Weiner v. Tivity Health, Inc.

528 F.Supp.3d 795

Eric WEINER, Individually and on Behalf of All Others Similarly Situated, Plaintiff,

v.TIVITY HEALTH, INC., Donato Tramuto, Glenn Hargreaves and Adam Holland, Defendants.

Case No. 3:17-cv-01469

United States District Court, M.D. Tennessee, Nashville Division.

Filed March 23, 2021

Eduard Korsinsky, Levi & Korsinsky, LLP, New York, NY, James A. Holifield, Jr., Holifield Janich Rachal & Associates, PLLC, Knoxville, TN, for Plaintiff Eric Weiner.

Alice Buttrick, Ji Eun Kim, Cohen, Milstein, Sellers & Toll PLLC, New York, NY, Benjamin A. Gastel, James Gerard Stranch, IV, Branstetter, Stranch & Jennings, PLLC, Nashville, TN, Christina D. Saler, Cohen Milstein Sellers & Toll PLLC, Philadelphia, PA, Daniel S. Sommers, Joshua Handelsman, Steven J. Toll, Cohen, Milstein, Sellers & Toll, PLLC, Washington, DC, for Plaintiff Oklahoma Firefighters Pension and Retirement System.

Brandon R. Keel, Jessica Perry Corley, Lisa R. Bugni, King & Spalding LLP, Atlanta, GA, Joseph Akrotirianakis, King & Spalding LLP, Los Angeles, CA, Joseph B. Crace, Jr., Wallace Wordsworth Dietz, Bass, Berry & Sims, Nashville, TN, for Defendants.

MEMORANDUM OPINION

WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE

For yet a fourth and fifth time, the Court is called upon to issue substantive rulings in this securities class action alleging that Tivity Health, Inc. intentionally failed to disclose that one of its two largest customers, United Health Care ("UHC"), intended to offer fitness and health improvement programs that would directly compete with Tivity's flagship "SilverSneakers" program. The first substantive ruling was in response to Defendants'¹ Motion to Dismiss, wherein the Court found that the Complaint met or exceeded the heightened pleading standards mandated by the Private Securities Litigation Reform Act of 1995, and rejected Defendants' assertion that they were entitled to shelter under the safe harbor provision of that Act based upon forward-looking statements. Weiner v. Tivity Health, Inc., 365 F. Supp. 3d 900 (M.D. Tenn. 2019) ( Weiner I ). The second was in response to Defendants' Motion to Reconsider and its assertion (among other things) that the Court overlooked controlling Sixth Circuit authority. In fact, the Court not only cited, but actually quoted the supposedly overlooked authority for the precise proposition advanced by Defendants. Weiner v, Tivity Health, Inc., No. 3:17-CV-01469, 2019 WL 2211764 (M.D. Tenn. May 22, 2019) ( Weiner II ). The third was in response to Plaintiffs' Motion to Certify a Class in which the Court found that the four requirements for certification – numerousity, commonality, typicality, and adequate representation – were met for a class consisting of "all those who purchased or otherwise acquired Tivity common stock between March 6, 2017 and November 6, 2017, inclusive." Weiner v. Tivity Health, Inc., 334 F.R.D. 123, 138 (M.D. Tenn. 2020) ( Weiner III ).

Now before the Court are Defendants' Motion to Decertify the Class (Doc. No. 118) and their Motion for Summary Judgment (Doc. No. 121). Both Motions have been exhaustively briefed by the parties (Doc. Nos. 119, 122, 133, 142, 143, 144). Indeed, those filings and the documents attached thereto run over 5,000 pages, no doubt with substantial duplication. Nevertheless, and because the underlying factual allegations have been set forth in the decisions already listed,² the Court finds it unnecessary to rehash them yet again. Instead, the Court proceeds directly to the pending motions.

I. Motion to Decertify

Defendants initially challenged class certification on the grounds that Plaintiff could not satisfy the typicality and adequacy requirements of Rule 23(a)(3) and (4), and that, even he could, certification was inappropriate under Rule 23(b)(3) because common issues would not predominate over individualized ones. More specifically, Tivity argued that Plaintiff could not show that reliance could be proven on a classwide basis because (a) the information that Plaintiff alleges Defendants misrepresented or concealed was publicly available long before the November 6, 2017 press release that Plaintiff alleges revealed this information to investors; and (2) Plaintiff could not rely on either the fraud-on-the-market presumption of reliance recognized in Basic Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988), or on the presumption for cases of omission recognized in Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). (Doc. No. 93 at 2-3).

In a lengthy Memorandum Opinion and Order, the Court rejected each of Defendant's arguments. Specifically, as it related to the issue of reliance and predominance, the Court found that the presumption announced in Basic was appropriate because Tivity stock traded in an efficient market and Tivity "presented no proof that any investor knew, or likely would have known, about UHC's entry into the market prior to the corrective disclosure." Weiner III, 334 F.R.D. at 135.

Dissatisfied with this Court's ruling, Tivity filed a petition for permission to appeal under Rule 23(f). In doing so, Tivity argued that "it rebutted the presumption [of reliance] by showing that information revealing the alleged fraud was within the public domain prior to the corrective disclosure and that some investors were likely aware of such information during the putative class period." In re Tivity Health, Inc., No. 20-0501, 2020 WL 4218743, at *1 (6th Cir. July 23, 2020).

The Sixth Circuit denied permission to appeal, but observed that "we trust that the district court will attentively resolve the defendants' concerns about class members' reliance on the allegedly fraudulent statements in deciding whether to decertify the class or certify subclasses, as appropriate." Id. With that as the lead sentence in its supporting Memorandum (Doc. No. 119 at 1), Tivity requests that the Court decertify the class.

At this point it is probably helpful to recall the general time-line underlying Plaintiff's allegations. In late 2016, Tivity became aware that, on January 1, 2017, UHC was going to launch the Optum Fitness Advantage program to compete directly with SilverSneakers in Washington and New Jersey, with the intention of expanding to other states in later years. In March 2017 (when the class period began), Tivity told its investors that "insourcing" was just a hypothetical risk and not an active threat. The assurance that UCH's entry into the market was just a possibility continued even when Tivity learned, in late April/early May 2017, that UCH would use Optum for its individual Medicare Advantage plans in nine additional markets in 2018, as well as for its AARP-branded Medicare Supplement plans in certain markets. In an earnings call with investors on April 27, 2017, Traumuto announced the "three-year renewal of our contract with United Health" on "favorable terms," even thought Tivity knew at that point UHC might further expand its use of Optum Fitness Advantage, which potentially would cause the loss of more Silversneakers members and revenue. The truth about UHC's entry into Tivity's physical fitness market finally became public knowledge on November 6, 2017, when UHC announced in several press releases that it would be offering Optum Fitness Advantage in 11 states in 2018. The announcement caused the price of Tivity common stock to plummet 34% on extremely high trading volume, so Plaintiff alleges.

When the Court decided to certify a class, it found there was insufficient evidence to conclude that investor knowledge would predominate over the common liability issues. The Court wrote:

Tivity has presented no proof that any investor knew, or likely would have known, about UHC's entry into the market prior to the corrective disclosure. Instead, it points to what Lead Plaintiff properly characterizes as a "hodgepodge" of information from which it is to be inferred that the information was out there and publicly available. The sources of that information, however, are not the types one would commonly expect investors to consult, such as SEC filings, Barron's, the Economist, Kiplinger's, or Investor's Business Daily. Instead, the supposed disclosures about UHC's movement could be found (if one looked) in such diverse places as "a packet of information" released by UHC for insurance agents, a tweet from the Deer Park Fitness Center in Washington, an online flyer from the West Monmouth County New Jersey YMCA, websites of other New Jersey YMCAs, a Harrison, Ohio fitness blog, another blog maintained by the Mercury Pharmacy in Washington, a user post on the "Insurance Forum" website, and the www.fitnessadvantage.optum.com website. It is little wonder that even Dr. Gompers [Defendants' expert] could only go so far as to say it is "likely" that "some of Tivity's institutional investors" were aware of Optum Fitness Advantage offerings in some states.

Weiner III, 334 F.R.D. at 135-36 (internal citations to record omitted). With discovery now closed, and the trial but months away, the evidence of investor knowledge presented by Defendants is only a bit more fulsome.

Much of what Defendants present was previously presented or at least should have been presented given Tivity's contention that UHC's entry into the market was "public knowledge." In addition to that already discussed, the Court was previously informed from Plaintiff's allegations that (1) sometime between October and December 2016, UHC "forwarded an aggressive letter ... to a fitness center that stated that UHC was launching Optum Fitness Advantage," which "suggested that the fitness center would lose all SilverSneakers members, not just those insured by UHC"; (2) before January 2017, Tivity was informed that UHC would not be renewing SilverSneakers in at least New Jersey and Washington state; (3) in January 2017, UHC began operating Optum Fitness Advantage in New Jersey and Washington state; and (4) by early 2017, UHC...