Case 4:19-cv-02033-YGR Document 352 Filed 03/28/23 Page 1 of 4
`
`
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`IN RE APPLE INC. SECURITIES
`LITIGATION
`
`
`
`
`
`Case No. 4:19-cv-02033-YGR
`
`ORDER MODIFYING CLASS
`
`Dkt. No.: 239
`
`
`
`
`
`On February 4, 2022, this Court granted in part plaintiff’s motion for class certification.
`
`(“Class Cert. Order,” Dkt. No. 224.) The Court certified the class but for the inclusion of option
`
`holders. The Court denied certification in that regard without prejudice. The Court found plaintiff
`
`failed to provide a method of determining damages on a class-wide basis and did not reach the
`
`additional question of whether the options trade in an efficient market such that options holders
`
`are entitled to the Basic presumption of reliance. Basic Inc. v. Levinson, 485 U.S. 224, 246
`
`(1988).
`
`As addressed in the Court’s prior order, while courts have granted class certification to
`
`options holders in similar cases, this Court was reticent to do so given the lack of evidence
`
`proffered by plaintiff.
`
`On April 15, 2022, plaintiff filed a supplemental motion to certify options investors as part
`
`of the class addressing those topics the Court raised. (Dkt. No. 239.) Having reviewed the
`
`parties’ briefings and expert reports, the Court GRANTS the motion.1
`
`
`1 The Court GRANTS defendants’ objection to the supplemental expert report and argument
`based thereon that plaintiff included with its reply. (Dkt. No. 291.) Plaintiff did not respond to
`this objection, which the Court takes as a concession. Additionally, raising new argument in reply
`is improper as it does not provide the opposing party with adequate opportunity to respond. See,
`e.g., Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007). The Court did not consider the report
`or related argument in reaching its decision on plaintiff’s motion.
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 4:19-cv-02033-YGR Document 352 Filed 03/28/23 Page 2 of 4
`
`
`
`I.
`
`Market Efficiency
`
`With respect to the efficiency of the market, in its Class Cert. Order, the Court outlined
`
`three issues for plaintiff to address should it renew its request to include option holders in the
`
`class.
`
`First, the Court noted that plaintiff’s expert, Professor Steven P. Feinstein, Ph.D., CFA,
`
`assumed without explanation that market efficiency for underlying stock translated to market
`
`efficiency for options and that cases addressing this issue have made the same assumption. (See
`
`Dkt. No. 224 at 20, n. 11 (collecting cases).) The Court indicated that additional information was
`
`required, including academic literature, on whether options trade in an efficient market where the
`
`underlying stock trades in an efficient market.
`
`Plaintiff’s renewed motion includes a report by Dr. Don M. Chance, an expert on financial
`
`derivatives. (Dkt. No. 239-2, Ex. A., “Chance Report.”) Chance explains that there is little
`
`academic literature in recent years regarding the efficiency of derivatives, including options,
`
`because their efficiency “is essentially settled” such that “academics rarely, if ever, test this matter
`
`anymore.” (Id. at ¶ 14.) Defendants’ expert, Steven Grenadier, does not argue with the general
`
`conclusion of Chance’s analysis, but rather emphasizes the possible exceptions and limitations.
`
`Grenadier contends that some the studies upon which Chance relies ignore certain types of options
`
`and that some studies have noted the potential for inefficiencies in some cases. (Dkt. No. 247-3,
`
`Ex. B., “Grenadier Report.”) This is insufficient to overcome plaintiff’s showing of overall
`
`efficiency at the stage of class certification. The Court need not resolve this battle between the
`
`experts at this juncture.
`
`Second, plaintiff addressed the relevance of factors identified in Cammer v. Bloom, 711 F.
`
`Supp. 1264, 1286–87 (D.N.J. 1989) and Krogman v. Sterritt, 202 F.R.D. 467, 478 (N.D. Tx. 2001)
`
`in terms of stock option, even though those factors are typically used to evaluate market efficiency
`
`of common stock. Chance explains with sufficient logic and persuasion that direct application of
`
`these criteria to options is not a useful measure of efficiency. (Chance at ¶¶ 68-71.) Defendants
`
`respond that this position contradicts the stance taken by plaintiff’s other expert, Feinstein, in his
`
`2
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 4:19-cv-02033-YGR Document 352 Filed 03/28/23 Page 3 of 4
`
`
`
`reports. Upon review, the Court notes that Feinstein also explained that the options did not satisfy
`
`all of the Krogman and Cammer factors. (Dkt. No. 165-3, Feinstein Report at ¶ 148.) Again,
`
`Chance’s explanation is sufficient for class certification purposes. Defendants can use any
`
`contradiction in terms of cross-examination.
`
`Additionally, defendants argue that plaintiff has not shown that Apple’s options
`
`themselves are traded in an efficient market. The Court agrees that plaintiff’s showing on this
`
`issue is minimal, but here, finds it adequate. Much more is required prior to trial. Further
`
`subcategories may be required for the final analysis but the Court need not resolve that issue at
`
`this juncture.
`
`II.
`
`Damages
`
`
`
`Next, the Court finds that plaintiff has provided an adequate method of calculating
`
`damages for options holders. (Chance at ¶ 118 (detailing steps of suggested discrete-dividend
`
`binomial model).) In its Class Cert. Order, the Court expressed concern that the proposed model
`
`did not have a method to account for variations in options. Feinstein’s report suggested the Black-
`
`Scholes model could be used but did not provide further detail. Plaintiff has now presented a
`
`common methodology for determining damages for the various options at issue here. Chance
`
`agrees that Black-Scholes (referred to by him as Black-Scholes-Merton) could be used, but
`
`proposes a related model that would also account for the right to exercise early that is a part of the
`
`American options at issue here. (Chance at ¶¶ 114-116.)
`
`Defendants argue that the model “cannot distinguish between investors who, ‘but-for’ the
`
`alleged price inflation, would have elected to purchase or sell the same options contract or a
`
`different contract. This is immaterial as the Court has found the options traded in an efficient
`
`market, entitling the class to the Basic assumption of reliance. The remainder of defendants’
`
`objections appear to highlight differences that exist between the various options that would
`
`prevent them from being calculated in exactly the same way or at the same time. Plaintiff is not
`
`required to show that each class member’s damages can be calculated at once. All it is required to
`
`show is that damages can “feasibly and efficiently be calculated once the common liability
`
`3
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 4:19-cv-02033-YGR Document 352 Filed 03/28/23 Page 4 of 4
`
`questions are adjudicated.” Hatamian v. Advanced Micro Devices, Inc., 2016 WL 1042502, at *8
`
`(N.D. Cal. Mar. 16, 2016) (quoting Levya v. Medline Indus., Inc., 716 F.3d 510, 514 (9th Cir.
`
`2013)). Plaintiff has done so here.
`
`III.
`
`CONCLUSION
`
`Accordingly, the motion is GRANTED. The class is modified to include the following
`
`bolded language:
`
`All persons and entities who purchased or otherwise acquired the publicly
`traded securities of Apple Inc., including purchasers of Apple Inc. call options
`and sellers of Apple Inc. put options, during the period from November 2, 2018
`through January 2, 2019, inclusive, 2 and who suffered damages by defendants’
`alleged violations of Sections 10(b) and 20(a) of the Exchange Act. Excluded from
`the class are (i) Apple and the individual defendants; (ii) members of the families
`of each individual defendant; (iii) officers and directors of Apple; and (iv) the legal
`representatives, heirs, successors or assigns of any such excluded party.
`
`This terminates docket number 239.
`
`IT IS SO ORDERED.
`
`Dated: March 28, 2023
`
`______________________________________
`YVONNE GONZALEZ ROGERS
`UNITED STATES DISTRICT JUDGE
`
`2 Plaintiff also sought to add the word “inclusive” after “November 2, 2018 through
`January 2, 2019 . . .” but provides no argument in this regard. Defendants do not respond. The
`Court interprets defendants’ silence as consent.
`
`4
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`