{"id":1738,"date":"2024-09-13T08:25:56","date_gmt":"2024-09-13T12:25:56","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1738"},"modified":"2024-09-13T08:25:56","modified_gmt":"2024-09-13T12:25:56","slug":"sixth-circuit-leaves-class-certification-order-intact-in-securities-fraud-case-and-denies-rule-23f-petition-to-appeal","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/09\/13\/sixth-circuit-leaves-class-certification-order-intact-in-securities-fraud-case-and-denies-rule-23f-petition-to-appeal\/","title":{"rendered":"Sixth Circuit Leaves Class Certification Order Intact In Securities Fraud Case And Denies Rule 23(f) Petition To Appeal"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown<\/strong><\/p>\n

Duane Morris Takeaways:<\/strong> On September 10 2024, in In Re Tivity Health Inc., et al.<\/em>, No. 23-0504 (6th Cir. Sept. 10, 2024), the U.S. Court of Appeals for the Sixth Circuit denied<\/a> the defendants\u2019 petition to appeal the U.S. District Court for the Middle District of Tennessee\u2019s order granting class certification to plaintiffs in a securities fraud case. The ruling closes the door to an immediate appeal of the class certification ruling, leaving proceedings to continue in the district court. The decision is a must read for class action defendants seeking to overturn a district court\u2019s Rule 23 class action certification ruling and exercising appellate options.<\/em><\/p>\n

Case Background<\/strong><\/p>\n

In the underlying lawsuit, the plaintiff filed a lawsuit on behalf of a putative class of investors against Tivity Health and three individual defendants. The lawsuit asserted claims of violations of Sections 10(b) and 20(a) of the Securities and Exchange Act arising from disclosures the company made to investors about its acquisition of Nutrisystem, a prominent diet and nutrition company.<\/p>\n

On June 7, 2022, the district court granted the motion of the lead plaintiff, Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund, for Rule 23(a) class certification. The court certified a class of persons who purchased or otherwise acquired the common stock of Tivity Health between March 8, 2019 and February 19, 2020. The defendants filed a Rule 23(f) petition seeking permission to appeal the ruling. The Sixth Circuit granted the petition on November 21, 2022, concluding the district court had not undertaken a \u201crigorous\u201d analysis of the Rule 23(a) factors. See<\/em> In Re Tivity Health Inc., et al.<\/em>, No. 22-0502 (6th Cir. Nov. 21, 2022). The Sixth Circuit remanded the case to the district court.<\/p>\n

Following remand, the district court again granted class certification pursuant to Rule 23(a). Thereafter, on June 22, 2023, the defendants filed a second Rule 23(f) petition, requesting permission to appeal the second class certification decision. The defendants primarily argued that the district court erroneously decided an open question of law about the scope of \u201cscheme liability\u201d under Section 10(b) of the Securities and Exchange Act.<\/p>\n

On July 10, 2023, lead plaintiff Sheet Metal Workers Local No. 33 responded in opposition to the request. In the opposition, the plaintiff contended that the U.S. Supreme Court had ruled definitely on the \u201copen\u201d question in Lorenzo v. Sec. & Exch. Comm\u2019n<\/em>, 587 U.S. 71 (2019). In Lorenzo<\/em>, the Supreme Court ruled that Section 10(b) of the Securities and Exchange Act encompassed a wide range of conduct, rejecting the argument that \u201cscheme liability\u201d was limited to deceptive acts. Consequently, the plaintiff argued there was no open question of law warranting interlocutory appeal of the district court\u2019s (second) grant of class certification.<\/p>\n

The Sixth Circuit\u2019s Ruling<\/strong><\/p>\n

First, the Sixth Circuit articulated the Rule 23(f) standard for review of a petition to appeal immediately from an order granting or denying class certification. It explained the analysis under Rule 23(f) considers several factors, including: (1) the petitioner\u2019s likelihood of success on the merits; (2) whether the certification decision turns on a novel or unsettled question of law; (3) whether the costs of continuing litigation may present such a barrier that later review is hampered; and (4) the posture of the case as it is pending before the district court.<\/p>\n

In applying the Rule 23(f) standard, the Sixth Circuit addressed only the second factor. It roundly rejected the defendants\u2019 argument that the district court\u2019s ruling turned on a novel or unsettled question of law. The Sixth Circuit reasoned that the plaintiffs\u2019 claim appeared to involve a \u201cstraightforward application\u201d of the Supreme Court\u2019s ruling on \u201cscheme liability\u201d in Lorenzo<\/em>. The Sixth Circuit declined to address any of the other factors in the Rule 23(f) analysis.<\/p>\n

Accordingly, finding no basis for interlocutory appeal, the Sixth Circuit entered a judgment denying the defendants\u2019 petition for permission to challenge the grant of class certification at this stage of the litigation.<\/p>\n

Implications For Class Action Defendants<\/strong><\/p>\n

As any corporation in a class action knows, a district court\u2019s grant of class certification is among the most significant inflection points in the litigation. Rule 23(f) is a tool for litigants to challenge a class certification ruling at the earliest possible stage, before the parties spend years engaging in costly and needless litigation. Similar to the Supreme Court\u2019s decision whether to grant a petition for certiorari, an appellate court has full discretion to grant or deny a Rule 23(f) petition. The Sixth Circuit\u2019s ruling in In Re Tivity Health, Inc. <\/em>illustrates the exceptionally high hurdle defendants face in overturning a district court\u2019s grant of class certification.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown Duane Morris Takeaways: On September 10 2024, in In Re Tivity Health Inc., et al., No. 23-0504 (6th Cir. Sept. 10, 2024), the U.S. Court of Appeals for the Sixth Circuit denied the defendants\u2019 petition to appeal the U.S. District Court for the Middle … <\/p>\n

Continue reading “Sixth Circuit Leaves Class Certification Order Intact In Securities Fraud Case And Denies Rule 23(f) Petition To Appeal”<\/span><\/a><\/p>\n","protected":false},"author":583,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[],"ppma_author":[30],"class_list":["post-1738","post","type-post","status-publish","format-standard","hentry","category-procedural-issues"],"authors":[{"term_id":30,"user_id":583,"is_guest":0,"slug":"classactiondefense","display_name":"Class Action Defense","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2020\/10\/dmlogo.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/583"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1738"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1738\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1738"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}