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When “[c]onfronted with a request for settlement-only class certification, the court must look to the factors designed to protect absentees.” Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997). Rule 23(a) and (b) “focus court attention on whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives,” a “dominant concern [that] persists when settlement, rather than trial, is proposed.” Id. at 621. Judicial supervision requires the court to weigh the value of differently-situated class members’ claims against one another to determine whether there exist irreconcilable intraclass conflicts that demand separate representation ((a)(4)) or whether the common questions predominate ((b)(3)). “[I]ntraclass equity” is a “requirement.” Ortiz v. Fibreboard Corp., 527 U.S. 815, 863 (1999).

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Here, the Court already has examined a critical issue that precludes a finding of adequate representation and predominance in the proposed class. Under Morrison v. National Australia Bank Ltd., the federal securities laws only reach fraudulent statements made in connection with a purchase or sale of a security traded on a U.S. stock exchange or “the purchase or sale of any other security in the United States.” 561 U.S. 247, 273 (2010) (emphasis added); City of Pontiac Policemen’s & Firemen’s Retirement Sys. v. UBS AG, 752 F.3d 173, 179-81 (2d Cir. 2014); In re Petrobras Sec. (“Petrobras Appeal”), 862 F.3d 250, 271 (2d Cir. 2017) (class member “only has a viable cause of action if the specific Petrobras Securities sued upon were purchased in a qualifying ‘domestic transaction’”). The purchase of a security not traded on a domestic exchange is “domestic if irrevocable liability is incurred or title passes within the United States.” Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 62 (2d Cir. 2012). Based on this precedent, the Court held that a purchase of Petrobras Notes is not domestic—and thus not subject to U.S. securities law—simply because it was settled through the Depository Trust Company (“DTC”) or the Notes were listed on the NYSE. In re Petrobras Sec. Litig. (“Petrobras I”), 150 F. Supp. 3d 337, 342-43 (S.D.N.Y. Dec. 20, 2015). The Court dismissed the claims of two named plaintiffs who purchased Notes listed but not traded on the NYSE. Plaintiffs alleged ownership was transferred in the U.S. because their Notes purchases settled through the DTC in New York, and this is the “functional equivalent of transfer of title.” Id. at 341. The Court rejected this argument, holding that “the operations of the DTC are insufficient to satisfy Absolute Activist,” as the mechanics “involve neither the substantive indicia of a contractual commitment … nor the formal weight of a transfer of title.” Id. at 342. The Second Circuit affirmed this conclusion. Petrobras Appeal, 862 F.3d at 272 n.24. Despite this history, the parties nevertheless persist in including foreign Note purchasers in the Settlement Class. The definition of “Covered Transaction” includes purchases of a Petrobras Security, including certain Petrobras Notes, that “cleared or settled through the [DTC’s] book-entry system.” Settlement ¶1(i), (q); Notice at 3. Additional foreign transactions

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are included to the extent Securities were merely “listed for trading” rather than actually traded on the NYSE. The class definition includes no further requirement of a domestic transfer of title that would subject a purchase to U.S. securities laws under Morrison, UBS and Absolute Activist. Including foreign purchases in the class raises two problems for certification: First, a single set of counsel and representatives cannot adequately represent the interests of foreign and domestic purchasers under Rule 23(a)(4); more recovery of the fund by one group necessary means a reduction in recovery by the other. In re Literary Works in Elec. Databases Copyright Litig., 654 F.3d 242 (2d Cir. 2011). Second, the question of whether one’s purchase of Notes was foreign or domestic cannot be answered through common evidence; instead, each inquiry will focus on individualized locational evidence. Petrobras Appeal, 862 F.3d at 262; Petrobras I, 150 F. Supp. 3d at 340. The Settlement Class fails Rule 23(a)(4) and (b)(3) and cannot be certified. A. Class members were not adequately represented where the same counsel represented those who purchased Petrobras Securities in domestic and foreign transactions. Adequacy of representation, a prerequisite to class certification, Fed. R. Civ. P. 23(a)(4), requires “structural assurance of fair and adequate representation for the diverse groups and individuals affected.” Amchem, 521 U.S. at 627. Each such group must have “separate representation to eliminate conflicting interests of counsel.” Ortiz, 527 U.S. at 856.“Only the creation of subclasses, and the advocacy of an attorney representing each subclass, can ensure that the interests of that particular subgroup are in fact adequately represented.” Literary Works, 654 F.3d at 252. Thus, “[a]dequacy is twofold: the proposed class representative [and counsel] must have an interest in vigorously pursuing the claims of the class, and must have no interests antagonistic to the interests of other class members.” Id. at 249 (internal quotation omitted). Here, the Settlement Class—and both the Exchange Act Class and Securities Act Class1—kludges together two subgroups with qualitatively different claims: (i) those who

1 As trustee to the Trust, Haynes is a member of the Exchange Act Class, within the overarching Settlement Class. Both the Exchange Act and Securities Act Classes suffer from the same (a)(4) and (b)(3) defects, and do not appear to have had separate representation themselves.

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purchased Petrobras Securities through a domestic transaction (and have stronger claims), and those who purchased Petrobras Securities through a foreign transaction (and have no claim, as evidenced by the Court’s earlier dismissal of such claims). See Amchem, 521 U.S. at 619-20. Because the two groups are competing for the same settlement funds, it creates an untenable intraclass conflict of interest to merge them into the same class with the same representation. See, e.g., Ortiz, 527 U.S. at 857; Literary Works, 654 F.3d at 251-52; see also Petrobras Appeal, 862 F.3d at 271 (domesticity of transaction is a material issue). Plaintiffs acknowledge that foreign transactions that “ultimately may have been dismissed by the Court” are “encompassed in the definition of Covered Transactions.” Dkt. 776 at 23. Purchases of Petrobras Notes frequently clear or settle through the DTC’s book-entry system. Petrobras I, 150 F. Supp. 3d at 342. All such transactions are included under subpart (ii) of “Covered Transactions” regardless of whether a particular transaction was domestic. Many of these transactions will be excluded from the reach of the Securities Act and Exchange Act—and therefore should be dismissed—because “they involve neither the substantive indicia of a contractual commitment necessary to satisfy Absolute Activist’s first prong nor the formal weight of a transfer of title necessary for its second.” Id. at 340. Additionally, Petrobras Notes “were listed or intended to be listed on the [NYSE, but] they did not trade there.” Id. at 339. As such, foreign transactions are also included in the Settlement Class to the extent that subpart (i) of “Covered Transactions” includes Notes that were listed but not actually traded on the NYSE. Id. at 340. Class members who purchased stock actually traded on the NYSE such as Haynes do not face the devastating hurdle to their claims that foreign purchasers face. Plaintiffs’ defense of the inclusion of meritless claims in the Settlement Class flounders. It centers in part on a “respectful[] disagree[ment]” with the Second Circuit’s holding that every DTC transaction is not a domestic transaction under Morrison. Dkt. 776 at 23. That ruling is the

While the Court could address these problems in each class separately using the same analysis, for ease of reference, Haynes addresses the problem at the level of the overarching Settlement Class.

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law of the case and cannot be challenged now. See United States v. Williams, 475 U.S. F.3d 468, 475 (2d Cir. 2007). Their defense also centers on a handful of out-of-circuit cases that are of marginal relevance or, in some cases, undermine their argument. While opining in In re Am. Int’l Group, Inc. Sec. Litig. that settlement class certification might be warranted if trial management concerns are the only obstacle, the court made clear that other Rule 23(a) and (b) criteria still apply in the settlement context: “if there appear to be conflicts within the class, with some members who could satisfy the presumption and others who cannot, a district court may need to address the applicability of the [fraud-on-the-market] presumption in order to make findings with respect to adequacy of representation or predominance, or to evaluate whether subclasses are necessary.” 689 F.3d 229, 243 (2d Cir. 2012) (cited at Dkt. 776 at 23). The release of claims arising from foreign transactions might command some settlement value; however, the proper valuation should have been tested through arms-length negotiation by separate representatives. Each subgroup required counsel whose sole duty was to represent and advocate on its behalf. Instead, class counsel was “obligated to advance the collective interests of the class, rather than those of a subset of class members”; entirely absent was “the advocacy of an attorney representing each subclass” or subgroup as required by Rule 23 to “ensure the interests of that particular subgroup are in fact adequately represented.” Literary Works, 654 F.3d at 252. The recovery of domestic purchasing class members such as Haynes is unfairly diluted by the inclusion of foreign purchasers, while the parties benefit by achieving a holistic settlement and release of claims without sharing the fees with counsel for a separate subclass. Amchem required subclassing where the conflict was even less stark. There, the proposed class encompassed members who had already manifested asbestos-related injuries, i.e., those with present claims, and those with who had been exposed to asbestos but did not show signs of injury, i.e., those with only potential future claims. The “two subgroups … had competing interests in the distribution of a settlement whose terms reflected ‘essential allocation decisions designed to confine compensation and to limit defendants’ liability.’” Literary Works, 654 F.2d

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at 250 (quoting Amchem, 521 U.S. at 627). See also Ortiz, 527 U.S. at 857 (groups holding claims of significantly different value had conflicting interests that should have been addressed with “reclassification with separate counsel”). The Second Circuit has applied Amchem and Ortiz to vacate class certification in similar circumstances. In Literary Works, the court struck down a settlement on Rule 23(a)(4) grounds where class counsel attempted to negotiate compensation for three separate “categories” of copyright-holding class members in a single settlement, where each class representative “served generally as a representative for the whole, not for a separate constituency.” 654 F.3d at 246, 251. Class representatives “cannot have had an interest in maximizing compensation for every category” where each category had qualitatively different claims. Id. at 252 (emphasis in original). The Second Circuit again rejected the adequacy of unitary representatives who “were in the position to trade diminution [of one subgroup’s] relief for increase of [another’s] relief” in In re Payment Card Interchange Fee & Merchant Discount Antitrust Litig., 827 F.3d 223, 234 (2d Cir. 2016). Payment Card recognized the incentives that generally undergird this problem: “(i) the interest of class counsel in fees, and (ii) the interest of defendants in a bundled group of all possible claimants who can be precluded by a single payment.” Id. at 236. Subclassing is required, with “separate representation to eliminate conflicting interests of counsel.” Ortiz, 527 U.S. at 856. It may be necessary to create three subclasses: (1) purchasers of Petrobras Securities traded on a domestic exchange, (2) purchasers of Petrobras Securities through domestic transactions that require evidence beyond the bright-line domestic exchange prong of Morrison, and (3) purchasers through foreign transactions. Class counsel’s inadequate representation is further evidenced by the cy pres settlement term. The Settlement Agreement provides, as suggested by Petrobras, that any remainder from the settlement fund will be donated to “a program in Brazil devoted to fighting corruption and improving corporate governance, which will be selected by Petrobras and approved by Class Counsel.” Settlement, Dkt. 767-1 ¶ HH. This provision runs afoul of the limitations on the use of

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cy pres. “The purpose of Cy Pres distribution is to put the unclaimed fund to its next best compensation use, e.g., for the aggregate, indirect, prospective benefit of the class.” Masters v. Wilhelmina Model Agency, 473 F.3d 423, 436 (2d Cir. 2007) (internal quotation omitted). A program devoted to fighting corruption in Brazil has an inappropriately narrow geographic scope where there has been no demonstration that all or even most of the class is Brazilian or owns securities in other Brazilian entities. Moreover, there is an inappropriately weak connection to the issue of securities fraud. See Nachshin v. AOL, LLC, 663 F.3d 1034, 1040 (9th Cir. 2011) (rejecting cy pres distribution with narrow geographic focus and no relation to the objectives of the underlying law); In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060 (8th Cir. 2015) (similar). A recipient with a much closer nexus to a class seeking damages for alleged shareholder fraud is the SEC Fair Funds for Investors, which benefits shareholders injured by securities fraud. By acceding to Petrobras’s suggestion of a cy pres recipient that fails to benefit the class, class counsel again showed themselves to be inadequate representatives. B. The Settlement Class cannot satisfy (b)(3)’s predominance requirement. The conflict between domestic and foreign purchases also undermines the cohesiveness necessary for Rule 23(b)(3) predominance. The Second Circuit addressed the predominance requirement at length in Petrobras’s appeal of this Court’s certification decision. Petrobras Appeal, 862 F.3d 250. The predominance requirement “is satisfied if: (1) resolution of any material legal or factual questions … can be achieved through generalized proof, and (2) these [common] issues are more substantial than the issues subject only to individualized proof.” Id. at 270 (internal quotation omitted). “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 class-wide proof.” Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (alteration and quotations omitted). Here, the Settlement Class is not sufficiently cohesive: class members who purchased a

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Petrobras Security in a domestic transaction have viable monetary claims, while those who purchased a Petrobras Security in a foreign transaction have no viable monetary claim. The Second Circuit recognized that “[o]n the available record, the investigation of domesticity appears to be an ‘individual question requiring putative class members to present evidence that varies from member to member.” Petrobras Appeal, 862 F.3d at 272 (internal quotations omitted). That is because a plaintiff may prove domesticity with evidence “‘including, but not limited to, facts concerning the formation of contracts, the placement or purchase orders, the passing of title, or the exchange of money.’” Id. (quoting Absolute Activist, 677 F.3d at 70). This Court’s analysis of the putative named plaintiffs’ evidence offered as proof of the domestic nature of their purchases shows how these transaction-specific facts are not susceptible to class-wide proof. See id.; Petrobras I, 150 F. Supp. 3d at 340-41. Rather, an individualized locational inquiry is essential to determining which transactions are domestic versus foreign under Morrison because Petrobras Securities were purchased in myriad ways. Id. at 273. “[T]he potential for variation across putative class members—who sold them the relevant securities, how those transactions were effectuated, and what forms of documentation might be offered in support of domesticity—appears to generate a set of individualized inquiries” for purposes of Rule 23(b)(3)’s predominance requirement. Id. On remand, plaintiffs have not put forth “class-wide evidence” of domesticity that would prevent the fact-finder from “hav[ing] to look at every class member’s transaction documents to determine who did and who did not have a valid claim.” Petrobras Appeal, 862 F.3d. at 274 (internal quotation omitted). Instead, in their motion for final approval, they acknowledge the risk that they could not meet predominance absent settlement, and base their defense on cherry picked snippets from the Second Circuit ruling and inapplicable cases. See Dkt. 776 at 14, 21. Plaintiffs zero in on a single sentence in a footnote where the Second Circuit comments that after carefully weighing “the relationship between common and individual questions,” this Court could “determine that any variation across plaintiffs is, on balance, insufficient to defeat

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predominance.” Dkt. 776 at 21. With this slender reed, plaintiffs seek to undermine Amchem’s direction that “the predominance inquiry—as distinguished from the trial-manageability inquiry—should not be watered down merely because the parties have entered a proposed settlement.” In re Grand Theft Auto Video Game Consumer Litig., 251 F.R.D. 139, 159 (S.D.N.Y. 2008). Amchem is clear: The “safeguards” of Rule 23(a) and (b) “are not impractical impediments—checks shorn of utility—in the settlement class context.” 521 U.S. at 621.2 Rule 23(e) “was designed to function as an additional requirement, not a superseding direction.” Id. They also divert attention from the actual individualized question of transaction locality that undermines predominance to the more generalized issues of defendants’ conduct. Even if other cases have held that common issues predominate with respect to the falsity and materiality of statements, plaintiffs offer no authority holding that individual issues do not predominate with respect to transaction locality in securities suits where a defendant has globally traded securities. Cf. Dkt. 766 at 21-22 (citing cases). In fact, in their only case to address Morrison directly, the Court certified a class only after it excluded any putative class members who “purchased, incurred ‘irrevocable liability,’ or obtained ‘title’ to securities … outside the United States [because] they do not have a viable cause of action under the Securities Act, and may not be included in the class certified here,” and it further related to the specific issue of “traceability” of the securities at issue. In re Smart Techs., Inc. S’holder Litig., 295 F.R.D. 50, 57 (S.D.N.Y. 2013). Transaction locality is not a “various secondary issue” but rather at the heart of whether a putative class member has a damages claim such that certification of her claims is permissible. Under the holdings of Amchem and the Second Circuit in this case, the Settlement Class cannot be certified due to lack of predominance.