United States District Court, N.D. Illinois, Eastern Division
HARRY PLOSS, as Trustee for the HARRY PLOSS TRUST DTD 8/16/1993, on behalf of himself and a proposed class, et al., Plaintiffs,
KRAFT FOODS GROUP, INC. and MONDELĒZ GLOBAL LLC, Defendants.
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang, United States District Judge
Ploss and other plaintiffs brought this proposed class-action
lawsuit against Kraft Food Group, Inc. and Mondelēz
Global LLC, alleging violations of the Commodity Exchange Act
(CEA); the Sherman Antitrust Act; and unjust
enrichment. (For simplicity, the Opinion will refer to
the Plaintiffs collectively as Ploss and to the Defendants
collectively as Kraft.) In the Consolidated Class Action
Complaint (“Complaint” for short), Ploss alleged
that Kraft manipulated the wheat-futures market using two
schemes: the long wheat futures scheme, and the wash trading
scheme. R. 71, Compl. After a prior motion to dismiss, all that
remains are the claims on the long wheat futures scheme.
See R. 113, Opinion (granting Kraft's motion to
dismiss (R. 76) as to Count Four (Section 9(a)(2) EFP wash
trading manipulation) and Count Five (Section 6(c)(1) EFP
wash trading manipulation)); Ploss v. Kraft Foods Group,
Inc., 197 F.Supp.3d 1037 (N.D. Ill. 2016).
now wishes to certify the class on the remaining claims.
See R. 237, Mot. Class Cert. In support of the
motion for class certification, Ploss submitted expert
reports authored by Dr. Craig Pirrong. R. 240, Pirrong Rep.;
R. 315, Pirrong Rebuttal Rep. In response, Kraft moves to
exclude Pirrong's opening report, R. 276, Defs.' Mot.
Exclude, and to strike his rebuttal report, R. 319,
Defs.' Mot. Strike. For the reasons below, the Court
grants Ploss's motion for class certification and denies
Opinion assumes familiarity with the facts set out in greater
detail in the opinion that addressed the motion to dismiss.
Ploss, 197 F.Supp.3d 1037. As a quick refresher,
Ploss alleges that Kraft manipulated the wheat-futures market
by buying and maintaining an enormous position on wheat
futures for the purpose of influencing prices, rather than
out of any legitimate need for that quantity of wheat. Compl.
¶ 122-138. Specifically, Kraft bought $90 million worth
of December 2011 wheat futures contracts, and then refused to
liquidate its long position and stopped buying wheat in the
cash market. Id. ¶¶ 86, 91, 92. These
acts, according to Ploss, falsely signaled to the market that
Kraft was satisfying its need for wheat from the futures
market rather than the cash market, and caused the wheat
prices in the cash market to drop and the price of wheat
futures to increase. Id. ¶¶ 55-56, 82. As
a result of the artificial prices allegedly caused by the
scheme, all of the Plaintiffs that transacted in December
2011 and March 2012 wheat futures lost money-that is, the
Plaintiffs allege that they either bought at a higher price
or sold at a lower price than they would have absent
Kraft's allegedly manipulative actions.
now seeks to certify the following two classes under Federal
Rule of Civil Procedure 23(b)(3), comprised of all persons
a. purchased a CBT December 2011 or a CBT March 2012 futures
contract after October 31, 2011 except that purchases of CBT
March 2012 futures contracts made after December 14, 2011
qualify for inclusion in the Class only to the extent they
were made in liquidation of a short position in the CBT March
2012 contract (whether an outright short position or as part
of a spread position) which was sold between November 1 and
December 14, 2011 inclusive; or
b. sold put options or purchased call options on the CBT
December 2011 contract or on the CBT March 2012 contract
after October 31, 2011 except that sales of put options or
purchases of call options on the CBT March 2012 contracts
made after December 14, 2011 qualify for inclusion in the
Class only to the extent they were made in liquidation of a
position in the CBT March 2012 contract (whether an outright
position or as part of a spread position) which was initiated
between November 1 and December 14, 2011 inclusive.
Mot. Class Cert. at 1. In support of the motion, Ploss first
submitted an opening expert report authored by Dr. Craig
Pirrong. See Pirrong Rep. In the opening report,
Pirrong opined, among other things, that Kraft caused
artificially high prices in the December 2011 and March 2012
wheat futures markets, thus causing the Plaintiffs'
damages. See generally id. Kraft, unsurprisingly,
opposes the class-certification motion. R. 267, Defs.'
Resp. Br. (SEALED). To rebut Pirrong's report, Kraft
submitted the expert report of Dr. James Overdahl, who
attempted to poke holes in Pirrong's causation opinions.
R. 264-3, Overdahl Rep. (SEALED). Ploss then submitted a
rebuttal report written by Pirrong, which responded to
Overdahl's criticisms. See Pirrong Rebuttal Rep.
Kraft moves to exclude Pirrong's causation opinions and
to strike parts of the rebuttal report.
justify class certification, a plaintiff must satisfy each
requirement of Rule 23(a)-numerosity, commonality,
typicality, and adequacy of representation-as well as at
least one of the subsections of Rule 23(b). See Harper v.
Sheriff of Cook Cnty., 581 F.3d 511, 513 (7th Cir.
2009); Oshana v. Coca-Cola Co., 472 F.3d 506, 513
(7th Cir. 2006). Here, Ploss is seeking class certification
under Rule 23(b)(3). So in addition to the requirements of
Rule 23(a), he must also show predominance and superiority.
See Fed. R. Civ. P. 23(b)(3). Separate and apart
from the requirements in Rule 23(a) and (b)(3), “a
class must be sufficiently definite that its members are
ascertainable.” Jamie S. v. Milwaukee Pub.
Sch., 668 F.3d 481, 493 (7th Cir. 2012);
Oshana, 472 F.3d at 513 (“The plaintiff must
also show ... that the class is indeed identifiable as a
to meet any of those requirements precludes class
certification. Harper, 581 F.3d at 513 (cleaned
The Court “must make whatever factual and legal
inquiries are necessary to ensure that requirements for class
certification are satisfied before deciding whether a class
should be certified, even if those considerations overlap the
merits of the case.” Am. Honda Motor Co. v.
Allen, 600 F.3d 813, 815 (7th Cir. 2010); see also
Schleicher v. Wendt, 618 F.3d 679, 685 (7th Cir. 2010)
(“[A] court may take a peek at the merits before
certifying a class, ” but that peek is “limited
to those aspects of the merits that affect the decisions
essential under Rule 23.”). At the same time, however,
the ultimate inquiry at the class-certification stage are the
requirements of Rule 23. See Bell v. PNC Bank, Nat.
Ass'n, 800 F.3d 360, 376 (7th Cir. 2015). So
class-certification proceedings cannot be allowed to turn
into a preemptive determination of the merits if the answers
to merits questions are not needed to decide the
certification motion. Id.
Rule 23 Requirements
challenges Ploss's showing on (1) typicality; (2) the
adequacy of class representatives; (3) predominance; and (4)
ascertainability. The Court addresses each in turn.
Typicality and Adequacy
23(a)(3) requires that “the claims or defenses of the
representative parties [be] typical of the claims or defenses
of the class.” Fed.R.Civ.P. 23(a)(3). “A
plaintiff's claim is typical if it arises from the same
event or practice or course of conduct that gives rise to the
claims of other class members and is based on the same legal
theory.” Lacy v. Cook Cty., Illinois, 897 F.3d
847, 866 (7th Cir. 2018) (quoting Rosario v.
Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992)) (cleaned
up). The typicality requirement “is meant to ensure
that the named representative's claims have the same
essential characteristics as the claims of the class
at-large.” Id. (cleaned up).
Rule 23(a)(4) requires that the named plaintiffs
“fairly and adequately protect the interest of the
class.” Fed.R.Civ.P. 23(a)(4). “To be an adequate
representative, the named plaintiff must be part of the class
and possess the same interest and suffer the same injury as
the class members.” Conrad v. Boiron, Inc.,
869 F.3d 536, 539 (7th Cir. 2017) (quoting Amchem Prod.,
Inc. v. Windsor, 521 U.S. 591, 625-26 (1997)) (cleaned
up). A class representative is not adequate if, for example,
the proposed representative is subject to a defense to which
other class members are not, or if the representative cannot
prove the elements of the class's claim for reasons
unique to the representative. CE Design Ltd. v. King
Architectural Metals, Inc., 637 F.3d 721, 724-25 (7th
the named Plaintiffs' claims are all typical of those of the
class. All class members, including the named Plaintiffs,
bought December 2011 and March 2012 wheat futures and
allegedly lost money because of the artificial prices caused
by the scheme. There simply is nothing that distinguishes the
claims of the proposed representatives from those of the rest
of the class. The proposed representatives' claims target
the same conduct, and seek relief under the Commodity
Exchange Act and the Sherman Act based on the same legal
theories and on the same facts. The named Plaintiffs are
adequate class representatives for largely the same reason:
the claims of the named Plaintiffs are identical, both
legally and factually, to those of the proposed class
members. There are no individual defenses or unique obstacles
to proving the claims that would in any way impede the named
Plaintiffs' ability to adequately represent the interest
of the class members. See Conrad, 6869 F.3d at 539.
contends, though, that Ploss failed to establish both
typicality and adequacy because the named Plaintiffs are
supposedly subject to one of Kraft's defenses: that
Kraft's conduct did not signal that it would physically
load out the wheat pursuant to the futures contracts.
Defs.' Resp. Br. at 26-28 (SEALED). Before getting into
what this defense really means, it is worth going back to the
allegations in the Complaint and Kraft's defenses. The
Complaint alleges that, as part of the long wheat futures
scheme, Kraft bought $90 million worth of December 2011 wheat
futures contracts, even though it did not make financial
sense to do so. Compl. ¶¶ 55-56, 82. This purchase
signaled to market participants that Kraft would supposedly
satisfy its need for wheat from the futures market, and not
from the local cash market. Id. ¶ 55. This in
turn artificially caused prices in the cash market to fall
and the December 2011 futures prices to rise, both of which
put Kraft ahead by millions of dollars. Id.
¶¶ 82-83, 87, 89. That was just as predicted by
Kraft's Senior Director of Global Procurement in internal
emails written in October and December 2011. Id.
¶¶ 83, 89.
defend against these allegations, Kraft argues that its
conduct did not signal that Kraft would physically
load out under the futures contracts. Defs.' Resp. Br. at
26 (SEALED). In other words, Kraft broadly contends that it
did not send any false signals, defraud anyone, or cause any
market participants to make trades based on artificially high
prices for December or March futures.
Id. With this defense laid out, Kraft argues
that the named Plaintiffs are subject to a unique defense
because they supposedly made admissions in line with the
defense. Id. Kraft points out, for example, that
Ploss conceded that, back in December 2011, he did not get a
signal about what Kraft was going to do in the wheat market,
and that before this litigation, Ploss did not know when
Kraft bought its December long position. Id. at 28;
see also R. 264-21, Ploss Dep. Tr. at 119:14-120:13
(SEALED). Ploss also testified that he did not know when
Kraft sold its March position, nor did he know that Kraft was
“stopping wheat” (which means, in futures jargon,
standing for delivery of the wheat) in the December delivery
period. Ploss Dep. Tr. at 124:21-125:10, 252:20-254:14
(SEALED). Likewise, the representative for White Oak Fund,
one of the named Plaintiffs, testified that, in December
2011, no one at White Oak had any specific understanding
about Kraft's futures position or whether any shipping
certificates would be delivered. Defs.' Resp. Br. at 27
(SEALED); see also R. 264-22, Exh. 22, Sullivan Tr.
first glance, this testimony suggests that Kraft is right-the
named Plaintiffs did not rely on any misrepresentations made
by Kraft. The problem for Kraft, however, is that Ploss's
theory of liability is based on how Kraft's conduct
affected the market as a whole, rather than on any
overt misrepresentations to particular market
participants. See Ploss, 197 F.Supp. at 1055. That
theory of liability is often referred to as a “fraud on
the market” theory, and is often invoked in
securities-fraud cases. It posits 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.” See Basic
Inc. v. Levinson, 485 U.S. 224, 241-42 (1988). Under
that theory, “misleading statements will therefore
defraud purchasers of stock even if the purchasers do not
directly rely on the misstatements.” Id.
Likewise, in a commodities-manipulation case, the fraud on
the market theory assumes that buyers and sellers rely on
public misstatements whenever the investor buys or sells
futures contracts at the price set by the market because the
market transmits information to the participants in the form
of the market price. Id. Here, by definition, if
Kraft manipulated the prices in the wheat futures market,
then all of the class members bought and sold
contracts at manipulated prices. In other words, the class
members relied on “misrepresentations” that were
baked into the market price at the time of their
transactions, rather than explicit misrepresentations
directed at them specifically. See Ploss, 197
F.Supp.3d at 1055. So it is unimportant, under Ploss's
theory of liability, whether any of the named Plaintiffs had
direct and specific knowledge of Kraft's conduct or its
futures positions. What Kraft labels as admissions by the
named Plaintiffs is neither specific to those Plaintiffs nor
anyway much of a defense. The named Plaintiffs have met the
typicality and adequacy requirements.