they did not fully disclose the extent of, or reasons 

for, these challenges.” Am. Compl. ¶ 64; accord, e.g., id. ¶ 11 (“Although Defendants finally 

disclosed the fact that, over time, they expected margin growth to slow, they did not come 

anywhere near the necessary level of candor with investors. Ultimately, deteriorating margins 

was a tremendous problem, . . . a fact that Defendants were keenly aware of but stubbornly 

refused to adequately disclose.” (emphasis added)); id. ¶ 68 (“Although as far back as 2012 

Defendants mentioned that margins could impact Liquidity’s balance sheet in the near term, 

 13 Notably, moreover, Yakirevich testified that he was not present at the conference at which Mr. Rallo made 

the relevant statements, and therefore “do[es]n’t know exactly what [Mr. Rallo] said.” Id. at 143:11–12. Further, 

when asked by the defense counsel whether he “view[ed] the newsthat there were worries about margins going 

forward and that that statement came from the CFO” as “new information,” Yakirevich responded, “to me, it was 

new information.” Id. at 144:9–17. Thus, even if Mr. Rallo’s statements gave Pier Capital some indication that 

retail margin growth would decelerate, Yakirevich’s testimony suggests that Pier Capital was unaware of “worries 

about margins” when first purchasing shares of LSI in January 2012.
44

these were belated and soft-pedaled general references that hardly revealed the truth regarding 

the known impact of competition on margins and profitability.”).14

(b) Pier Capital Was Not Indifferent to 

Retail Margins

The defendants’ second contention—that Pier Capital sold its stock in LSI for reasons 

unrelated to retail division margins, Defs.’ Opp’n Pls.’ Mot. Class Cert. at 27–28—is undercut

by the record, and, even if it were true, would not be dispositive. The defendants first point to an 

email that Yakirevich sent on October 16, 2012, at the same time he sold some of Pier Capital’s 

LSI stock, in which he wrote that “[w]hile we continue to like the long-term growth story behind 

[LSI], we are concerned about the cyclical deceleration in GMV growth.” Defs.’ Opp’n Pls.’ 

Mot. Class Cert., Ex. 35, Yakirevich Email (dated Oct. 16, 2012) at PIER_019271, ECF No. 82-

7. This email, however appears to explain why Pier Capital was scaling down to a 1% interest in 

LSI from its then-current 2.3% interest. Although the email consists only of a single sentence, 

the subject line reads “LQDT – selling to 1% scap smid.” Id. 15 The email is addressed to other 

employees of Pier Capital. Id. During Yakirevich’s deposition, defense counsel inquired about 

the October 16, 2012 email, asking “[a]nd the reason you are selling [the LSI shares] is because 

of concern about deceleration in GMV growth trends?” Yakirevich Dep. at 259:10–12. 

Yakirevich responded: “So, at the time we owned an oversized position. . . . And things ha[d]

been decelerating. Then basically, we are saying is that we need to reduce our exposure.” Id. at 

259:14–21. Regarding Pier Capital’s “oversized position” in LSI, Yakirevich explained that 

 14 The defendants also take issue with the plaintiffs’ claim that LSI’s November 29, 2012 earnings report 

constituted a corrective disclosure, sincethat earnings report was issued one day after Pier Capital sold its last shares 

of LSI. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 27. Accordingly, the defendants press, “Pier Capital (and thus 

NNERF) has no loss attributable to that report.” Id. The defendants say nothing further about the legal significance 

of this fact. The defendants also cite no caselaw indicating that a lead plaintiff is atypical if it did not suffer a direct 

loss from every single alleged misrepresentation.

15 “Scap smid” refers to Pier Capital’s “small cap” portfolio. Yakirevich Dep. at 260:17–19.
45

“[t]ypically, we own between 75 and 100 names in a portfolio. I mean, our strategy is to 

establish 1% positions.” Id. at 33:1–3. Thus, the email on which the defendants so heavily rely 

appears to suggest that, at least in part, the sale of LSI stock down to a 1% position may have 

been simply in keeping with Pier Capital’s “typical[]” practice. In addition, given the plaintiffs’ 

allegations that, at the time of the October 2012 sale, LSI was pumping the market with 

incomplete information about the retail division, one would not expect Yakirevich to choose to 

sell based on that information.

The defendants also cite Yakirevich’s testimony that Pier Capital decided to sell LSI 

because “there w[ere] questions about the government business.” Defs.’ Opp’n Pls.’ Mot. Class 

Cert. at 28 (emphasis in original). From this testimony, the defendants speculate that “[i]t was 

this factor, and not any undisclosed facts or trend concerning retail margins, sales or product mix 

that prompted Pier Capital to sell its LSI shares nearly two years before the May 8, 2014 

announcement that supposedly revealed the truth about the Retail Division.” Id. (emphasis in 

original). Yakirevich’s testimony simply does not establish that retail margins were irrelevant to 

Pier Capital’s investment decisions, and that if the truth had been revealed, Pier Capital would 

have been indifferent to it. In any event, Yakirevich testified that there were concerns about the 

government business at the time, and that this was “one of the factors that basically impact[ed] 

the company’s ability to grow,” Yakirevich Dep. at 125:2–11 (emphasis added).

In sum, the defendants’ arguments that Pier Capital was not misled by the defendants’ 

alleged misrepresentation fail, and NNERF is not atypical.

(c) NNERF Suffered an Overall Loss 

Notwithstanding Pier Capital’s Gain

The defendants also contend that NNERF cannot represent a class of people that suffered 

a loss by investing in LSI because “[i]t is undisputed that Pier Capital’s investment in LSI 
46

yielded a $69,270 profit for NNERF.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 28; see also 

Yakirevich Dep. at 95:9–15. In total, Pier Capital earned over $1.6 million on LSI. Yakirevich 

Dep. at 304:22–305:18. Thus, according to the defendants, NNERF has not suffered the same 

injury as the rest of the putative class, and so is an atypical representative. See Defs.’ Opp’n

Pls.’ Mot. Class Cert. at 28–29. The plaintiffs respond that “[t]his argument borders on the 

disingenuous, for, as Defendants well know, despite making a small profit from the Class Period 

trades made on its behalf by Pier Capital (one of its investment managers), the NNERF as a 

whole suffered a devastating loss of $526,422 based on its’ overall LSI trades during the Class 

Period.” Pls.’ Omnibus Reply at 20.

The defendants do not dispute that the NNERF suffered an overall loss through its 

investments with LSI. NNERF’s small profit, through one of its investment advisors, while 

suffering an overall loss, is a minor factual variation that does not defeat typicality. The 

defendants do not cite any cases to the contrary, and indeed, appear to concede the point by 

arguing that “[w]here the lead plaintiff makes a profit during the class period, ‘he has not 

suffered a loss, his claim fails, and he is not a typical representative of his class.’” Defs.’ Opp’n 

Pls.’ Mot. Class Cert. at 28 (quoting In re Organogenesis Sec. Litig., 241 F.R.D. 397, 403 (D. 

Mass. 2007)). In other words, the caselaw relied upon by the defendants focuses on the lead 

plaintiff’s overall experience with the stock—not the performance of the individual investment 

advisors acting on behalf of the lead plaintiff.

In an analogous case, the plaintiff-investor had invested through two investment 

advisories, one of which had purchased shares of the defendant’s stock during the class period, 

and one of which had not. See Rosen v. Textron, Inc., 369 F. Supp. 2d 204, 208 (D.R.I. 2005). 

The plaintiffs in that case conceded, and the court agreed, that “only purchases by” the advisory 
47

who made investments during the class period would be “in issue.” Id. Here, the defendants 

may wish to challenge which purchases of LSI stock are in issue, but a typicality challenge is 

unavailing. Notably, other class members may very well have booked a profit on particular 

trades or during particular time periods, even if they suffered overall losses. That Pier Capital 

profited from a small portion of its investment is not sufficiently anomalous to affect adversely 

NNERF’s typicality.16

3. New South

The defendants argue that “NNERF is also subject to unique defenses based on the 

testimony of its second investment advisor, New South.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 

29. Echoing their arguments with respect to Van Berkom and Pier Capital, the defendants assert 

that, unlike other investors, New South (1) “was not misled by or about any of the purported 

material misstatements that form Plaintiffs’ core theory of fraud” because “retail margins and 

organic growth were not material to New South’s investment decision;” (2) “had nearly a dozen 

private calls and meetings with [LSI’s] senior management;” and (3) “purchased LSI shares 

 16 In a similar vein, the defendants assert that Pier Capital is atypical because it cannot prove loss causation, 

i.e., that its losses are attributable to the fraud. In particular,the defendants contend that Pier Capital cannot “recoup 

any price decline that occurred after November 28, 2012 because it no longer owned shares and thus cannot 

demonstrate loss causation.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 28. For support, the defendants cite In re Flag 

Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29 (2d Cir. 2009), in which an in-and-out trader that sold months before 

the alleged corrective disclosure was deemed atypical and inadequate, and therefore not permitted to serve as a class 

representative. Id. at 41. In re Flag Telecom Holdings, however, was decided on its unique facts, which are not 

present in the instant case. In particular, the plaintiffs in In re Flag Telecomm Holdings, relied on a “leakage” 

theory to establish loss causation, i.e., that “the truth regarding Flag’s financial condition began to leak into the 

market prior to the February 13, 2002 announcement, causing the value of Flag common stock to decline,” since the 

plaintiffs had sold their stock shares prior to the end of the class period on February 13, 2002. Id. at 40. The Second 

Circuit held that the plaintiffs had “failed to demonstrate that any of the information that ‘leaked’into the market 

prior to February 13, 2002, revealed the truth with respect to the specific misrepresentations alleged.” Id.; accord 

Silversman v. Motorola, Inc., 259 F.R.D. 163, 171 (N.D. Ill. 2009) (noting that the Second Circuit in In re Flag 

TelecomHoldings “did not reject the leakage theory per se”). Here, in contrast, the defendants do not contest that 

the partial corrective disclosures identified by the plaintiffs—the June 22, 2012 statement by Mr. Rallo, the July 2, 

2012 Off Wall Street report, and a September 12, 2012 report projecting reduced earnings estimates—gave some 

indication that retail margins were deteriorating but did not reveal the full extent of that decline.
48

because it believed that the market for LSI stock was inefficient.” Id. (emphasis in original).

Each of these arguments is addressed in turn.

(a) The Retail Division Was Not 

Irrelevant to New South’s Investment 

Thesis

First, citing testimony by Alexander McLean, New South’s portfolio manager who 

oversaw LSI investments, the defendants contend that New South’s investment in LSI was 

premised on the DoD contract and that the performance of the retail division was irrelevant. Id.

at 30 (“New South’s investment thesis was destroyed by the results of the DoD auction—not 

revelation of any hidden problem with the Retail Division.”). Indeed, “New South began to 

liquidate its LSI holdings almost a month before the final May 8, 2014 corrective disclosure.” 

Id. (emphasis in original). The defendants focus on McLean’s testimony about an October 6, 

2014 quarterly letter to investors, issued after LSI’s final May 8, 2014 corrective disclosure, and 

argue that this letter “confirm[s] that its decision to sell had nothing to with Retail.” Id. 

The letter in question states that that New South’s “initial experience with [LSI] was 

quite a prosperous one,” McLean Dep. at 217:26, but that “[s]everal issues surfaced that were not 

accounted for in the due diligence process, including more unprofitable accounts than expected,” 

a statement which referred to LSI’s GoIndustry acquisition in the commercial capital assets 

division, id. at 217:7–15. The following paragraph of the letter states that “more recent setbacks 

with the DoD surplus contract will be of longer lasting detriment.” Id. at 219:1–6 (referencing 

LSI’s loss of the rolling stock options contract to a competitor). The defendants emphasize that

this letter, issued after the full truth came to light, “had nothing to do with Retail.” Defs.’ Opp’n 

Pls.’ Mot. Class Cert. at 30; compare McLean Dep. at 205:21–206:3 (“Q: And was that decision 

[to sell LSI stock] primarily driven by the loss of a DOD contract, as we discussed? A: That 

was—that was definitely—a major part of our decision.”). During his deposition, McLean 
49

testified that the loss of the contract “was definitely a—a major part of our decision.” (emphasis 

added)). Yet, just because New South sold its LSI stock upon the loss of the DoD contract (and 

attributed its sale to the loss of that contract) does not establish that New South was indifferent to 

the alleged fraud or the health of the retail division, and the defendants have simply adduced no 

testimony to that effect. Compare Capital Guardian, 183 F. Supp. 3d at 466 (the Basic

presumption was rebutted because the defendant, Vivendi, had established that the plaintiff was 

“indifferent to the fraud”).

The defendants also note that in April 2014, following LSI’s loss of the DoD contract, 

New South revised its model, which “showed LSI’s EBITDA growth going to negative 23.8% in 

2015 and projecting a negative EBIDTA in 2014.” Defs.’ Opp’n Pl.’s Mot. Class Cert. at 30 

(citing McLean Dep. at 72:13–16). At the same time, this revised model “contained no change 

in New South’s estimate for the Retail Division,” and, accordingly, it is clear that “all of the 

positive year over year growth projections in the New South model were reversed by the loss of 

one DoD contract and the increased costs associated with the DoD contract it retained, not 

anything to do with the retail division.” Id. (citing McLean Dep. at 205:14–206:3). This model 

does not prove as much as the defendants suppose. Although the model indicates that the loss of 

the DoD business was catastrophic, it does not indicate that the retail division was irrelevant.

The defendants next assert that New South was not misled about competition because 

McLean knew about LSI’s two major competitors, including Iron Planet, which outbid LSI for 

the DoD contract. Id. According to the defendants, “[a] Plaintiff cannot possibly represent a 

class adequately, much less be typical, if its own investment manager flat out contradicts claims 

about the falsity of a statement that ‘when you look to the competition, there is a lot of it, but it’s 

not very formidable.’” Id. at 31 (quoting Am. Compl. ¶ 165). The defendants mischaracterize 
50

McLean’s testimony. McLean did not testify that the competition was not formidable but rather 

that “at the time, we thought that Liquidity Services had advantages over their competition.” 

McLean Dep. at 204:7–9 (emphasis added). Thus, contrary to the defendants’ argument, 

McLean did not concede in his deposition that LSI’s competition was actually “not very 

formidable,” but rather that, at the time, presumably based on statements by LSI management, 

McLean was under the impression that LSI had a competitive advantage. 

The defendants further argue that New South was not misled about LSI’s retail margins 

and organic growth. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 31. Again, the defendants twist 

McLean’s testimony and misunderstand the plaintiffs’ allegations. For example, the defendants 

state that, “[f]ar from being misled that margins would improve, . . . by June 21, 2012, McLean 

expected that LSI’s margins would drop by 100 to 150 basis points.” Id. (emphasis in original) 

(citing McLean Dep. at 130:9–13). Yet McLean’s testimony on this point suggests that he 

understood that margins would drop 100 to 150 basis points “from the Go/Dove integration,”

McLean Dep. at 130:16–17, which occurred not in the retail division, but in the commercial 

capital assets division, id. at 129:4–8. Likewise, the defendants point to McLean’s notes, dated 

July 16, 2013, id. at 179:12–13, from what appeared to be an earnings call, id. at 180:5. The 

defendants assert that McLean’s notes from this call “reflect discussion about ‘many disruptions 

in retail.’” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 31 (quoting McLean Dep. at 180:10–17). Yet, 

the full notation reads “[m]any disruptions in retail in the past,” McLean Dep. at 180:13–14

(emphasis added), rather than any statement about retail margins in the future. Moreover, when 

defense counsel asked McLean whether his notes referred to “something that was said on the 

earnings call,” McLean responded, “I don’t remember,” and defense counsel did not press 
51

further. Id. at 180:15–16.17 As the plaintiffs point out, moreover, much of the other evidence 

marshalled by the defendants concerns margins in general rather than retail margins in particular. 

The defendants’ effort to show that “McLean understood LSI management to be issuing 

warnings about the retail margins and understood that it would notsee margin growth,” Defs.’ 

Opp’n Pls.’ Mot. Class Cert. at 31 (emphasis in original), is consistent with the allegations in the

complaint. As noted above, the main thrust of the plaintiffs’ claims is that, “[a]lthough as far 

back as 2012 Defendants mentioned that margins could impact Liquidity’s balance sheet in the 

near term, these were belated and soft-pedaled general references that hardly revealed the truth 

regarding the known impact of competition on margins and profitability.” Am. Compl. ¶ 68. 

Accordingly, the fact that McLean was generally aware that retail margins would not continue to 

grow does not render New South and, by extension, NNERF, atypical. 

(b) New South’s Private Meetings with 

LSI Management Do Not Negate 

Typicality

Next, the defendants argue that New South’s relationship with LSI management renders 

NNERF atypical. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 32. McLean testified that he met with 

LSI management, including Messrs. Angrick and Rallo, before the initial investment was made,

McLean Dep. at 36:8–17, and “periodically” thereafter, id. at 39:2–5. 

 17 The defendants also cite New South’s reaction to third quarter 2011 earnings results, after the release of 

which LSI management warned that “margins may be squeezed in coming quarters as consumer weakness pressures 

volume and value of retail goods sold” in LSI’s marketplaces. McLean Dep. at 111:19–22. McLean testified that 

one of New South’s “takeaway[s]” was that “margins were [not] going up, at this point in time, for [LSI’s] retail 

business.” Id. at 112:5–13; see also id. at 112:14–17 (“Q: All right. But that’s what you understood management to 

be doing, is issuing a warning about retail margins? A: Yes.”). This evidence falls short of establishingthat New 

South was not misled about margins in the retail division. First, LSI issued this statement in May 2011, eight 

months before the start of the class period. Second, this “warning” appeared in public material issuedby LSI, and so 

cannot form the basis of a unique challenge to New South’sreliance, as opposed to all investors, with access to 

public information.
52

“The presumption of reliance may be rebutted if a purchaser of stock relies on nonmarket information that is not generally available to the public and, therefore, not available to the 

unnamed class members.” Beach v. Healthways, Inc., Civ. No. 3:08-0569, 2009 WL 3245393, at 

*3 (M.D. Tenn. Oct. 5, 2009). As the defendants acknowledge, however, McLean testified that 

New South “w[as] not provided with material non-public information” in its private meetings 

with LSI. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 32. Indeed, when asked whether “New South 

ha[d] any non-public information about Liquidity when it made investment decisions, at any 

point, to purchase Liquidity stock,” McLean responded, “[n]ot that I’m aware of.” McLean Dep. 

at 321:1–5. The defendants nevertheless argue that NNERF’s typicality is destroyed because 

“New South admitted that its decision to invest was influenced by its private meetings and

discussions with management.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 33. The defendants rely 

on Beck v. Status Game Corp., 1995 WL 422067, at *4 (S.D.N.Y. July 14, 1995), in which the 

court held that a putative class representative was atypical because he would be subject to a 

unique defense in light of his testimony that private meetings with the defendant influenced his 

decision to buy the defendant’s stock. Beck, however, is simply not the majority rule, as 

explained supra.18 So long as insider information was not divulged during the private 

meetings—as is the case here, in light of McLean’s unrebutted testimony—the NNERF will not 

be subject to a unique defense on this basis. See, e.g., In re Intuitive Surgical, 2016 WL 

 18 Indeed, the caselaw that may be read to support the defendants’ position tends to be older, see, e.g., Grace 

v. Perception Technology Corp., 128 F.R.D. 165, 169 (D. Mass. 1989) (“It is beyond reality to suggest that any 

potential shareholder could meet with corporate officers to discuss information that was already available to the 

public. Personal contact with corporate officers and special meetings at the company will render a plaintiff atypical 

to represent the class.”), whereas more recent caselaw indicates that private meetings are insufficient, on their own, 

to subject a plaintiff to unique defenses. Further, although on first blush Graceappears to hold that private meetings 

render a plaintiff atypical, the court in that case operated under the assumption that private meetings could never be 

cabined to exclusively public information—as the defendants have conceded is the case here. See Defs.’ Opp’n Pls.’ 

Mot. Class Cert. at 32 (acknowledging that neither New South nor Van Berkom were “provided with material nonpublic information in these meetings”).
53

7425926, at *6 (“The fact that certain of Plaintiffs’ investment managers met with [Defendant] 

on occasion does not, without more, render [Plaintiffs] atypical of the proposed class.”); O’Neil 

v. Appel, 165 F.R.D. 479, 492 (W.D. Mich. 1996) (“Each plaintiff has filed an affidavit 

indicating that he did not rely upon any information that was not a matter of public record. It 

often happens that purchasers rely upon statements by brokers, and that brokers have some level 

of access to corporate officials. This, without more, is insufficient to find a class representative 

to be atypical.” (citing Kilpatrick v. J.C. Bradgord Co., 827 F.2d 718, 724 (11th Cir. 1987))). 19

(c) New South’s Investment Strategy Does 

Not Defeat NNERF’s Typicality

Finally, as with Caisse, the defendants argue that NNERF is subject to a unique defense 

because New South was a “value investor” and invested based on the notion that “the market for 

(and thus stock price of) LSI was inefficient,” which rebuts the Basic presumption of reliance. 

Defs.’ Opp’n Pls.’ Mot. Class Cert. at 34. As a general matter, New South questions the notion 

of efficient markets, telling clients that “investment markets are neither rational nor efficient,” 

and the “concept of market efficiency is completely invalid.” McLean Dep. at 292:4–21, 294:4–

295:9. In making investment decisions, New South constructs its own model “to determine a 

value for the company.” McLean Dep. at 44:20–21. New South invests in companies it “thinks 

are trading at significant discounts to what [New South] determine[s] their true intrinsic value 

per share to be.” Id. at 45:9–12. McLean testified that New South “did not think the market was 

accurately pricing the value of [LSI].” Id. at 285:5–13. 

 19 The defendants also argue that New South is subject to unique defenses because New South “proposed 

business strategies to LSI.” Id. at 33 (citing New South’s proposal that LSI acquire GoIndustry and that LSI engage 

FedEx as a client). Even if true, the defendants do not explain why this fact is relevant to the claims in this suit, nor 

does Shiring, 244 F.R.D. at 314, the single case the defendants cite, hold that a securities plaintiff is atypical because 

the plaintiff proposed business strategies to the defendant.
54

As explained above with respect to Van Berkom, a plaintiff’s status as a value investor is 

not, in and of itself, sufficient to rebut the Basic presumption. See Halliburton II, 134 S. Ct. at 

2410–11; Willis, 2017 WL 1063479, at *7; In re Diamond Foods, 295 F.R.D. at 252 (noting that 

“courts have routinely rejected” the argument that institutional investors’ investment strategies 

subject them to unique defenses concerning the Basic presumption and collecting cases). Here, 

moreover, although New South utilized a sophisticated model in determining whether to invest in 

LSI, McLean testified that there was “actually a . . . line item in [his] model for margins,” 

McLean Dep. at 51:11–13, and, to derive input values for its model, New South looked at 

historical information and “evaluated how the company had been growing in the past” and “what 

sort of margins they could do,” id. at 51:1–10. Among the metrics considered by New South,

“top line growth,” which in this case was GMV, and “cash flow margins” were viewed as “the 

most important ones.” Id. at 51:17–52:4. New South’s investment analysis was based on 

publically available information, such as “10-Ks, Qs, proxy statements, . . previous earnings,

releases, [and] conference call transcripts.” Id. at 43:15–20. Accordingly, the defendants cannot 

dispute that public information concerning margins factored into New South’s models and 

resultant investment decisions with respect to LSI, and New South’s investment strategy thus 

does not subject NNERF to unique defenses.20

 20 In addition to the non-reliance argument, the defendants contend that Caisse and NNERF are atypical 

because “they are subject to [] unique defenses and arguments to a jury about spoliation.” Defs.’ Opp’n Pls.’ Mot. 

Class Cert. at 35. According to the defendants, Caisse did not instruct Van Berkom to preserve documents 

concerning LSI, and neither New South nor Pier Capital received a preservation notice from NNERF, creating a 

possibility that highly material documents from the investment advisors have been lost. Id. at 35–36. As a threshold 

matter, the caselaw cited by the defendants pertains to parties’ obligations to preserve evidence—not the 

preservation obligations of third parties, like Van Berkom, Pier Capital, and New South. See id. at 35 n.15 (citing 

Falcon v. Philips Electronics N. Am. Corp., 304 Fed. App’x896, 897 (2d Cir. 2008); Fortress Bible Church v. 

Feiner, 734 F. Supp. 2d 409, 521 (S.D.N.Y. 2010), aff’d, 694 F.3d 208 (2d Cir. 2012)). In any event, as the 

plaintiffs point out, Pls.’ Omnibus Reply at 21, the defendants’ spoliation argument appears to be predicated on the 

testimony of Yakirevich, who testified that he personally first learned of the litigation in 2016, Yakirevich Dep. at 

46:16–22, and McLean, who testified that he never received a litigation hold notice, McLean Dep. at 33:14–18. In 

fact, however, NNERF sent litigation hold notices to representatives at both Pier Capital and New South. See Pls.’ 

Omnibus Reply, Ex. 27, Document Retention Letter from NNERF to Pier Capital (dated Oct. 22, 2014) at 
55

* * *

In sum, then, each of the defendants’ arguments concerning the co-lead plaintiffs’ 

typicality fails, and certification is not precluded under Rule 23(a)(3). The defendants also 

argue, however, that certification is improper because the co-lead plaintiffs cannot satisfy Rule 

23(a)(4)’s adequacy requirement, which argument is addressed below.

d. Adequacy

Rule 23(a)’s final requirement is that a putative class representative “fairly and 

adequately protect the interests of the class.” FED. R. CIV. P. 23(a)(4). The D.C. Circuit has 

recognized two criteria for determining the adequacy of representation: (1) “the named 

representative[s] must not have antagonistic or conflicting interests with the unnamed members 

of the class,” and (2) “the representative[s] must appear able to vigorously prosecute the interests 

of the class through qualified counsel.” Hoyte v. District of Columbia, Civ. No. 1:13-00569, 

2017 WL 3208456, at *4 (D.D.C. July 27, 2017) (quoting Twelve John Does v. District of 

Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997)). To comport with “[b]asic consideration[s] of 

fairness,” Rule 23(a)(4) “require[s] that a court undertake a stringent and continuing examination 

of the adequacy of representation by the named class representatives at all stages of the litigation 

where absent members will be bound by the court’s judgment.” Keepseagle v. Vilsack, 102 F. 

Supp. 3d 205, 212 (D.D.C. 2015) (quoting Nat’l Ass’n of Reg’l Med. Programs v. Mathews, 551 

 LSI_NNERF_0000008, ECF No. 89-7; id., Ex. 52, Document Retention Letter from NNERF to New South (dated 

Oct. 22, 2014) at LSI_NNERF_0000006, ECF No. 89-9. On the other hand, the plaintiffs do not claim to have sent 

a litigation hold letter to Van Berkom. Nevertheless,the defendants have pointed to no particular or even 

generalized shortcomings in VanBerkom or Caisse’s production, for example, by identifying the types of documents 

that the investment advisors failed to produce. Indeed, as the plaintiffs point out, the three advisories collectively 

produced 101,626 pages of documents, and “[t]he fact that the investment managers’ productions include 

contemporaneous handwritten notes from meetings with LSI managers at least three years prior underscores how 

thorough those productions were.” Pls.’ Omnibus Reply at 22. Finally, the defendants have made no attempt to 

explain why such a spoliation defense would constitute more than a minor variation between the co-lead plaintiffs 

and the remainder of the class.
56

F.2d 340, 344–45 (D.C. Cir. 1976)). As the Supreme Court has observed, the Rule 23(a)(4) 

“adequacy-of-representation requirement ‘tends to merge’ with the commonality and typicality 

requirements of Rule 23(a), which ‘serve as guideposts’” for determining whether a class action 

should be maintained and whether the class representative’s claim and class claims are “so 

interrelated that the interests of the class members will be fairly and adequately protected in their 

absence.” Amchem, 521 U.S. at 626 n.20.

The defendants contest the lead plaintiffs’ adequacy in two ways. First, they argue that 

because typicality and adequacy are interrelated, the atypical lead plaintiffs cannot adequately 

protect the interests of class members. Defs.’ Opp’n Pls.’ Mot. Class Cert. at 17. Given that the 

plaintiffs have established typicality, this adequacy challenge fails. Second, the defendants 

contend that the lead plaintiffs are inadequate representatives because they “have relinquished 

control of this litigation to class counsel” and have insufficient knowledge of the litigation. Id. at 

37. For support, the defendants cite deposition testimony from the Rule (30)(b)(6) designees of 

Caisse and NNERF to demonstrate that the designees had limited knowledge of the merits of the 

case, and the fact that they were contacted by lawyers and asked if they would like to serve as 

class representatives. Id. at 37–39.

The adequacy requirement does not require class representatives to initiate legal 

proceedings, nor does it mandate that representatives have intricate knowledge of complex legal 

claims. See Thorpe v. District of Columbia, 303 F.R.D. 120, 151 (D.D.C. 2014) (“Rule 23(a)(4) 

does not require either that the proposed class representatives have legal knowledge or a 

complete understanding of the representative’s role in class litigation.”); New Directions 

Treatment Servs. v. City of Reading, 490 F.3d 293, 313 (3d Cir. 2007) (“A class representative 

need only possess a minimal degree of knowledge necessary to meet the adequacy standard.”). 
57

While the lead plaintiffs’ involvement in litigation can be considered under the adequacy prong, 

“only a ‘total lack of interest and unfamiliarity with [the] suit would be sufficient grounds to 

deny plaintiffs’ motion [to certify class].’” Harris v. Koenig, 271 F.R.D. 383, 391 (D.D.C. 2010)

(quoting In re Newbridge Networks Sec. Litig., 926 F. Supp. 1163, 1177 (D.D.C. 1996)). 

Particularly in complex cases, “the qualifications of class counsel are generally more important 

in determining adequacy than those of the class representatives.” Id. at 392 (quoting In re Avon 

Secs. Litig., No. 91–cv–2287, 1998 WL 834366, at *9 (S.D.N.Y. Nov.30, 1998)). Indeed, 

“[c]ourts rarely deny class certification on the basis of the inadequacy of class representatives, 

doing so only in flagrant cases, where the putative class representatives display an alarming 

unfamiliarity with the suit, display an unwillingness to learn about the facts underlying their 

claims, or are so lacking in credibility that they are likely to harm their case.” In re Facebook, 

Inc., IPO Sec. & Derivative Litig., 312 F.R.D. 332, 345 (S.D.N.Y. 2015) (quoting In re Pfizer 

Inc. Sec. Litig., 282 F.R.D. 38, 51 (S.D.N.Y. 2012)). 

This is not such a “flagrant” case. Contrary to the defendants’ depiction, Caisse and 

NNERF have demonstrated a reasonable level of knowledge and interest regarding this litigation. 

Caisse’s designee, Paul Eric Naud, stated that the claims involve statements that are “misleading, 

in terms of organic growth and in terms of margins that were too rosy, and the competitive 

situation of the company was not as great as portrayed [by] the management.” Defs.’ Opp’n 

Pls.’ Mot. Class Cert., Ex. 6, Deposition of Paul Eric Naud at 103:11–14, ECF No. 81-7. Naud 

also demonstrated knowledge of the general roles and responsibilities of lead plaintiffs, and 

stated that Caisse was regularly meeting with counsel and staying updated on the case. Id. at 

256:5–21. Similarly, the NNERF’s 30(b)(6) designee, Tonya Anne O’Connell expressed 

knowledge that the “claims in this case [are] on the retail side where Liquidity claimed that the 
58

retail business was doing very well.” Defs.’ Opp’n Pls.’ Mot. Class Cert., Ex. 7, Deposition of 

Tonya Anne O’Connell at 74:22–24, ECF No. 81-8. She also demonstrated basic knowledge of 

the status and procedural history of the lawsuit. Id. at 29:2–17. Thus, Caisse and NNERF, who 

have already satisfied the PSLRA’s requirements for appointment as co-lead plaintiffs, see Order 

Appointing Lead Pl. & Approving Selection of Counsel, have sufficient knowledge and control 

of the litigation to meet the adequacy requirement. Accordingly, all four Rule 23(a) 

requirements are satisfied.

2. Rule 23(b) Requirements

In addition to satisfying all four Rule 23(a) requirements, a party seeking to certify a class 

must meet the requirements set out in one of Rule 23(b)’s subsections. Here, the lead plaintiffs 

rely on Rule 23(b)(3), which requires that “questions of law or fact common to class members 

predominate over any questions affecting only individual members, and that a class action is 

superior to other available methods for fairly and efficiently adjudicating the controversy.” 

While the defendants do not contest that the plaintiffs have demonstrated the superiority of the 

class action in this case, the defendants argue that the plaintiffs have not established that 

common questions of law or fact predominate. The two prongs of the Rule 23(b)(3) inquiry are

addressed in turn.

a. Predominance

To demonstrate that common issues predominate over individualized issues, a plaintiff 

need not “prove that each ‘element of his claim is susceptible to classwide proof.’” Amgen, 568 

U.S. at 469. Rather, the predominance inquiry “tests whether proposed classes are sufficiently 

cohesive to warrant adjudication by representation.” Amchem, 521 U.S. at 623. “This calls upon 

courts to give careful scrutiny to the relation between common and individual questions in a 
59

case.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016). “An individual question 

is one where ‘members of a proposed class will need to present evidence that varies from 

member to member,’ while a common question is one where “the same evidence will suffice for 

each member to make a prima facie showing [or] the issue is susceptible to generalized, classwide proof.’” Id. (quoting 2 W. Rubenstein, NEWBERG ON CLASS ACTIONS § 4:50, pp. 196–97 

(5th ed. 2012) (internal quotation marks omitted)). The predominance inquiry turns on “whether 

the common, aggregation-enabling, issues in the case are more prevalent or important than the 

non-common, aggregation-defeating, individual issues.” Id. (emphasis added) internal quotation 

marks omitted); accord In re Petrobras Sec., 862 F.3d 250, 268 (2d Cir. 2017) (“[P]redominance 

is a comparative standard.”). Critically, “[w]hen ‘one or more of the central issues in the action 

are common to the class and can be said to predominate, the action may be considered proper 

under Rule 23(b)(3) even though other important matters will have to be tried separately, such as 

damages or some affirmative defenses peculiar to some individual class members.’” Tyson 

Foods, 136 S. Ct. at 1045 (quoting 7AA C. Wright, A. Miller, & M. Kane, FEDERAL PRACTICE 

AND PROCEDURE § 1778, pp. 123–24 (3d ed. 2005)).

In this case, the plaintiffs have established that the central questions of “(i) whether 

Defendants intentionally or recklessly made materially false and misleading statements and/or 

omissions; and (ii) whether such false and misleading statements and/or omissions caused the 

members of the Class to suffer damages as a whole” can be answered through common evidence. 

Pls.’ Mem. Supp. Class Cert. at 13. The defendants argue, however, that individualized damages 

questions predominate over these common questions. The plaintiffs retained Chad Coffman to 

prepare an expert report addressing, inter alia, “whether the calculation of damages in this matter 

are subject to a common methodology under Section 10(b) . . . and SEC Rule 10b-5.” Id., Ex. 2, 
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Expert Report of Chad Coffman (“Coffman Rep.”) at ¶ 1, ECF No. 64-4. In addressing the 

damages issue, Mr. Coffman began by stating that he had “not been asked to calculate class-wide 

damages in this action,” since damages “will be subject to further discovery.” Id. ¶ 77; see also 

In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d at 252 (while the plaintiffs need not 

“be prepared at the certification stage to demonstrate through common evidence the precise 

amount of damages incurred by each class member, . . . the common evidence [must] show all 

class members suffered some injury” (emphasis in original) (internal quotation marks omitted)). 

Mr. Coffman’s report explains that the “standard and well-settled formula for assessing damages 

for each class member under Section 10(b) is the ‘out-of-pocket’ method, which measures 

damages as the artificial inflation per share at the time of purchase less the artificial inflation at 

the time of sale . . . .” Coffman Rep. ¶ 77. According to Mr. Coffman, “[t]he methodology and 

evidence for establishing the artificial inflation per share in the market price on each day during 

the Class Period is also common to the class and can be measured class-wide.” Id. ¶ 78. Most 

commonly, experts “quantify artificial inflation” by “perform[ing] an event study that measures 

price reactions to disclosures that revealed the relevant truth concealed by the alleged material 

omissions and/or misrepresentations.” Id. Such a study “would be common to the class.” 

Id. Damages for any given class member would be determined “formulaically” by considering 

“the investor’s purchase and sale history for the security, which is routinely available from 

brokerage statements and/or other documents that provide evidence of securities transactions.” 

Id. In sum, then, Mr. Coffman concluded, “based on [his] expertise and experience in dozens of 

similar matters and understanding the nature of the claims in this case,” that damages “are 

subject to a well-settled, common methodology that can be applied to the class as a whole.” Id.
61

The defendants advance two arguments critical of Mr. Coffman’s report: first, that Mr. 

Coffman’s report does not adequately demonstrate that damages are capable of measurement on 

a class-wide basis; and, second, that Mr. Coffman failed to explain how the plaintiffs’ damages 

methodology is consistent with its theory of liability and “‘measures only those damages 

attributable to that theory.’” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 41 (quoting Comcast Corp. v. 

Behrend, 133 S. Ct. 1426, 1432–33 (2013)). Given that the defendants’ arguments are 

predicated on Comcast, a review of that decision is helpful.

Comcast involved claims by Comcast subscribers seeking damages for alleged violations 

of the federal antitrust laws. 133 S. Ct. at 1429–30. The question presented was whether the 

class of subscribers had been properly certified under Rule 23(b)(3)—i.e., whether questions 

common to the class predominated over individualized questions. Id. at 1430. The district court 

had held—and neither party disputed—that, to satisfy Rule 23(b)(3)’s predominance 

requirement, the plaintiffs had to show “(1) that the existence of individual injury resulting from 

the alleged antitrust violation (referred to as ‘antitrust impact’) was ‘capable of proof at trial 

through evidence that was common to the class rather than individual to its members;’ and 

(2) that the damages resulting from that injury were measurable ‘on a class-wide basis’ through 

use of a ‘common methodology.’” Id. (quoting Behrend v. Comcast Corp., 264 F.R.D. 150, 154 

(E.D. Pa. 2010)). Regarding the first requisite showing, the plaintiffs proposed four theories of 

antitrust impact. Id. The district court credited only one of those theories—the “overbuilderdeterrence theory,” i.e., that Comcast’s actions would deter market entrants—as “capable of 

classwide proof and rejected the rest.” Id. at 1431. The district court further found that damages

could be calculated on a class-wide basis. Id. On appeal to the Third Circuit, and again before 

the Supreme Court, Comcast argued that the plaintiff-subscribers had not met their burden of 
62

proving predominance, since the plaintiffs’ damages model “did not isolate damages resulting 

from any one [of the four] theor[ies] of antitrust impact.” Id.

The Supreme Court began with the “unremarkable premise” that “[i]f [the plaintiffs] 

prevail on their claims, they would be entitled only to damages resulting from reduced 

overbuilder competition, since that is the only theory of antitrust impact accepted for class-action 

treatment by the District Court.” Id. at 1433. Accordingly, “a model purporting to serve as 

evidence of damages in this class action must measure only those damages attributable to that 

theory.” Id. at 1433 (emphasis added). If a model measures damages not attributable to the 

alleged injury, then the model “cannot possibly establish that damages are susceptible of 

measurement across the entire class for purposes of Rule 23(b)(3).” Id. To be sure, 

“[c]alculations need not be exact,” but “any model supporting a plaintiff’s damages case must be 

consistent with its liability case, particularly with respect to the alleged anticompetitive effect of 

the violation.” Id. (internal quotation marks omitted). In Comcast, because “the model assumed 

the validity of all four theories of antitrust impact initially advanced by [the plaintiffs],” id. at 

1434, there was “no question that the model failed to measure damages resulting from the 

particular antitrust injury on which petitioners’ liability . . . [was] premised,” id. at 1433. Thus, 

the proposed class had been improperly certified under Rule 23(b)(3). Id. at 1435.

The D.C. Circuit has examined Comcast on only one occasion. In In re Rail Freight Fuel 

Surcharge Antitrust Litigation, freight customers brought an antitrust class action against the 

four major freight railroad companies, alleging that the railroads had engaged in a price fixing 

conspiracy in setting their fuel surcharges. 725 F.3d at 248. By way of background, between 

March 2003 and March 2004, the defendants did away with their previous policy of assessing 

fuel surcharges only if fuel prices reached a certain level (called a “trigger” or “strike” price). 
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See id. “Not all shippers were affected” by this change, however, since some of the putative 

class members “had entered into so-called legacy contracts with the defendants . . . , thereby 

guaranteeing that they would be subject to fuel surcharge formulae that predated the later 

changes.” Id. This fact ultimately proved dispositive, as explained below.

Before the district court, the certification decision “centered on the predominance 

requirement, and whether the plaintiffs could show, through common evidence, injury in fact to 

all class members from the alleged price-fixing scheme.” Id. at 249. The district court 

ultimately certified the class of freight customers, and the D.C. Circuit granted interlocutory 

review of the certification order. Id. at 251. Much of the relevant Comcast analysis comes from 

the D.C. Circuit’s rationale for granting interlocutory review, which requires, inter alia, that the 

“certification decision . . . be questionable.” Id. at 252 (internal quotation marks omitted). The 

Court began by explaining that “[m]eeting the predominance requirement demands more than 

common evidence [that] the defendants colluded to raise fuel surcharge rates.” Id. In addition, 

the plaintiffs had to show that “they [could] prove, through common evidence, that all class 

members were in fact injured by the alleged conspiracy.” Id. (citing Amchem, 521 U.S. at 623–

24). Absent such a showing, “individual trials [would be] necessary to establish whether a 

particular shipper suffered harm from the price-fixing scheme.” Id. 

The customer-plaintiffs introduced an expert report “purport[ing] to quantify the injury in 

fact to all class members attributable to the defendants’ collusive conduct.” Id.; see also id. at 

249–50 (describing the expert’s methodology). The defendants argued that the expert’s model 

was “defective” and failed to prove that all class members had been injured. Id. at 252. The 

D.C. Circuit agreed, concluding that the expert’s methodology “detects injury where none could 

exist,” since the damages model yielded “similar results” for all class members—regardless of 
64

whether they were subject to legacy contracts, i.e., “those shippers who, during the Class Period, 

were bound by rates negotiated before any conspiratorial behavior was alleged to have 

occurred.” Id.; see also id. at 253 (noting that the damages model “yielded false positives with 

respect to legacy shippers). Accordingly, the plaintiffs had failed to meet their burden of 

showing a class-wide injury in fact, and the D.C. Circuit vacated the class certification order. 

Id. at 252–53 (“Common questions of fact cannot predominate where there exists no reliable 

means of proving classwide injury in fact.”).

The D.C. Circuit was careful to note, however, that the plaintiffs need not “be prepared” 

to “demonstrate through common evidence the precise amount of damages incurred by each 

class member.” Id. at 252 (citing Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 

815–16 (7th Cir. 2012); Wal–Mart, 564 U.S. at 362). Instead, it is enough that the common 

evidence “show all class members suffered some injury.” Id. (emphasis in original). The Circuit 

also explained that Comcast, which had been handed down in the months after the district court’s 

decision, “sharpen[ed] the defendants’ critique of the damages model as prone to false positives” 

insofar as Comcast clarified that the district court must “scrutinize the evidence before granting 

certification, even when doing so ‘requires inquiry into the merits of the claim.’” Id. at 253 

(quoting Comcast, 133 S. Ct. at 1433). The Circuit described Comcast as holding that 

“[p]redicating class certification on a model divorced from the plaintiffs’ theory of liability . . . 

indicates a failure to conduct the rigorous analysis demanded by Rule 23.” Id.; see also id. at 

255 (“Rule 23 not only authorizes a hard look at the soundness of statistical models that purport 

to show predominance—the rule commands it.”).

Against this backdrop, the defendants’ arguments predicated on Comcast are unavailing. 

In passing, the defendants assert that Mr. Coffman offers only a “conclusory statement” that 
65

“‘damages in this matter can be calculated using a methodology common to the class.’” Defs.’ 

Opp’n Pls.’ Mot. Class Cert. at 41 (quoting Coffman Rep. ¶ 77). Yet, as set out above, Mr. 

Coffman explained how an event study could be used to ascertain the effect of each alleged 

misrepresentation on LSI’s stock price, and how the study could be applied “formulaically” to 

calculate out-of-pocket expenses for an individual class member. Coffman Rep. ¶ 78. Unlike in 

In re Freight, the defendants have not identified any deficiencies with this methodology, and, 

even after Comcast, other courts have approved of this methodology at the class certification 

stage. See, e.g., Strougo v. Barclays PLC, 312 F.R.D. 307, 327 n.136 (S.D.N.Y. 2016)

(“‘Plaintiff's proposed determination of damages by event study appears to be a workable 

methodology of determining damages on a class-wide basis.’” (quoting Wallace v. IntraLinks, 

302 F.R.D. 310, 318 (S.D.N.Y. 2014)); In re JPMorgan Chase & Co. Sec. Litig., Civ. No. 12-

03852, 2015 WL 10433433, at *7 (S.D.N.Y. Sept. 29, 2015) (approving the plaintiffs’ expert’s 

“propos[al] to calculate classwide, per-share damages through an event study analysis of the 

stock price inflation caused by Defendants’ alleged misrepresentations or omissions”); Wallace, 

302 F.R.D. at 318 (“Presumably, if plaintiff prevails, class members who purchased or sold at 

different times during the class period will be entitled to significantly different recoveries. While 

calculating the proper damages based on the date of purchase and sale may be complicated, it 

does not demand excessive individual inquiry.”); In re Diamond Foods, Inc., Sec. Litig., 295 

F.R.D. at 252 (same). 

The defendants’ second contention is that Mr. Coffman “nowhere explains, as he must 

under Comcast, why the ‘out-of-pocket’ methodology is consistent with Plaintiffs’ theory of 

liability in this case.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 41 (emphasis in original). 

According to the defendants, “[e]ven if the Court were to construe the Complaint here as fitting 
66

the ‘out-of-pocket’ mold,[21] Coffman’s report would still fall well short of Comcast’s exacting 

requirements.” Id. at 42. In particular, the defendants criticize Mr. Coffman’s “unadorned 

incantation” that “he might use an ‘event study’ sometime in the future to calculate damages.” 

Id. (emphasis in original). The defendants argue that Mr. Coffman’s report is “insufficient under 

Rule 23(b)(3)” and cite In re BP P.L.C. Sec. Litig. (“BP”), 2013 WL 6388408, at *17 (S.D. Tex. 

Dec. 6, 2013), for support, see Defs.’ Opp’n Pls.’ Mot. Class Cert. at 42–43. The defendants 

misapprehend BP. Contrary to the defendants’ understanding, the district court in BP did not 

hold that an event study no longer passes muster to show that damages are measurable on a 

class-wide basis at the class certification stage. Instead, the court simply observed Comcast’s 

clear command that “class-wide damages must hew to Plaintiffs’ theories of liability.” BP, 2013 

WL 6388408, at *16; see also id. at *17 (“Plaintiffs have failed to meet their burden of showing 

that damages can be measured on a class-wide basis consistent with their theories of liability.”).

BP is distinguishable from the instant case insofar as the defendants in BP proffered their 

own event study, which raised three ways in which an event study was “inconsistent with 

Plaintiffs’ theories of liability,” id. at *16, two of which the plaintiffs were unable to address, id.

at *17. Here, unlike Comcast, the plaintiffs’ proposed event study is not based on theories of 

liability that have been previously dismissed, and, in contrast to In re Rail Freight Fuel 

Surcharge Antitrust Litigation, no study in this case shows that an injury has occurred where it 

clearly has not (i.e., the false-positive problem the D.C. Circuit identified). Put differently, the 

cases relied upon by the defendants involved denials of class certification because the proffered 

 21 The defendants alternatively argue that, if the Court determines that the plaintiffs may invoke the Affiliated 

Ute presumption of reliance—applicable in the case of an omission, rather than a misrepresentation—then the 

plaintiffs “run head on to the same fatal problem as the . . . plaintiffs” in Ludlow v. BP, P.L.C., 800 F.3d 674 (5th 

Cir. 2015). Defs.’ Opp’n Pls.’ Mot. Class Cert. at 42. This argument need not be addressed since, as explained 

supra,see note 8, the Affiliated Ute presumption is inapplicable in this case.
67

event study did not allow a determination as to whether a particular class member suffered an 

injury in fact. Here, however, because the plaintiffs invoke the Basic presumption, if the 

proposed event study ultimately shows that the alleged misrepresentations caused LSI’s stock 

price artificially to fluctuate upward, all plaintiffs who purchased LSI stock during the class 

period will be able to show an injury in fact. Thus, Mr. Coffman’s proposed event study, which 

would measure the effect of the alleged misrepresentations on LSI’s stock price, tracks the 

plaintiffs’ theory of liability in this case. See La. Mun. Police Emps. Ret. Sys. v. Green Mtn.

Coffee Roasters, Inc., Civ. No. 2:11-289, 2017 WL 3149424, at *7 (D. Vt. July 21, 2017) (“Here, 

Plaintiffs have offered a damages methodology that can be applied on a class-wide basis, and 

that is consistent with their theory of the case. . . . Indeed, Dr. Tabak’s analysis proposes to 

calculate damages throughout the Class Period as alleged by the Plaintiffs, and based upon their 

single theory of fraud perpetrated through November 2011. That methodology does not run 

afoul of Comcast.”); In re JPMorgan Chase & Co. Sec. Litig., 2015 WL 10433433, at *7

(finding predominance where “Plaintiffs’ expert proposes to calculate classwide, per-share 

damages through an event study analysis of the stock price inflation caused by Defendants’

alleged misrepresentations or omissions”).

Unable to identify any specific issue with an event study in this run-of-the-mill securities 

fraud case, the defendants make much of the fact that, “despite extensive motion practice which 

limited and clarified that the only remaining claims related to LSI’s Retail Division, Coffman 

believed that the disclosures at issue here pertained to all divisions of the Company and he would 

not even accept counsel’s contrary representations.” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 43 

(citing Pls.’ Omnibus Reply, Ex. 55, Deposition of Chad Coffman (“Coffman Dep.”) at 15:6–

17:21; 20:7–21:3, ECF No. 89-10). This argument is similar to an argument that was rejected by 
68

a judge in the Southern District of New York. In In re JPMorgan Chase & Co. Securities

Litigation, the plaintiffs’ expert proposed to calculate class-wide, per-share damages through an 

event study to determine the stock price inflation caused by the defendants’ alleged 

misrepresentations. See 2015 WL 10433433, at *7. The defendants argued, inter alia, that the 

plaintiffs’ expert “may not be able to control for the price impact of information other than 

Defendants’ alleged misrepresentations and omissions.” The court did not express an opinion on 

that criticism but noted instead that any such flaws in the expert’s report would “appl[y] to the 

calculation of damages for every member of the Proposed Class.” Id. Accordingly, “the issue of 

damages does not preclude a finding that questions of law or fact common to class members 

predominate over questions affecting only individual members.” Id. Likewise here, to the extent 

that the defendants believe that the plaintiffs’ expert will be unable to “isolat[e] the alleged 

inflationary impact of supposedly false statements concerning the Retail Division from 

statements concerning LSI’s other divisions,” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 44, the 

defendants may take up that issue after the class is certified with respect to all class members. 

See Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 310 F.R.D. 69, 99 (S.D.N.Y. 

2015) (holding that the plaintiffs did not run afoul of Comcast where their expert testified that he 

would use a “damages methodology [that he] customarily appl[ies, which] involves [ ] measuring 

the abnormal return on [the security] on the correct[ive] disclosure date . . . and then adjusting 

for any confounding news”); see also In re Goldman Sachs Grp., Inc. Sec. Litig.,Civ. No. 10-

3461, 2015 WL 5613150, at *8 (S.D.N.Y. Sept. 24, 2015) (“The possibility that Defendants 

could prove that some amount of the price decline is not attributable to Plaintiffs’ theory of 

liability does not preclude class certification.”).22

 22 The defendants’ argument that Mr. Coffman “simply assumes that the price declines following the alleged 

corrective disclosures are appropriate proxies for the associated price inflation at the time the alleged misstatements 
69

Accordingly, the plaintiffs have shown that common issues predominate over individual 

issues, and the defendants’ effort to undermine that showing based on Comcast fails.

b. Superiority

Rule 23(b)(3) also requires a determination that “a class action is superior to other 

available methods for fairly and efficiently adjudicating the controversy.” The Supreme Court 

has explained that class actions are necessary to enable litigation through economies of scale, as

“most of the plaintiffs would have no realistic day in court if a class action were not available.” 

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809 (1985); Bunn, 306 F.R.D. at 87 (“The 

superiority requirement is intended to ensure[ ] that resolution by class action will achieve 

economies of time, effort, and expense and promote . . . uniformity of decision as to persons 

similarly situated, without sacrificing procedural fairness or bringing about other undesirable 

consequences.” (quoting Amchem, 521 U.S. at 615)). Rule 23(b)(3)’s superiority inquiry entails 

consideration of four factors: (a) the class members’ interests in individually controlling the 

prosecution of separate actions; (b) the extent and nature of any litigation concerning the 

controversy already commenced; (c) the desirability of concentrating the litigation of the claims 

in one forum; and (d) the likely difficulties in managing the class action. Bunn, 306 F.R.D. at 87.

Here, the defendants do not contest that “a class action is superior to other available 

methods for fairly and efficiently adjudicating the controversy.” As the plaintiffs argue, class

members’ interest in asserting individual claims is limited, there is no other pending litigation 

that is substantially similar to this suit, a class action would eliminate the risk of inconsistent 

adjudication, and there are no foreseeable management difficulties. See Pls.’ Mem. Supp. Class 

 

were made” and “offers no methodto take into consideration . . . the changing macroeconomic environment, 

industry trends and LSI-specific changes during the two and a half year class period that would affect the impact of 

the alleged misstatements on LSI’s stock price at different points in time,” Defs.’ Opp’n Pls.’ Mot. Class Cert. at 45, 

fails for the same reason.
70

Cert. at 25–26. Thus, like many similar securities fraud cases, this controversy is well-suited for 

class treatment. See In re Newbridge Networks Securities Litig., 926 F. Supp. 1163, 1176 

(D.D.C. 1996) (“[C]ourts have widely recognized the utility of, and the necessity for, class 

actions in securities litigation.”).23

C. The Defendants’ Motion for Summary Judgment

The defendants have also moved for summary judgment on the element of reliance. As 

both parties have observed, the arguments are virtually identical to the arguments the defendants 

raise in opposition to the plaintiffs’ class certification motion. In short, the defendants contend 

that there are no genuine issues of material fact as to whether the Basic presumption is rebutted 

with respect to the co-lead plaintiffs in light of the practice of their three investment advisories. 

The defendants’ arguments with respect to each investment advisory are addressed in turn. 

Given the significant overlap with the arguments addressed above, these arguments can be 

disposed of in fairly short order.

1. Van Berkom

The defendants maintain that the Basic presumption is rebutted as to Caisse, disproving 

reliance, and therefore warranting summary judgment in favor of the defendants, because 

(1) Van Berkom “would still be invested [in LSI] but for the loss of the DoD contract—

regardless of any supposed fraud regarding the Retail Divison;” (2) “Van Berkom was not misled 

 23 The plaintiffs also move for appointment of co-lead plaintiffs’ counsel as class counsel, see Pls.’ Mem. 

Supp.Class Cert. at 26–27, which motion the defendants do not address in their opposition to class certification. 

Pursuant to Federal Rule of Civil Procedure 23(g), “a court that certifies a class must appoint class counsel,” and in 

making such appointment, must consider(1) “the work counsel has done in identifying or investigating potential 

claims in the action;” (2) “counsel’s experience in handling class actions, other complex litigation, and the types of 

claims asserted in the action;” (3) “counsel’s knowledge of the applicable law;” and (4) “the resources that counsel 

will commit to representing the class.” FED.R.CIV. P. 23(g)(1)(A). “[A]ny other matter pertinent to counsel’s 

ability to fairly and adequately represent the interests of the class” may also be considered. FED.R.CIV. P.

23(g)(1)(B). For the reasons set out in the plaintiffs’ motion, and not contestedby the defendants, Spector Roseman 

Kodroff & Willis, P.C. and Labaton Sucharow LLP are appointed class counsel.
71

about the Retail Dvision [sic];” and (3) Van Berkom’s analyst “testified that [he] believed the 

market for LSI shares was inefficient and purchased based on [LSI’s] own models and its own 

assumptions about LSI’s future business.” Defs.’ Mot. Summ. J. at 18–19. 24 The evidence cited 

by the defendants—mostly in the way of deposition testimony—does not conclusively establish 

any of these points.

Although Van Berkom’s portfolio manager, Sirois, testified that Van Berkom would 

“most likely” still be invested in the company if the DoD contracts had not lapsed, Sirois Dep. at 

78:23–24 (emphasis added), he did not state that the alleged fraud would have no bearing on the 

decision whether to invest, or that Van Berkom certainly would still be invested if the DoD 

contracts had been renewed. Moreover, after testifying that Van Berkom would “most likely” be 

invested but for the loss of the DoD contracts, Sirois clarified that the company “went from 

pretty good margins to making almost nothing. And therefore, when that happened, the stock no 

longer fit with our criteria and that’s why we sold it.” Sirois Dep. at 78:20-79:2. The 

defendants’ assertion that “LSI would still meet all of Van Berkom’s investment criteria” but for 

the loss of the DoD contract, Defs.’ Mem. Supp. Mot. Summ. J. at 20, is not borne out by the 

record. For support, the defendants cite LSI’s June 2014 letter to clients, and although the letter 

focuses on the surprising loss of the DoD contract, it simply does not state that Van Berkom 

would have maintained its position in LSI but for that loss. See Defs.’ Mem. Supp. Mot. Summ. 

J., Ex. 13, Van Berkom June 2014 Letter to Clients at VAN BERKOM_000072, ECF No. 83-15 

(describing the loss of the DoD business as “the latest in a string of disappointments with this 

company since [Van Berkom] first became shareholders” and explaining that “a perfect storm of 

 24 The defendants also argue that Van Berkom’s private meetings with LSI management negates reliance,see 

id. at 23–25, but that is not the law, so long as insider information is not disclosed, as discussed above. Here, no 

evidence has been adduced that Van Berkom obtained insider information during its meetings with LSI, and, 

accordingly, summary judgment is not warranted on the basis of private meetings.
72

different events have reduced and have negatively and significantly impacted the profitability of 

this company”).25 On these facts, the defendants have not established that the DoD contracts 

were the sole consideration for Van Berkom and that the alleged fraud was irrelevant to Van 

Berkom’s investment decisions.

The defendants next argue that “Van Berkom was not misled” about the health of the 

retail division, either with respect to competition or margins. The testimony relied upon by the 

defendants suggests only that Sirois, and Van Berkom, were aware of other competitors and that 

margins in other divisions were higher. The testimony does not establish that Sirois knew the 

extent of the competition or the degree to which retail margins had declined. See Sirois Dep. at 

19:10–12 (“[W]hile there was [sic] many players, I don’t think they were all on equal footing 

with Liquidity Services.” (emphasis added)); id. at 116:15–22 (“The other part of our thesis was 

that the market was big enough and fragmented enough that you could have more than one big 

winner in that space. We felt there was room for probably two or three sizeable players over 

time that could split—that could share the market. So we were concerned, but not overly

concerned with any competitors.”); id. at 25:12–27:22 (explaining that Van Berkom “knew that 

the retail margins were weaker” than the DoD margins but that “[w]e just didn’t know they were 

that bad”). Thus, the defendants have not demonstrated that there is no genuine issue of material 

fact as to whether Van Berkom was not misled by LSI’s alleged misrepresentations.

Finally, the defendants argue that “Van Berkom’s investment philosophy—which Sirois 

employed as to LSI—belies any reliance on market price as an accurate measure of intrinsic 

value; rather it was premised on the market being inefficient.” Defs.’ Mem. Supp. Mot. Summ. 

 25 The defendants cite Van Berkom’s position as of the date of Sirois’s deposition that LSI should have won 

the DoD contract. Defs.’ Mem.Supp. Mot. Summ. J. at 19 & n.21. This fact is irrelevant to the question whether 

the DoD contract was Van Berkom’s sole consideration in making its investment decisions with respect to LSI. 
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J. at 22 (emphasis in original). As explained in detail above, Van Berkom’s sophisticated 

modeling and its belief that LSI’s market price did not reflect its intrinsic value does not rebut 

the Basic presumption. In short, as Chief Justice Roberts explained in Halliburton II, value 

investing is premised not on the notion that a company’s stock price is meaningless but rather 

that the stock price has not yet come to reflect all publicly available information. 134 S. Ct. at 

2410–11. In this regard, a value investor like Van Berkom does rely on the stock price in 

deciding whether to invest. See id. at 2410 (“[T]here is no reason to suppose that . . . the value

investor . . . is as indifferent to the integrity of market prices as Halliburton suggests.”); In re 

DVI, Inc. Sec. Litig., 639 F.3d 623, 641–42 (3d Cir. 2011) (“We read Basic to mean that an 

investor who seeks to use the fraud-on-the-market presumption of reliance must show reliance 

on publicly available information in making the investment decision regardless of the investor’s 

personal belief as to the security’s value.”), abrogated on other grounds by Amgen, 133 S. Ct. 

1184.

2. Pier Capital

With respect to NNERF’s first investment advisor, Pier Capital, the defendants argue that 

they are entitled to summary judgment because Pier Capital was not misled by the alleged 

misrepresentations, and in any event, Pier Capital earned a profit of $1.6 million on its LSI 

investment. Defs.’ Mem. Supp. Mot. Summ. J. at 25–28. As to the latter argument, which may 

be quickly disposed of, Pier Capital is not a co-lead plaintiff in this suit. As explained above, the 

fact that Pier Capital earned a profit on its investment is not dispositive given that NNERF also 

held investments in LSI through New South, and overall, NNERF sustained a loss on its 

investment in LSI.
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The defendants’ former argument—that Pier Capital was not misled by the alleged 

misrepresentations—is belied by the record. The defendants focus on the fact that three alleged 

partial corrective disclosures “did not reveal to Yakirevich,” Pier Capital’s portfolio manager, 

“any information he did not already know.” Id. at 26. As explained above, however, 

Yakirevich’s testimony indicates that he had not known of the extent of the declines in retail 

margins prior to the final corrective disclosure on May 8, 2014. See, e.g.,Yakirevich Dep. at 

143:14–15, 152:15–16 (expressing an “understanding” based on one of the partial corrective 

disclosures, Mr. Rallo’s statements, that “‘the pace of margin expansion would not be as robust,” 

but explaining that he did not believe “that it was going to stop”). The defendants’ assertion that 

“it was ultimately [the failure of the government business] and not any undisclosed facts or trend 

concerning retail margins, sales, growth, competition or product mix, that prompted Pier Capital 

to sell its LSI shares” also fails in light of Yakirevich’s testimony to the contrary. See, e.g., id. at 

120:10–13 (“As a story, we expected both—obviously you want both businesses—retail and 

government business—to contribute and not, you know, slow down.”). Thus, the defendants 

have not established the absence of a genuine issue of material fact as to whether Pier Capital 

was misled by the alleged misrepresentations and, accordingly, are not entitled to summary 

judgment on that basis.

3. New South

The defendants similarly argue that there is no genuine issue of material fact that the 

Basic presumption is rebutted as to NNERF’s second investment advisory, New South, because 

(1) New South was not misled by LSI’s alleged misrepresentations, Defs.’ Mem. Supp. Mot. 

Summ. J. at 29–32; (2) New South’s private contact with LSI management was “integral” to its 
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investment decisions, id. at 32–33; and (3) New South believed the market for LSI stock was 

inefficient, id. at 33–35. 

Genuine issues of fact exist as to whether New South was misled by LSI’s statements 

concerning the health of the retail division. The defendants rely on the same evidence relied 

upon in opposing class certification. For example, the defendants point out that New South’s 

April 2014 model, built after LSI lost the DoD contract but before the final corrective disclosure 

issued on May 8, 2014. According to the defendants, “all of the positive year over year growth 

projections in the New South model were reversed by the loss of one DoD contract and the 

increased costs associated with the DoD contract it retained—and not anything to do with the 

Retail Division.” Id. at 29. 26 As noted above, however, the fact that the model indicates that LSI 

went from profitable to unprofitable because of the change in government business does not 

prove that New South was not misled by, or did not rely on, statements concerning the retail 

division. Unlike in the Vivendi cases, again cited by the defendants, see, e.g., Defs.’ Reply Supp. 

Mot. Summ. J. at 5 n.3, ECF No. 92 (“[T]he facts in the Vivendi trilogy are on all fours with this 

case and dictate that summary judgment on the issue of reliance should be granted in 

Defendants’ favor.”), there is no clear statement here that New South was indifferent to the 

alleged fraud or the health of the retail division. See Capital Guardian, 183 F. Supp. 3d at 466 

(Basic presumption rebutted because investor was “indifferent” to the fraud). The defendants 

also assert, again, that New South knew about LSI’s competition and agreed with LSI’s appraisal 

that the competition was not very “formidable.” Defs.’ Mem. Supp. Mot. Summ. J. at 30. As 

explained, McLean did not agree during his deposition that the competition was not formidable 

 26 In response to the defendants’ argument that McLean did not change his assumptions about the retail 

division in creating the April 2014 model, the plaintiffs make the commonsense point that McLean had no reason to 

change his assumptions at that time, given that the truth about the retail margins had not yet been revealed. See Pls.’ 

Sur-Reply Resp. Defs.’ Reply Supp. Mot. Summ. J. at 5, ECF No. 94-1.
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but rather that, as of February 2014, New South had identified “some of” LSI’s competitors and 

“understood some of them to be very small,” McLean Dep. at 203: 6–10, and that “[New South] 

thought that Liquidity Services had advantages over their competition,” id. at 204:7–9 (emphasis 

added). Similar, the defendants argue that McLean was aware that retail margins would not 

continue to grow. Defs.’ Mem. Supp. Mot. Summ. J. at 31–32. For the reasons set out above, 

the evidence does not bear this out. In short, even assuming McLean had a general sense based 

on LSI’s limited disclosures concerning margin growth that the retail division’s margins were 

suffering, his testimony simply does not indicate that he knew the extent of the margin 

deterioration.

As for the defendants’ argument that New South’s private contact with LSI influenced its 

investment decisions, given the lack of any evidence that New South was granted access to 

insider information, see, e.g., McLean Dep. at 321:1–5 (New South “w[as] not provided with 

material non-public information” in its private meetings with LSI and otherwise no awareness of 

possession of non-public information about LSI when investing), such meetings do not warrant 

summary judgment on the issue of reliance. Finally, citing the Vivendi cases, the defendants 

contend that the Basic presumption is rebutted if an investor does not rely on the market price of 

the stock as an accurate measure of its intrinsic value. See Defs.’ Mem. Supp. Mot. Summ. J. at 

33 (citing GAMCO, 927 F. Supp. 2d at 100). This argument has been amply addressed and 

rejected above. Briefly, the fact that New South constructed its own models to evaluate LSI’s 

true value does not, in and of itself, rebut the Basic presumption as to NNERF. See Halliburton 

II, 134 S. Ct. at 2410–11. 
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IV. CONCLUSION

For the foregoing reasons, the plaintiffs’ motion to certify a class of investors in LSI 

common stock, during the class period of February 1, 2012 through May 7, 2014, inclusive, is 

granted, and the defendants’ partial motion for summary judgment on the issue of reliance is 

denied. 

An appropriate Order accompanies this Memorandum Opinion.

Date: September 6, 2017

__________________________

BERYL A. HOWELL

Chief Judge