2:06-cv03226-ES-CLW Document 286 07/23/12 Page 1 of 21...

Case 2:06-cv03226-ES-CLW Document 286 Filed 07/23/12 of 21 PagifiD: 6268

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

NOT FOR PUBLICATION

In re PAR PHARMACEUTICAL SECURITIES LITIGATION

Civil Action 06-3226 (ES) (CLW)

OPINION

SALAS, DISTRICT JUDGE

Pending before this Court is Plaintiff Louisiana Municipal Employees Retirement

System's ("LAMPERS" or "Plaintiff') motion for class certification pursuant to Fed. R. Civ. P.

23(a) and 23(b)(3) and to appoint Berman DeValerio as Class Counsel and Lite DePalma

Greenberg, LLC ("Lite DePalma") as Liaison Counsel. The Court has jurisdiction over the

subject matter of this action pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 78aa. The Court has

considered the submissions made in support of and in opposition to the instant motion and

decides the motion without oral argument pursuant to Federal Rule of Civil Procedure 78.

Based on the reasons that follow, LAMPERS's motion is GRANTED.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Defendant Par Pharmaceutical Companies, Inc. ("Par") manufactures and distributes

generic and branded drugs in the United States.' (Docket Entry No. 133, Lead Plaintiffs' Second

Consolidated Amended Complaint ("SAC") ¶ 16). LAMPERS seeks to bring a securities class

action pursuant to the Securities Exchange Act of 1934 on behalf of purchasers of Par securities

between July 23, 2001 and July 5, 2006 (the "Proposed Class Period"). (Id. ¶ 1). LAMPERS

alleges that Par issued materially false and misleading statements regarding the Company's

1 The Court will collectively refer to defendants Dennis J. O'Connor, Scott Tarriff and Par as "Defendants."

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financial performance by materially overstating assets, revenues and net income and materially

understating accounts receivable reserves and inventories reserves. (Id. ¶ 2).

On July 5, 2006, Par issued a press release (the "July Announcement") announcing that it

would be restating its financial statements for fiscal years 2004, 2005 and the first quarter of

2006 to correct "an understatement of accounts receivable reserves which resulted primarily

from delays in recognizing customer credits and uncollectible customer deductions." (Id. ¶ 4).

In response, Par common stock dropped from $18.25 per share to $13.47 per share. (Id. ¶ 5).

Shortly thereafter, the Securities and Exchange Commission ("SEC") commenced an

investigation into Par related to the July Announcement. (Id. ¶ 6). Subsequently, on December

14, 2006, Par announced that it would also be restating its financial statements for the period

prior to 2004 and would be reducing previously reported revenues and earnings by at least $84

million through the first quarter of 2006 (the "December Announcement"). (Id. ¶ 8). Following

the December Announcement, Par's stock increased from $20.99 on December 14 to $21.60 on

December 15. (Docket Entry No. 264, Defendants' Memorandum of Law in Opposition to Lead

Plaintiff's Motion for Class Certification ("Def. Opp.") 4). On March 13, 2007, Par filed its

restatement in the amended Annual Report on its Form 10-K for fiscal year 2005 (the

"Restatement"). (SAC ¶ 9). The Restatement included the restated financial statements for 2001

through 2005. (Id.). On July 10, 2007, Par filed an amended 10-Q for the first quarter of 2006,

restating Par's first quarter financial statements. (Id.). "Iii total, these restatements, stretching

from 2001 through the end of the first quarter of 2006, revealed that Par had understated its

accounts receivable reserves by more than $83.5 million and overvalued its inventories by

greater than $9.9 million." In re Par Pharni. Sec. Litig., Civil Action No. 06-cv-3226, 2009 U.S.

Dist. LEXIS 90602, at *7 (D.N.J. Sept. 30, 2009).

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Plaintiff also alleges that Defendants Tariff and O'Connor (and others, also known as the

insiders) sold their personally-held shares of Par common stock at artificially inflated prices.

(SAC ¶J 186-89). Plaintiff contends that these sales were unusual because (1) they departed

from pre-Class period trading patterns; (2) occurred when the insiders knew of undisclosed

adverse information about Par; and (3) the gains from the sales exceeded the insiders' ordinary

compensation. (Id. ¶J 187-190).

On December 5, 2006, the Court appointed Snow Capital Investment Partners, L.P.

("Snow Capital") and W.R. Capital Management ("WR Capital") as co-lead plaintiffs. (See

Docket Entry No. 81, (the "December 5 Order")). Thereafter, on August 8, 2011, the Court

vacated the portion of the December 5 Order appointing Snow Capital and WR Capital as co-

lead plaintiffs and Robbins Geller Rudman & Dowd LLP and Federman & Sherwood as co-lead

counsel. (See Docket Entry No. 258, (the "August 8 Order")). The August 8 Order appointed

LAMPERS as the sole lead plaintiff and Berman DeValerio as sole lead counsel. (See Ed.).

LAMPERS is a statewide retirement system for full-time municipal police officers in

Louisiana. (Docket Entry No. 242-3, Declaration of R. Randall Roche in Support of Plaintiffs'

Motion for Leave to Propose a Class Representative ("Roche Dec.") ¶ 2). LAMPERS has more

than 10,000 members, and for the period ending June 30, 2010, had approximately $1.27 billion

in investments held in trust for pension benefits. (Id.). Between July 23, 2001 and July 5, 2006,

LAMPERS made net purchases of approximately 53,100 shares of Par common stock and

suffered losses of approximately $482,732.00, based on either FIFO or LIFO. (Id. at 6).

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II. LEGAL ANALYSIS

Federal Rule of Civil Procedure 23(a) sets forth the prerequisites for a class action.

Specifically, Rule 23(a) states:

One or more members of a class may sue or be sued as representative parties on behalf of all members only if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a). The plaintiff must demonstrate all four elements of Rule 23(a) by a

preponderance of the evidence. "In other words, to certify a class the district court must find that

the evidence more likely than not establishes each fact necessary to meet the requirements of

Rule 23." In re Mercedes-Benz Tele Aid Contract Litig., 267 F.R.D. 113, 137-38 (D.N.J. 20 10)

(quoting In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2008)). In making

this assessment, a court may conduct "a preliminary inquiry into the merits" and "may consider

the substantive elements of the plaintiffs' case in order to envision the form that a trial on those

issues would take." Hydrogen Peroxide, 552 F.3d at 317 (internal citations omitted). This

requires a "rigorous consideration of all the evidence and arguments offered by the parties." Id.

at 321. Thereafter, "[i]f all four requirements of Rule 23(a) are met, a class of one of three types

(each with additional requirements) may be certified." Id. at 309-10.

LAMPERS asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of

1934 and Rule lob-S. (SAC ¶J 103-104). The elements of a § 10(b) private action are "(1) a

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

the 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." Stoneridge Inv.

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Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008). Section 20(a) creates a cause

of action against individuals who exercise control over a corporation that has committed a

violation of Section 10(b). Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 252 (3d

Cir. 2009).

Here, LAMPERS requests that the Court certify a class action on behalf of those who

purchased or otherwise acquired Par's securities between July 23, 2001 and July 5, 2006 and

were damaged (the "Proposed Class"). LAMPERS contends that it has met the four

requirements of Rule 23(a) and the class should be certified under Rule 23(b)(3), which provides

for certification when "the court finds that the 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." Fed.

R. Civ. P. 23(b)(3). LAMPERS also seeks to certify itself as Class Representative, Berman

DeValerio as Class Counsel and Lite DePalma as Liaison Counsel.

A. Numerosity

Federal Rule of Civil Procedure 23(a)(1) allows for certification when "the class is so

numerous that joinder of all members is impracticable." Although there isn't a "single magic

number" that will satisfy the numerosity requirement, the Third Circuit has held that the

requirement will generally be satisfied "if the named plaintiff demonstrates that the potential

number of plaintiffs exceeds 40." Stewart v. Abraham, 275 F.3d 220, 226-227 (3d Cir. 2001).

Plaintiff argues that this element is met because Par's common stock was actively traded

throughout the Proposed Class Period on the New York Stock Exchange. (See Docket Entry

No. 260, Memorandum of Law in Support of Lead Plaintiff's Motion for Class Certification ("P1.

Moving Brief') 12). Par's SEC filings, including Par's Annual Reports of Form 10-K ("10-K")

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for the years 2000 to 2005, state that Par had over thirty million shares of common stock

outstanding during the Proposed Class Period, held by several thousand record holders and a

substantial number of unidentified beneficial owners. (See Declaration of Joseph J. DePalma

dated September 9, 2011 ("DePalma Dec."), Exhibit A; see also Declaration of Ryan F. Harsch

in Support of Defendants' Opposition to Lead Plaintiff's Motion for Class Certification ("Harsch

Dec."), Exhibit A). Therefore, Plaintiff contends that the proposed class "easily" satisfies the

numerosity requirement as it consists of hundreds, if not thousands, of members. (P1. Moving

Brief 13). Defendant does not dispute Plaintiff's statistics. As such, the Court finds this element

has been met as joinder of such a large number of plaintiffs would be impracticable.

B. Commonality

Federal Rule of Civil Procedure 23(b) requires the plaintiff to demonstrate that "there are

questions of law or fact common to the class." Plaintiff must show that it "share [s] at least one

question of fact or law with the grievances of the prospective class." Stewart, 275 F.3d at 227

(internal quotations omitted). Plaintiff's interests must also be representative of the class. In re

ConiniunityBank off. Va., 418 F.3d 277, 303 (3d Cir. 2005).

Plaintiff alleges that Defendants intentionally or recklessly made (or omitted) false and

misleading statements of material fact in SEC filings, press releases and investor conference calls

during the Proposed Class Period. (P1. Moving Brief 15-16). Plaintiff also alleges that

Defendants utilized fraudulent accounting practices to conceal Par's actual financial and

operational condition. (Id. at 16). As such, Plaintiff listed the following questions of law and

fact that are common to the members of the Proposed Class:

(1) whether Defendants' conduct violated the federal securities laws; (2) whether Defendants pursued the fraudulent course of conduct alleged; (3) whether Defendants misrepresented and/or failed to disclose material facts during the Class Period; (4)

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whether Defendants knowingly or recklessly misrepresented and/or omitted to disclose material facts; (5) whether the market price of the Company's common stock during the Class Period was artificially inflated due to the wrongful conduct alleged; and (6) whether the members of the class have sustained compensable damages, and if so, the proper measure of damages.

(Id.). Defendants do not dispute that LAMPERS has met the commonality requirement.

The Court finds that LAMPERS has met the commonality requirement in Rule 23(b)(2).

LAMPERS and the proposed class members' claims involve the same factual and legal theories.

LAMPERS has alleged, among other things, that Par and the other named Defendants violated

securities laws by misrepresenting and/or failing to disclose material facts in Par's public filings.

LAMPERS also alleges that this conduct artificially inflated Par's common stock during the

Proposed Class Period. These allegations would be common to the members of the Proposed

Class.

C. Typicality

Federal Rule of Civil Procedure 23(a)(3) requires LAMPERS to demonstrate that "the

claims or defenses of the representative parties are typical of the claims or defenses of the class."

In essence, the Court will inquire "whether the interests of the named plaintiffs align with the

interests of the absent members." Stewart, 275 F.3d at 227. Importantly, "factual differences

among the claims of the putative class members do not defeat certification." Baby Neal v.

Casey, 43 F.3d 48, 56 (3d Cir. 1994). Further, "Fun instances wherein it is alleged that the

defendants engaged in a common scheme relative to all members of the class, there is a strong

assumption that the claims of the representative parties will be typical of the absent class

members." Weisfeld v. Sun Chem. Corp., 210 F.R.D. 136, 140 (D.N.J. 2002) (internal quotations

omitted). Importantly, class certification is not appropriate "where a putative class representative

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is subject to unique defenses which threaten to become the focus of the litigation." Baffa v.

Donaldson, Lu/kin & Jenrette Sec. Corp., 222 F.3d 52, 59 (2d Cir. 2000) (citations omitted).

Plaintiff alleges that its claims satisfy the typicality requirement because they arise from

the same course of fraudulent conduct and each Class member must make identical legal

arguments to establish Defendants' liability. (P1. Moving Brief 2l). Specifically, Plaintiff states

that all members of the Proposed Class will demonstrate that Defendants made materially false

and misleading statements and failed to disclose adverse facts about Par's financial and

operational condition. (Id.). Plaintiff also alleges that the damages suffered by all members of

the Proposed Class arose from the purchase of Par's shares at artificially inflated prices followed

by a decline in the share price after Par revealed the fraud. (Id.).

Defendants contend that LAMPERS is not an adequate class representative because it is

subject to unique defenses related to reliance, loss causation, materiality and scienter. First,

Defendants contend that the two investment managers responsible for purchasing Par's stock on

behalf of LAMPERS, Intech Investment Management LLC ("Intech") and Sterling Capital

Management LLC ("Sterling"), were atypical investors. (Def. Opp. 27-32). Defendants argue

that Intech was an "in and out" investor in Par that sold its shares prior to the July

Announcement. (Id. at 27). Because of this, Defendants argue that LAMPERS cannot prove

loss causation for any Intech trades. Additionally, Defendants argue that Intech utilizes a unique

investment strategy premised on a mathematical model that negates the fraud on the market

theory of reliance. (Id. at 28-29). Specifically, Defendants contend that the presumption of

reliance is negated because Intech did not rely on the market price of Par's stock and thus did not

consider Par's alleged misrepresentations. (Id.). As a result, LAMPERS would be subject to a

unique defense. Defendants also contend that Sterling's trades are subject to unique defenses


because Sterling believed the Restatement was minor and Sterling purchased stock immediately

following the Restatement, both of which implicate materiality and loss causation. (Id. at 30).

1. Intech

a. In and Out Investor

Defendants first argue that LAMPERS is subject to a unique defense to loss causation

because Intech is an "in and out" investor. In re Flag Telecom Holdings, Ltd. Sec. Litig., 574

F.3d 29, 37 (2d Cir. 2009) (defining "in and out" investors as those who sold their stock prior to

the alleged corrective disclosures). Courts typically limit the class to exclude "in and out"

investors because they would be unable to demonstrate the required loss causation element. Id.

at 38. In other words, Defendants contend that if LAMPERS were an "in and out" investor, it

could not demonstrate that the "misrepresentation or omission was a substantial factor in causing

a decline in the security's price, thus creating an actual economic loss for the plaintiff." (Def.

Opp. 27) (quoting McCabe v. Ernst & Young, LLP, 494 F.3d 418, 425-26 (3d Cir. 2007)).

Defendants argue that Intech is an "in and out investor" because it sold LAMPERS's holdings in

Par prior to the July Announcement. LAMPERS does not dispute that Intech sold LAMPERS's

holdings in Par prior to the July Announcement, but states that it held Par common stock during

the duration of the Proposed Class Period through other investment advisors and thus is not

subject to a unique defense.

The Court agrees with LAMPERS. Intech was only one investment manager acting on

LAMPERS's behalf. The Roche Declaration states that LAMPERS made net purchases of

53,100 shares of Par common stock during the Proposed Class Period .2 (See Roche Dec. ¶ 6,

Harsch Dec., Exhibit 20). At this time, the Court need not view LAMPERS's holdings in Par

2 The Court notes that the Roche Declaration has only been updated to reflect LAMPERS's losses in the expanded Proposed Class Period and not the relevant trades. Courts have held that this will not render a proposed lead plaintiff inadequate. See In re DVI, Inc. Sec. Litig., 249 F.R.D. 196, 206 (ED. Pa. 2008).

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stock that Intech and Sterling purchased separately because Intech and Sterling are not the

proposed lead plaintiffs. Moreover, Defendants do not point the Court to any authority that

supports separating LAMPERS's holdings by the investment managers. LAMPERS has

demonstrated that it held shares in Par's common stock at the close of the Proposed Class Period.

(Harsch Dec., Exhibit 20). Thus, the Court is not convinced that Intech's sales of LAMPERS's

holdings in Par renders LAMPERS an "in and out" trader. The Court finds that this issue would

not turn into a unique defense that would "threaten to become the focus of the litigation." Baffa,

222 F.3d at 59 (internal quotations and citations omitted).

b. Reliance

In addition, Defendants argue that LAMPERS would be subject to unique defenses to the

reliance element of the § 10(b) cause of action because Intech utilized a unique investment

strategy premised on a proprietary mathematical model. Defendants contend that this investment

strategy rebuts the "fraud on the market" presumption of reliance.

Reliance "establishes that but for the fraudulent misrepresentation, the investor would not

have purchased or sold the security." In re DVI, Inc. Sec. Litig., 639 F.3d 623, 631 (3d Cir.

2011) (internal quotations omitted). Reliance may either be proven directly or by utilizing the

fraud on the market theory. See Basic, Inc. v. Levenson, 485 U.S. 224, 245-47 (1988). The

fraud on the market theory establishes a rebuttable presumption of class-wide reliance which is

"based on the hypothesis that, in an open and developed securities market, the price of a

company's stock is determined by the available material information regarding the company and

its business ... Misleading statements will therefore defraud purchasers of stock even if the

purchasers do not directly rely on the misstatements .... Id. at 241-42 (omissions in original).

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To invoke the fraud on the market presumption of reliance, Plaintiff must show it traded

shares in an efficient market and the misrepresentation became public. Semerenko v. Cendant

Corp., 223 F.3d 165, 178 (3d Cir. 2000). Once the presumption is invoked, "the court presumes

'(1) that the market price of the security actually incorporated the alleged misrepresentations, (2)

that the plaintiff actually relied on the market price of the security as an indicator of its value,

and (3) that the plaintiff acted reasonably in relying on the market price of the security." In re

DVI, 639 F.3d at 631-32 (quoting Semerenko, 223 F.3d at 178-79). The inquiry does not end

there. A defendant may rebut the presumption by "[any showing that severs the link between

the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his

decision to trade at a fair market price .... Basic, 485 U.S. at 248 (internal quotation mark

omitted).

Here, LAMPERS has set forth with specificity why the fraud on the market presumption

applies to the Proposed Class's claims. LAMPERS utilizes the expert report of Dr. John D.

Finnerty, Ph.D. to demonstrate that Par's stock traded in an efficient market utilizing the factors

enumerated in Cammer v. Bloom, 711 F. Supp. 1264, 1286-87 (D.N.J. 1989). (See DePalma

Dec., Exhibit D). Defendants do not present any evidence to the contrary and appear to concede

that Par common stock traded in an efficient market. Defendants also do not dispute that the

alleged misrepresentations became public at the July 5 Announcement. (Def. Opp. 3). The Court

is satisfied that LAMPERS has adequately presented evidence to utilize the fraud on the market

presumption of reliance.

The elements are (1) the stock's average trading volume; (2) the number of securities analysts who follow and report on the stock; (3) the presence of market makers and arbitrageurs; (4) the company's eligibility to file a Form 5-3 Registration Statement; and (5) a cause and effect relationship between unexpected corporate events or financial news releases and an immediate response in the stock's price. Cammer, 711 F. Supp. 1286-87.

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Defendants, however, attempt to rebut the presumption of reliance arguing that because

Intech utilized a mathematical model for its trading activity, LAMPERS did not rely on the

market price of Par's stock and thus was not impacted by Par's alleged misrepresentations. (Def.

Opp. 28-29). Defendants do not disclose any facts or testimony that support this contention.

LAMPERS, on the other hand, points the Court to testimony from Nancy Holden, Senior Vice

President, head of Intech's Portfolio Management Group, describing Intech's methodology. (See

generally Harsch Dec., Exhibit 7). Specifically, Ms. Holden testified that Intech believes that

"large cap markets are efficient and stock prices reflect all available public knowledge." (Id.

49:20-22). Defendants have not suggested that Intech or LAMPERS had access to any

information that is not public or that Intech did not rely upon the information in the market as an

indicator of Par's value. As such, the Court finds that LAMPERS would not be subject to a

unique defense that would threaten to become the focus of the litigation based on Intech's

utilization of a mathematical model. See In re Worldconi, Inc. Sec. Litig., 219 F.R.D. 267, 281-

82 (S.D.N.Y. 2003) (finding that mathematical models reflecting an evaluation of publicly

available information will not render a plaintiff vulnerable to a unique defense or threaten to

become the focus of the litigation).

ii. Sterling

Defendants also contend that Sterling's trades are subject to unique defenses because

Sterling believed the Restatement was minor and Sterling purchased stock immediately

following the Restatement, both of which implicate materiality, loss causation and scienter. 4 The

Court will address each argument below.

The Supreme Court recently decided that plaintiffs do not need to demonstrate loss causation at the class certification stage in the context of the predominance requirement. Erica P. John FuncZ Inc. v. Halliburton Co., 131 S. Ct 2179, 2187 (2011).

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First, the Court is unclear of the relevance of Defendants' argument that Sterling believed

the Restatement was minor. The Proposed Class Period begins on July 23, 2001 and ends on

July 5, 2006. The email that reflects the opinion of one Sterling employee that the Restatement

was minor is dated October 3, 2006, months after the end of the Proposed Class Period. (See

Harsch Dec., Exhibit 11). In that same vein, Sterling's post disclosure purchases are also not

relevant to this Court's analysis. See In re Saloman Analyst Metromedia, 236 F.R.D. 208, 216

(S.D.N.Y. 2006) (finding that "the fact that an investor purchased additional shares upon

learning the new information does not mean that he or she did not rely on the integrity of the

market in purchasing shares before the new information was known") (reversed and remanded

on other grounds); see also In re Frontier Ins. Group, Inc. Sec. Litig, 172 F.R.D. 31, 42

(E.D.N.Y. 1997) (finding post disclosure purchases have no bearing on whether the proposed

lead plaintiff relied on the integrity of the market during the class period). Finally, the Court is

not convinced that the testimony cited by Defendants about Brian Walton's 6 opinions about Par

would become a unique defense that would threaten to become the focus of the litigation. The

Court must focus on LAMPERS's state of mind, not Sterling's. Since the Court is not persuaded

by any of the Defendants' arguments as they relate to the Sterling trades, the Court finds that

LAMPERS would not be subject to unique defenses that will become the focus of the litigation.

D. Adequacy

Finally, Federal Rule of Civil Procedure 23(a)(4) requires LAMPERS to demonstrate that

it "will fairly and adequately protect the interests of the class." The Court's task is to address

whether "the putative named plaintiff has the ability and the incentive to represent the claims of

the class vigorously, that he or she has obtained adequate counsel, and that there is no conflict

Defendants do not inform the Court who Tim Beyer is, his title or his association with Sterling's investments on behalf of LAIvIIPERS. 6 Mr. Walton is Sterling's Managing Director and is one of LAIvIPERS's investment managers. (Iiarsch Dec., ¶ 10).

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between the individual's claims and those asserted on behalf of the class." Hassine v. Jeffes, 846

F.2d 169, 179 (3d Cir. 1988). "Adequate representation depends on two factors: (a) the

plaintiffs attorney must be qualified, experienced, and generally able to conduct the proposed

litigation, and (b) the plaintiff must not have interests antagonistic to those of the class." Wetzel

v. Liberty Mut. Ins. Co., 508 F.2d 239, 247 (3d Cir. 1975).

Plaintiff argues that it is willing and able to represent the class and none of its interests

are antagonistic to those of the Proposed Class. (P1. Moving Brief 22-23). Plaintiff also

contends that its counsel is experienced, capable and committed to representing the Proposed

Class. (Id. at 24). Defendant contends that LAMPERS is not an adequate class representative

because LAMPERS's lacks basic knowledge about the lawsuit, has not directed the case or

monitored counsel and is subject to unique defenses on reliance, materiality, loss causation and

damages. (Def. Opp. 14-16). Defendant also contends that Mr. Roche's Declarations contain

inaccurate and misleading statements about his role in the litigation. (Id. at 25).

First, the Court finds (and Defendants do not oppose) that Berman DeValerio and Lite

DePalma are "qualified, experienced, and generally able to conduct the proposed litigation."

Wetzel, 508 F.2d at 247. As such, the Court will appoint Berman DeValerio as Class Counsel

and Lite DePalma as Liaison Counsel. Second, the Court finds that LAMPERS is willing and

able to represent the Proposed Class. As noted above, the Court already found that LAMPERS is

not subject to unique defenses that will become the focus of the litigation. Moreover,

LAMPERS does not have any conflicts between its claims and the Proposed Class. As such, the

Court need only address the contention that LAMPERS is inadequate because it lacks basic

Mr. Roche submitted two declarations over the course of this litigation. He submitted the first, dated September 14, 2006 (Docket Entry No. 20), in connection with LAMPERS's first application for appointment as co-lead plaintiff. He submitted the second declaration on May 6, 2011 (Docket Entry No. 242-3) in connection with LAMPERS's motion to be appointed class representative after WR Capital and Snow Capital stepped down.

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knowledge about the lawsuit and that Mr. Roche's Declarations are misleading. (See Def. Opp.

22-25).

The knowledge element of the adequacy prong is "modest." In re Monster Worldwide,

Inc. Sec. Litig., 251 F.R.D. 132, 135 (S.D.N.Y. 2008). Generally, "class representative status

may be denied only 'where the class representatives have so little knowledge of and involvement

in the class action that they would be unable or unwilling to protect the interests of the class

against the possibly competing interests of the attorneys. "' Id. (quoting Baffa, 222 F.3d at 61).

Moreover, "[fln the context of complex securities litigation, attacks on the adequacy of the class

representative based on the representative's ignorance ... are rarely appropriate." County of

Suffolk v. Long Island Lighting Co., 710 F. Supp. 1407, 1416 (E.D.N.Y. 1989) (citing Surowit v.

Hilton Hotels Corp., 383 U.S. 363, 370-74 (1966)).

Defendants spend much of their opposition detailing the many facts of which Mr. Roche

was not aware, leading Defendants to conclude that Mr. Roche will not "direct" the litigation.

(See Def. Opp. 22-23). The Court, however, finds that the standard by which Defendants wish to

hold Mr. Roche is entirely too onerous. See McDonough v. Toys R Us, Inc., 638 F. Supp. 2d

461, 477 ("The adequacy-of-representation test is not concerned whether plaintiff personally

derived the information pleaded in the complaint or whether he will personally be able to assist

his counsel.") (quoting Lewis v. Curtis, 671 F.2d 779, 789 (3d Cir. 1982) (internal quotations

omitted) (abrogated on other grounds)). It is disingenuous to contend that Mr. Roche knows

nothing about this litigation. To the contrary, having read his deposition in its entirety, the Court

is satisfied that Mr. Roche was aware of a number of relevant facts about this litigation,

including, most importantly, his obligation "[flo represent the other shareholders, make sure they

get the best result that can be achieved on their behalf and to do that without regard to the

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hardship or trouble I have to go through." (Harsch Dec., Exhibit 4, 141:10-15, 11:17-22, 18:11-

13, 20:19-23, 53:13-19, 56:2-6.). The Court is also satisfied that Mr. Roche has properly relied

upon counsel to guide him through this complex litigation and does not find that this litigation is

"lawyer-driven." Mr. Roche testified that he asked Berman DeValerio, among other law firms,

to monitor LAMPERS investments for potential litigation. (Harsch Dec., Exhibit 4, 12:2-21).

Finally, Defendants argue that Mr. Roche made false and misleading statements in his

Declaration submitted in connection with Plaintiffs' motion to substitute LAMPERS as Lead

Plaintiff. (See Harsch Dec., Exhibit 18). Specifically, Defendants contend that Mr. Roche

represented that he "regularly consulted" with Berman DeValerio in the Declaration but when

asked at his deposition, testified that he had not spoken to counsel since 2006. (See Def. Opp.

25). Defendants, however, failed to quote the Roche Declaration in its entirety. In fact, Mr.

Roche swore that he would "assist as necessary" and "regularly consult" with counsel "as case

developments have warranted." (Harch Dec., Exhibit 19, ¶ S (emphasis added)). In light of WR

Capital and Snow Capital stepping down as Lead Plaintiffs, LAMPERS has only recently had to

increase its involvement in this case. As such, LAMPERS did not have any reason to consult

with counsel regularly because it was not acting as Lead Plaintiff. The Court is satisfied that

Mr. Roche did not intend to submit a misleading or wrong declaration and LAMPERS is an

adequate class representative.

E. Rule 23(b)(3)

Because the Court has found that Plaintiff has satisfied the four requirements of Rule

23(a), the Court will now consider the next step of the analysis found in Rule 23(b).

Specifically, Plaintiffs seek certification under Federal Rules of Civil Procedure 23(b)(3), which

permits certification when "the court finds that the questions of law or fact common to class

16


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." These requirements are commonly known as predominance and superiority.

i. Predominance

Predominance is "far more demanding" than commonality because "[flssues common to

the class must predominate over individual issues Hydrogen Peroxide, 552 F.3d at 311

(internal citations omitted). As such, "a district court must formulate some prediction as to how

specific issues will play out in order to determine whether common or individual issues

predominate a given case." Id. Generally, common issues of law and fact predominate over

individual issues in a putative securities class action alleging that the defendants made materially

false or misleading statements to investors. Brosious v. Children's Place Retail Stores, 189

F.R.D. 138, 147 (D.N.J. 1999) ("Each class member seeks to prove the same falsities, in the

same documents, with the same resultant damages."). As noted above, the fraud on the market

theory of reliance applies in a securities fraud case where the securities trade in an efficient

market, giving rise to a presumption that a company's investors relied upon the misstatements.

La. Mun. Police Enips. Ret. Sys. v. Dunphy, Civil Action No. 03-4372, 2008 U.S. Dist. LEXIS

19616, at *1849 (D.N.J. Mar. 13, 2008). Therefore, individual issues of reliance do not prevent

common questions of law and fact, so long as LAMPERS can utilize the fraud on the market

theory. DVI, 249 F.R.D. at 207.

LAMPERS argues that its claim involves Defendants' alleged fraud, the same as all the

other members of the Proposed Class. (P1. Moving Brief 29). Therefore, all issues of liability

are identical and the only issue remaining will be the computation of damages suffered by each

Class member. (Id. at 30). LAMPERS claims that because Par's common stock traded in an

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open and efficient market, the Court may presume that reliance is common to all members of the

Proposed Class. (Id). LAMPERS contends that it can satisfy all of the factors enumerated in

Caninier, 711 F. Supp. at 1286-87, that set forth the standard to demonstrate whether a market is

efficient. In support, LAMPERS relies upon Dr. Finnerty's report and conclusions. (P1. Moving

Brief 32) (citing DePalma Dec., Exhibit D, Finnerty Dec. ¶J 10-56)).

Defendants only oppose this element as it relates to the Proposed Class Period. In

essence, Defendants argue that Plaintiff cannot rely upon the fraud on the market presumption of

reliance for purchases of Par stock prior to April 29, 2004. (Def. Opp. 34-36). Defendants argue

that after the December Announcement Par's stock price increased. Therefore, there was no loss

to shareholders from a loss causation perspective. (Id at 35-36). Furthermore, Defendants also

contend that the accounting errors for 2001 through 2003 disclosed in the December

Announcement were not material because the stock price increased and thus, the fraud on the

market presumption for that period is rebutted. Accordingly, individual issues of reliance will

defeat the predominance element for any stock purchased prior to April 29, 2004. (Id.).

In response, LAMPERS argues that the December Announcement was not a corrective

disclosure and is thus irrelevant to a loss causation analysis. (See P1. Reply 22). Although

Plaintiff argues that it need not establish loss causation at this stage in the litigation, Plaintiff

notes that it will be able to do so at trial. Plaintiff argues that the July Announcement notified

the "market to expect further clarification as to the breadth of the restatement .... (Id. at 23).

As such, Plaintiff contends that the market had already taken the longer restatement period into

account after the July Announcement. (Id at 24).

The Court finds that Plaintiff has satisfied the predominance requirement. As an initial

matter, the Court notes that Plaintiff is not required to demonstrate loss causation at the class

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certification stage. See Hall/burton, 131 S. Ct. at 2186. Defendants do not contest that common

issues predominate over individual issues but instead focus on the timing of the Proposed Class

Period. Notwithstanding, the Court is satisfied with LAMPERS's representation that it will be

able to present evidence to demonstrate that the market had already corrected by the December

Announcement. 8 The July 2006 Announcement noted that the "[flhe company is in the process

of determining whether any of this amount should be recorded in prior period financial

statements." (Harsch Dec., Exhibit 2). In fact, Dr. Finnerty, Plaintiff's expert, testified that the

December Announcement "may not be [significant] because the company had already

announced that it was doing these write-downs and that there was uncertainty about how far back

they would go." (Docket Entry No. 274, Declaration of Bryan A. Wood in Support of Lead

Plaintiff's Reply Memorandum ("Wood Dec."), Exhibit H 234:11-14). Dr. Finnerty went on to

state that "the market may very well have regarded this as, as either insignificant or even could

have concluded that perhaps this is favorable news ... (Id. 234:16-19). Defendants have not set

forth any expert testimony to rebut Dr. Finnerty's hypothesis. At this time, the Court is

convinced that such an announcement may have acted to notify the market of potential future

restatements, thus, making it possible that the stock would not decrease in value upon future

announcements. See Police & Fire Ret. Sys. ofDetroit v. SafeNet, Inc., 645 F. Supp. 2d 210, 231

(S.D.N.Y. 2009); Freeland v. Iridium World Commc 'ns, Ltd., 233 F.R.D. 40, 47 (D.D.C. 2006).

fl. Superiority

Plaintiff contends that a class action is "superior to other available methods for fairly and

efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). The Court will consider the

following factors to make this determination:

8 The Court notes that this determination, like all determinations made for the purpose of class certification, is not binding on the trier of fact. Hydrogen Peroxide, 552 F.3d at 318, n. 19.

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(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 begun by members of the class; (C) the desirability ... of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.

Id. Defendants do not oppose that Plaintiff has met this element. It is not disputed that the cost

of separate actions would be prohibitive to individual class members and a class action would

relieve that hurdle. Moreover, LAMPERS has represented that there are no other pending suits

in other forums. Finally, the Court does not anticipate any difficulties in the management of this

case as a class action. Having reviewed the evidence before it, the Court is satisfied that Plaintiff

has set forth evidence to meet this element.

F. Relevant Class Period

Finally, Defendants argue that, as a result of the Restatement, Par discovered that it

understated, not overstated, its net revenue for the first quarter of 2004 and first two quarters of

2005. Therefore, the investors who bought Par stock following the earnings announcement in

the first quarter of 2004 and the first two quarters of 2005 should also be excluded from the

Proposed Class because Plaintiffs cannot establish that the price of Par stock was inflated during

those periods. (Def. Opp. 37-38). As such, Defendants propose that the Court should certify a

class of investors who bought stock between July 28, 2004 and April 28, 2005 and October 27,

2005 to July 5, 2006. (Id. at 38). At this stage, the Court does not find Defendants' arguments to

limit the class of investors persuasive because Plaintiff has made other allegations of material

misstatements including inventory valuation, investment in joint venture, leases, and accounts

payable and R&D. (See, e.g., SAC ¶J 38, 41, 42). The Court, however, will reserve the right to

reconsider the class period at a future date, if appropriate.

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G. Class Definition

Because the Court is satisfied that the LAMPERS has met the relevant requirements of

Rule 23, the Court hereby certifies the following class: those who purchased or otherwise

acquired the securities of Par between July 23, 2001 and July 5, 2006 and were thereby damaged,

excluding defendants Par, Scott Tarriff, Dennis J. O'Connor, as well as Par's officers and

directors, members of their immediate families, legal representatives, heirs, successors or

assigns, any entity in which Defendants have or had a controlling interest and those who sold all

of their shares prior to July 6, 2006.

III. CONCLUSION

The Court hereby GRANTS Plaintiff's motion. An appropriate order shall accompany

this opinion.

s/Esther Salas Dated: July 23, 2012

Esther Salas, U.S.D.J.

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