case3:04-cv-01836 document108 filed 09/17/2007 page 1...

Case 3:04-cv-01836 Document 108 Filed 09/17/2007 of 6

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

TODD FENER, On Behalf of Himself and AllOthers Similarly Situated,

Plaintiff,

Civil Action No. 3:04-CV-1836-D(Consolidated withCivil Action No. 3:04-CV-1869-DCivil Action No. 3:04-CV-2156-D)

vs.

BELO CORP., et al.,

Defendants.

ELECTRONIC CASE FILING

CLASS ACTION

LEAD PLAINTIFF'S MOTION FOR CLASS CERTIFICATION


TO: ALL PARTIES AND THEIR COUNSEL OF RECORD

PLEASE TAKE NOTICE that, pursuant to Federal Rules of Civil Procedure 23(a) and

23(b)(3), Lead Plaintiff, Operating Engineers Construction Industry and Miscellaneous Pension

Fund (Local 66) ("Lead Plaintiff ), seeks an Order certifying a class of all persons who purchased

the publicly traded securities of Belo Corporation between May 12, 2003 and August 6, 2004 (the

"Class Period ), and who were injured thereby. Lead Plaintiff files this Motion for Class

Certification ("Motion ) pursuant to Judge Fitzwater's grant of the parties' agreed stipulation on

May 30, 2007. Lead Plaintiff has conferred with counsel for defendants and has been unable to

reach an agreement as to the disposition of this Motion.

Lead Plaintiff's Motion is based upon this notice, the accompanying Memorandum of Law,

in Support ofLead Plaintiffs Motion for Class Certification, the Declaration ofAlexandra S. Bernay

in Support of Lead Plaintiffs Motion for Class Certification, the Declaration of Robert T. Jack in

Support of Lead Plaintiffs Motion for Class Certification and the Proposed Order Granting Lead

Plaintiff's Motion for Class Certification submitted concurrently herewith.

DATED: September 17, 2007 Respectfully submitted,

COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

HENRY ROSENBENNY C. GOODMAN IIIALEXANDRA S. BERNAYANDREA N. WILLIAMS

s/ Alexandra S. BernayALEXANDRA S. BERNAY

655 West Broadway, Suite 1900San Diego, CA 92101Telephone: 619/231-1058619/231-7423 (fax)

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Lead Counsel for Plaintiffs

LAW OFFICE OF ROBERT E. JENKINS, P.C.ROBERT E. JENKINSState Bar No. 240368423010 LBJ Freeway, Suite 1200Dallas, TX 75234Telephone: 214/289-3797

PROVOST & UMPHREY LAW FIRM, LLPJOE KENDALLState Bar No . 11260700WILLIE C. BRISCOEState Bar No. 240017883232 McKinney Avenue, Suite 700Dallas , TX 75204Telephone : 214/744-3000214/744-3015 (fax)

Co-Liaison Counsel

S:\CasesSD\Be1o\N0T00045357.doc

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CERTIFICATE OF SERVICE

I hereby certify that on September 17, 2007, I electronically filed the foregoing with the

Clerk ofthe Court using the CM/ECF system which will send notification ofsuch filing to the e-mail

addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I have

mailed the foregoing document or paper via the United States Postal Service to the non-CM/ECF

participants indicated on the attached Manual Notice List.

I certify under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct . Executed on September 17, 2007.



655 West Broadway, Suite 1900San Diego, CA 92101-3301Telephone: 619/231-1058619/231-7423 (fax)E-mail: xanb(abcs rcom

District Version 3.0.3Case 3:04-cv-01836 Document 108 Filed 09/17/2007 of 6

Mailing Information for a Case 3:04-cv-01836

Electronic Mail Notice List

The following are those who are currently on the list to receive e-mail notices for this case.

. Alexandra S Bernayxanb@csgrr. com,hectorm@csgrr. com,e_file_sd@c sgrr.com

. Thomas E [email protected],[email protected],[email protected]

Page 1 of 2

. Willie [email protected],[email protected],provost_ [email protected]

. Roger F [email protected]

. Anissa F Curlissacurliss @mathisdonheiser.com,[email protected],[email protected]

. Roger [email protected],[email protected]

. Benny C Goodman, [email protected],[email protected]

. Robert E [email protected]

. Joe [email protected]@provostumphrey.com

. Hamilton [email protected],[email protected]

. Randal G [email protected]@mathisdonheiser.com

. Martin B [email protected],[email protected]

. Henry Rosenhenryr@csgrr. com,e_file_sd@csgrr. com

. Andrea N [email protected]

Manual Notice List

https://ecf.txnd.uscourts.gov/cgi-bin/MailList.pl?942476007722564-L_390_0-1 9/17/2007

District Version 3.0.3 Page 2 of 2


The following is the list of attorneys who are not on the list to receive e-mail notices for this case (whotherefore require manual noticing). You may wish to use your mouse to select and copy this list intoyour word processing program in order to create notices or labels for these recipients.

• (No manual recipients)


Case 3:04-cv-01836 Document 108-2 Filed 09/17/2007 Page 1 of 5



DALLAS DIVISION


Plaintiff,


vs.

BELO CORP., et al.,

Defendants.


CLASS ACTION

[PROPOSED] ORDER GRANTING LEAD PLAINTIFF'S MOTION FOR CLASSCERTIFICATION


Having considered arguments in support of and in opposition to Lead Plaintiff's Motion for

Class Certification, the Court finds that the motion should be granted.

IT IS HEREBY ORDERED:

Lead Plaintiffs Motion for Class Certification is GRANTED.

2. This action shall proceed as a class action with the members ofthe class consisting of

All persons who purchased the publicly traded securities of Belo Corporationbetween May 12, 2003 and August 6, 2004, and who were injured thereby. Excludedfrom the class are defendants and members oftheir immediate families, any entity inwhich a defendant has a controlling interest, and the legal representatives, heirs,successors or assigns of any such excluded party.

Operating Engineers Construction Industry and Miscellaneous Pension Fund (Local

66) is appointed as Class Representative.

4. Coughlin Stoia Geller Rudman & Robbins LLP is appointed Class Counsel.

Provost & Umphrey Law Firm, LLP and Law Office of Robert E. Jenkins, P.C. are

appointed Co-Liaison Counsel.

ORDER

IT IS SO ORDERED.

DATED:THE HONORABLE SIDNEY FITZWATERUNITED STATES DISTRICT JUDGE

S:\CasesSD\Belo\ORD00045366 Class Cert.doc

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I hereby certify that on September 17, 2007 , I electronically filed the foregoing with the






foregoing is true and correct. Executed on September 17, 2007.



655 West Broadway, Suite 1900San Diego, CA 92101-3301Telephone: 619/231-1058619/231-7423 (fax)E-mail: [email protected]


Case 3 : 04-cv-01836 Document 108-2 Filed 09/17/2007 Page 4 of 5






. Willie [email protected],[email protected],provost_dallas@yahoo. com












Manual Notice List





DALLAS DIVISION


Plaintiff,


vs.

BELO CORP., et al.,

Defendants.


CLASS ACTION

MEMORANDUM OF LAW IN SUPPORT OF LEAD PLAINTIFF'S MOTION FORCLASS CERTIFICATION


TABLE OF CONTENTS

Page

I. INTRODUCTION ...............................................................................................................1

II. BACKGROUND .................................................................................................................1

A. The Significance ofDMN Circulation to Belo ........................................................3

B. Defendants Created Numerous Schemes to Falsely Inflate CirculationFigures ......................................................................................................................3

1. The Mandatory Goal of Meeting the Prior Year's CirculationNumbers .......................................................................................................3

2. Implementation of the Non-returnable Policy .............................................4

3. Financial Incentives and Contest Rewards ..................................................4

4. Artificial Overstatement of Home Delivery Subscriptions ..........................5

5. Inflated Bundle Delivery Figures .................................................................5

6. Warnings from the Distributor .....................................................................5

C. The Truth About Circulation Overstatement at DMN Is Revealed..........................6

III . ARGUMENT ....................................................................................................................... 8

A. This Action Should Be Certified as a Class Action Pursuant to FederalRule of Civil Procedure 23(a) ..................................................................................8

1. The Class Is so Numerous that Joinder of All Members IsImpracticable ................................................................................................ 8

2. Common Questions of Law or Fact Exist ....................................................9

3. The Proposed Class Representative the Operating EngineersConstruction Industry and Miscellaneous Pension Fund' s (Local66) Claims Are Typical ..............................................................................11

4. The Proposed Class Representative Will Adequately Protect theInterests of the Class ..................................................................................12

a. The Legal Standard for Adequacy .................................................12

b. The Proposed Class Representative ...............................................12

(1) Lead Plaintiff and Proposed Class Representativethe Operating Engineers Pension Fund ..............................12

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Page

c. The Proposed Class Representative Will VigorouslyProsecute the Interests of the Class Through QualifiedCounsel ..........................................................................................15

5. This Action Satisfies Fed. R. Civ. P. 23(b)(3 ) ........................................... 16

a. Common Questions of Law or Fact Predominate ..........................16

(1) Class-Wide Reliance Predominates Over IndividualReliance ..............................................................................17

(i) Defendants Made Public MaterialMisrepresentations .................................................17

(ii) Belo Stock Traded in an Efficient Market .............19

(iii) Plaintiffs Traded Shares During the ClassPeriod .....................................................................21

(2) Loss Causation Has Been Established ...............................22

b. The Class Action Is Superior to Other Available Methodsfor the Fair and Efficient Adjudication of This Action ..................23

IV. CONCLUSION .................................................................................................................. 24

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TABLE OF AUTHORITIES

Page

CASES

Basic Inc. v. Levinson,485 U.S. 224 ( 1988) ...............................................................................................17, 21, 22

Bell v. Ascendant Solutions, Inc.,422 F.3d 307 (5th Cir. 2005) ....... ....................................................................17, 19, 20, 21

Blackie v. Barrack,524 F.2d 891 (9th Cir. 1975) ....... ......................................................................................23

Durrett v. John Deere Co.,150 F.R.D. 555 (N.D. Tex. 1993) ......................................................................................16

Feder v. Elec. Data Sys.,429 F.3d 125 (5th Cir. 2005) ....... ......................................................................................12

Forbush v. J. C. Penney Co.,994 F.2d 1101 (5th Cir. 1993 ) ..... ........................................................................................9

Greenberg v. Crossroads Sys., Inc.,364 F.3d 657 (5th Cir. 2004) ....... ......................................................................................17

Henry v. Cash Today, Inc.,199 F.R.D. 566 (S.D. Tex. 2000) . .............................................................................. passim

In re Corrugated Container Antitrust Litig.,643 F.2d 195 (5th Cir. 1981) .............................................................................................14

In re Dynegy, Inc. Secs. Litig.,226 F.R.D. 263 (S.D. Tex. 2004) .......................................................................................15

In re Elec. Data Sys. Corp. Secs. Litig.,226 F.R.D. 559 (E.D. Tex. 2005) ............................................................................... passim

In re Enron Corp. Secs. Litig.,206 F.R.D. 427 (S.D. Tex. 2002) .......................................................................................15

In re Xcelera. com Sec. Litig.,430 F.3d 503 (1st Cir. 2005) ........................................................................................20,20,21

Keasler v. Natural Gas Pipeline Co.,84 F.R.D. 364 (E.D. Tex. 1979) .........................................................................................23

Lightbourn v. County ofEl Paso,118 F.3d 421 (5th Cir. 1997) .........................................................................................9,9,11

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Page

Longden v. Sunderman,123 F.R.D. 547 (N.D. Tex. 1988) ......................................................................................23

Mullen v. Treasure Chest Casino L.L. C.,186 F . 3d 620 (5th Cir. 1999) ...............................................................................................9

Oscar Private Equity Invs. v. Allegiance Telecom, Inc.,487 F.3d 261 (5th Cir. 2007) .......................................................................................22,22,23

Pederson v. La. State Univ.,213 F.3d 858 (5th Cir. 2000) ...............................................................................................8

Phillips v. Joint Legislative Comm. on Performance & Expenditure Review,637 F.2d 1014 (5th Cir. 1981 ) ...........................................................................................11

Regents ofthe Univ. of Cal. v. Credit Suisse First Boston,482 F.3d 372 (5th Cir. 2007) .............................................................................................18

Schwartz v. TXU Corp.,No. 3:02-CV-2243-K, 2005 U.S. Dist . LEXIS 28453(N.D. Tex. Nov. 8 , 2005) ...................................................................................................15

Southland Sec. Corp. v. INSpire Ins. Solutions Inc.,365 F.3d 353 (5th Cir. 2004) .............................................................................................18

Stirman v. Exxon Corp.,280 F.3d 554 (5th Cir. 2002) .............................................................................................12

Unger v. Amedisys Inc.,401 F.3d 316 (5th Cir. 2005) .............................................................................................19

Watson v. Shell Oil Co.,979 F.2d 1014 (5th Cir. 1992) .............................................................................................8

Weinberger v. Thornton,114 F.R.D. 599 (S.D. Cal 1986) ........................................................................................24

STATUTES, RULES AND REGULATIONS

15 U.S.C.

§78J(b) ..................................................................................................................................1§78t(a) ..................................................................................................................................1§78u-4 ................................................................................................................................12

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Page

Federal Rules of Civil ProcedureRule 9(b) ............................................................................................................................17Rule 23 .........................................................................................................................16,16,24Rule 23 (a) ................................................................................................................... passim

17 C.F.R.§240.10b-5 ...........................................................................................................................1

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1. INTRODUCTION

This case is ideally suited for class treatment. Each of the prerequisites for certification are

clearly met and Lead Plaintiff is highly motivated to obtain the best possible result for the class. The

proposed class is as follows:

All persons who purchased the publicly-traded securities of Belo Corporation("Belo or "Belo Corp. or the "Company )between May 12, 2003 and August 6,2004 ("Class Period ), and who were injured thereby.

Excluded from the Class are defendants and members of their immediate families,any entity in which a defendant has a controlling interest, and the legalrepresentatives, heirs, successors or assigns of any such excluded party.

For the reasons demonstrated below, class certification is warranted here.

II. BACKGROUND

This private securities fraud class action seeks damages under §§10(b) and 20(a) of the

Securities Exchange Act of 1934 and Rule I Ob-5 of the Securities and Exchange Commission on

behalf of defrauded investors who purchased Belo common stock during the Class Period and were

injured thereby. The case has been pending since August 2004. Plaintiffs filed a Second Amended

Consolidated Complaint for Violation of the Federal Securities Laws (the "Complaint ) in May

2006.1 The Court denied defendants' motion to dismiss the Complaint as to defendants Belo, Robert

Decherd ("Decherd ), James Moroney ("Moroney ), and Barry Peckham ("Peckham ) (collectively

"defendants ) in May 2007.

Belo is a media company that owns several newspapers, television stations, local and

regional cable news channels, and websites. ¶2. Belo's most prominent and valuable business

segment is The Dallas Morning News ("DMN or "the newspaper ). Id. Defendant Decherd has

served as the Chairman and Chief Executive Officer ("CEO ) of Belo since 1987, as President of

1 All references to the Complaint will be set forth as `°¶_ or "¶¶_.

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Belo since 1994, and is a member of Belo's seven-person Management Committee. ¶166-67.

Decherd prepared and signed Belo's Security and Exchange Commission ("SEC ) filings, issued

statements in press releases , and led the Company's conference calls with analysts and investors

during the Class Period. ¶68. In conjunction with each of Belo's Forms 10-K and 10-Q filed with

the SEC, Decherd signed a certification attesting to his review ofthe contents ofthe filing to confirm

it did not contain any untrue statement or omission of material fact. ¶69.

Defendant Moroney has served as Chief Executive Officer ("CEO ) and Publisher ofDMN

since June 2001 , and is a member of Belo's seven-person Management Committee . ¶177, 79.

Moroney's primary responsibility as Publisher ofDMNwas to monitor the newspaper's circulation

numbers relative to those figures for the same time period the previous year. ¶78. Moroney was

aware that these circulation numbers, whether they were accurate or not, would be conveyed to the

public through SEC filings. Id.

Defendant Peckham served as Executive Vice President in charge ofcirculation at DMNuntil

he resigned on August 5, 2004. ¶81. He worked at Belo and DMN for 21 years , and held senior

circulation positions atDMNsince September 1988 . Id. As Executive Vice President ofcirculation

at DMN, Peckham's main responsibility was to monitor the newspaper' s performance , primarily by

closely examining circulation numbers compared to those reported the previous year. ¶82. Peckham

was aware that DAMcirculation figures would be conveyed to the public through SEC filings, even

if the numbers were not accurate. Id.

On August 5, 2004, defendants revealed a considerable overstatement ofDMNcirculation,

prompting a flurry of Belo stock trading by shocked investors, ultimately leading to a substantial

drop in the value of Belo stock by the following day. ¶12, 202.

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A. The Significance ofDMN Circulation to Belo

DMN represents a major source of Belo's income , comprising 60% of Belo's publishing

revenue and 30% of its total revenue. ¶59. During the Class Period, DMN derived 90% of its

revenue from advertising. ¶130, 79. Advertising rates were based upon DMN's circulation, and

higher reported newspaper circulation numbers allowed DMNto charge advertisers a greater fee,

thus generating more revenue for Belo. ¶9. Moroney and Peckham conducted and participated in

weekly meetings focused on circulation numbers and issues . ¶189, 97, 102, 227-231.

From 2003 to 2005, DMNsuffered the largest circulation decline ofthe top ten newspapers

in the country. ¶3. By reporting artificially inflated DMN circulation figures, Belo was able to

recognize unearned revenue in the form of overpriced advertising rates during the Class Period.

1187-88, 93-96, 99-101, 106-108, 116-117, 120-121, 124-125, 130-133, 136-137, 141-142, 146-147,

155-156, 159, 162, 166, 172-173, 179, 186-187, 189.

B. Defendants Created Numerous Schemes to Falsely Inflate CirculationFigures

Defendants implemented numerous schemes that enabled and encouraged the artificial

inflation ofthe newspaper's circulation figures and worked tirelessly to ensure that no one, including

the Audit Bureau of Circulation ("ABC ) or the public, could detect their various methods of fraud.

1. The Mandatory Goal of Meeting the Prior Year's CirculationNumbers

DMN management implemented various tactics to ensure the previous year's circulation

figures were met, which included rigging ABC circulation audits ofDMNthat were conducted twice

a year . ¶12. Advanced notice of these audits was given by Peckham and Moroney to DMN

managers . ¶14. Also in advance of these ABC audits, Peckham and Moroney ordered DMNCity

and State Regional Managers ("Regional Managers ), as well as District and Zone Managers, to

ensure any reported figures met or exceeded the prior year's circulation numbers . ¶112, 14. DMN

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managers in turn informed distributors of this mandatory goal. ¶112-13. Avoiding disclosure of

decreasing circulation was achieved by the following means: Zone Managers demanded distributors

sign blank audit sheets so they could fill in the circulation numbers themselves; Zone Managers

wrote the circulation figures on audit sheets and then forced distributors to sign; and Regional

Managers left voice mails for Zone Managers and distributors, dictating the number for draws and

average unsold newspaper figures that had to be met during the audit period. ¶112-14.

In 1999 , DMN management began dictating circulation draws to distributors, leaving no

choice as to how many newspapers the latter must buy from DMN. ¶120, 24. Regional Managers

notified distributors of the maximum number of papers they were permitted to label "unsold,

thereby preventing any report of more unsold papers than the prior year. ¶18. Zone Managers

ordered distributors to go on "`midnight recoveries,' whereby the distributors had to retrace their

route to collect any unsold newspapers from the racks and dispose of them. ¶19.

2. Implementation of the Non-returnable Policy

In September 1999, at Peckham's direction, DMNinstituted a non-returnable policy, whereby

distributors were not permitted to return unsold newspapers . ¶11. DMNwas the only newspaper in

the country to implement a complete ban on returns, which virtually eliminated accurate

recordkeeping of unsold papers as well as distributors' incentive to return unsold papers because

they would no longer receive refunds for doing so. Id.

3. Financial Incentives and Contest Rewards

Various contests were held and benefits became available to reward distributors and

managers if circulation figure "`goals ' were met . ¶122-23, 25. In addition, the low wholesale price

per newspaper paid by the distributors, versus the high price paid by a customer, encouraged

distributors to purchase newspapers themselves in order to inflate their circulation numbers and

thereby realize the rewards and incentives offered by DMN. ¶122-23.

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4. Artificial Overstatement of Home Delivery Subscriptions

The false overstatement of home delivery subscriptions was another major factor in

establishing artificially inflated figures. Circulation Managers set the number ofmonthly newspaper

subscription "`stops' (i.e., cancellation for any reason) distributors were allowed to report. ¶28.

Some home subscription "`starts' recorded were actually invalid, such as a new subscription that a

customer did not request, yet were included on subscriber lists and thus counted in circulation

figures. ¶129, 31. Moreover, cancelled subscriptions were rarely taken offthese subscriber lists, and

therefore were wrongly reported in circulation numbers. ¶31.

5. Inflated Bundle Delivery Figures

Bulk deliveries to commercial customers were often larger than the customer ordered, yet the

commercial subscribers rarely noticed the extra newspapers and paid the overcharged price. ¶32.

Even ifthese additional unordered copies were noticed, and the customer requested a cancellation or

the correct number ofnewspapers, the extra copies had already been delivered and paid for, and thus

had been included in circulation figures. Id. Often times these requested stops were not accounted

for inDMNcirculation numbers. Id. Furthermore, free bundles ofnewspapers for which DMNwas

given permission to place in high traffic areas of local colleges were counted in circulation figures

regardless of how many papers were read, even though Circulation Managers were informed by

distributors that most papers remained in the racks. ¶33.

6. Warnings from the Distributor

In early 2003, a distributor began a telephone campaign in which he contacted Decherd,

Moroney and Peckham to explain that he was being instructed to lie about the number ofnewspapers

he sold. ¶141, 45, 47. On January 10, 2003, this same distributor sent a letter directly to Decherd

explaining that he had recorded numerous phone calls during which his Circulation Manager asked

him to lie on the circulation audit. 1141,45-47,220. Moreover, this distributor told Decherd that he

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was uncomfortable lying on the audit, and that his draw needed to be cut because he had too many

unsold papers to achieve the unsold paper average mandated by the State Regional Manager, which

was not possible because a "`no-cut' rule had been instituted during the January 2003 audit period.

¶143, 48. Despite the insistence of his State Zone Manager, this distributor refused to lie. ¶44.

Other distributors, however, were less honest and did report false information on audit forms. ¶47.

C. The Truth About Circulation Overstatement at DMN Is Revealed

On August 5, 2004, Belo admitted that its most prominent and valuable business segment,

The Dallas Morning News, had been intentionally overstating circulation figures as part of a

complex scheme to defraud advertisers and investors. ¶194. In a press release, Belo admitted that it

had advised the ABC of its intention to restate previously inflated circulation figures for DMN for

the six-month periods ended September 2003 and March 2004. Id.

Also on August 5, 2004, Belo divulged that it, and specifically defendant Decherd, hadbegun

a review of the circulation practices at every Belo newspaper company beginning in June 2004.

¶195. The Company confessed that the scheme to overstate circulation figures at DWbegan in

1999 with "`circulation sales rewards programs' that had been implemented in order to understate

the number ofunsold newspaper returns , and thereby inflate circulation figures . ¶1196-197. In the

press release , Decherd stated that DMN "`is making procedural changes necessary to ensure the

collection and reporting of more accurate circulation data.' ¶200.

On the same day, Belo announced that it expected to report a decline in DMN circulation

figures for the six-month period ending September 2004 of approximately 5% daily and 11.5%

Sunday, as compared to the newspaper' s September 2003 figures . ¶198. The Company estimated

the percentage of circulation decline directly related to the overstatement scheme would be about

1.5% daily and 5% Sunday. Id. In the same August 5, 2004 press release, Belo announced the

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immediate resignation of defendant Peckham, who had served as "`executive Vice-

president/operations ... who was responsible for the circulation department.' ¶199.

Belo's stock price immediately responded to these statements that verified the existence of a

scheme designed to artificially overstate circulation at DMN. On August 6, 2004, the Company's

stock price dropped to a 52-week low of $21.55, down $1.66 a share. ¶202. Belo's stock opened at

a low of $18, but recovered after an unprecedented trading volume of 4.6 million shares, which

followed a conference call wherein defendant Decherd publicly assured stock analysts and investors

that the circulation overstatement scandal at DMNwould be quickly resolved. Id. His reassuring

words, however, were too late for many investors who suffered significant losses as a result of

Belo's acknowledgement of the scheme to report inflated circulation figures. Id. Stock analysts

lowered their ratings on Belo and earnings estimates were greatly reduced. ¶¶203-205. Events after

the end of the Class Period further confirm defendants' fraud, during the Class Period.

On August 16, 2004, Belo announced its plan to compensate advertisers for the ad space

overpriced during the Class Period, which was estimated to cost the company $30 million. ¶207.

On September 29, 2004, Belo announced the new projected decline of DMN circulation figures

would be 5.1% daily and 11.9% Sunday. ¶211. Belo stated, "`While it is difficult to separate the

overstatements from normal business trends, most of the declines are believed to be related to

overstatements.' Id.

On January 21, 2005, the ABC informed Belo that it would be unable to issue an audit report

of DMN circulation figures as it had originally planned for the periods ended March 31 and

September 30, 2004, due primarily to the nonexistence ofreliable documents and records needed to

support revised circulation figures for single copy sales . ¶216. On February 3, 2005, Belo

confirmed that due to its failure to keep accurate records, the Company would be unable to restate

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the previously reported inflated DMNcirculation figures for the six-month periods ended September

2003 and March 2004, which had been included in Belo's SEC filings. ¶217.

III. ARGUMENT

A. This Action Should Be Certified as a Class Action Pursuant to FederalRule of Civil Procedure 23(a)

Rule 23(a) of the Federal Rules of Civil Procedure lists the prerequisites for maintaining a

class action:

One or more members of a class may sue or be sued as representative parties onbehalf of all only if (1) the class is so numerous that joinder of all members isimpracticable, (2) there are questions of law or fact common to the class, (3) theclaims or defenses of the representative parties are typical of the claims or defensesof the class, and (4) the representative parties will fairly and adequately protect theinterests of the class.

As discussed infra, the proposed class and its representative satisfy each of these prerequisites.

1. The Class Is so Numerous that Joinder of All Members IsImpracticable

The numerosity requirement of Rule 23(a)(1) is satisfied when a potential class is so

numerous that joinder of all members is impracticable . Watson v. Shell Oil Co., 979 F.2d 1014,

1022 (5th Cir. 1992). A reasonable estimate of the number ofpurported class members satisfies the

numerosity requirement. Henry v. Cash Today, Inc., 199 F.R.D. 566, 569 (S.D. Tex. 2000). "A

plaintiff [seeking class certification] need not allege the exact number and identity of the class

members, but rather must establish that joinder is impracticable through `some evidence or

reasonable estimate of the number ofpurported class members.' In re Elec. Data Sys. Corp. Secs.

Litig., 226 F.R.D. 559, 564 (E.D. Tex. 2005) (citing Pederson v. La. State Univ., 213 F.3d 858, 868

(5th Cir. 2000)).

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The proposed class consists of those who purchased Belo's publicly-traded common stock

during the Class Period.2 The exact number of class members is presently unknown and can be

ascertained only through discovery. Based on the Company's reported shares outstanding3 and

trading volume4 during the Class Period, however, plaintiffs estimate there are several thousands of

class members nationwide. "Regardless ofwhat fraction of [] stock holders join the class, the class

will comfortably exceed the 100-150 person threshold set by the Fifth Circuit as satisfying the

numerosity requirement. Elec. Data, 226 F.R.D. at 564. See Mullen v. Treasure Chest Casino

L.L. C., 186 F. 3d 620, 624 (5th Cir. 1999). Accordingly, the proposed class is sufficiently numerous

to make joinder of all members impracticable.

2. Common Questions of Law or Fact Exist

Under Rule 23(a)(2), questions of law or fact common to the class must be present. This

"commonality requirement is "not a high burden . Henry, 199 F .R.D. at 569. Commonality is

satisfied "when `there is at least one issue , the resolution of which will affect all or a significant

number of the putative class members.' Lightbourn v. County ofEl Paso, 118 F.3d 421, 426 (5th

Cir. 1997). See Forbush v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir. 1993).

2 According to Belo's SEC Form 10-K for the fiscal year ending December 31, 2003, itscommon stock is traded on the New York Stock Exchange ("NYSE ). See Declaration ofAlexandraS. Bernay in Support of Lead Plaintiffs Motion for Class Certification ("Bernay Decl. ) at Ex. 1.

3 According to Belo's SEC Forms 10-K for the fiscal years ending December 31, 2003, andDecember 31 , 2004, shares ofcommon stock outstanding were, respectively : 115,712,264 shares (atFebruary 29, 2004) and 114,228,563 shares (at February 28, 2005). See Bernay Decl., Exs. 1 & 2.

4 See Bernay Decl., Ex. 3 (Belo Corp. historical stock prices printout, including volume, forClass Period.).

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In this case there is a well-defined community of interest with respect to the questions oflaw

and fact, including:

(a) whether the 1934 Act was violated by defendants;

(b) whether defendants omitted and/or misrepresented material facts;

(c) whether defendants' statements omitted material facts necessary to makethese statements not misleading, in light ofthe circumstances under which they weremade;

(d) whether defendants knew or deliberately disregarded their statements werefalse and misleading;

(e) whether the prices of Belo common stock were artificially inflated; and

(f) the extent ofdamage sustained by class members and the appropriate measureof damages.

¶306.

Plaintiffs' claims arise from the same set of facts and are based on common legal theories

surrounding the overarching fraudulent scheme and course of business that operated to defraud all

purchasers ofBelo's publicly traded common stock during the Class Period. Commonality has been

satisfied when plaintiffs' allegations of securities fraud are based upon "[d]efendants['] [] uniform

misrepresentations to the investing public in [company] filings with the SEC and in press releases;

[and] these material misrepresentations and omissions artificially inflated the market price of

[company] securities, injuring each class member who purchased the artificially priced [company]

securities. Elec. Data, 226 F.R.D. at 564. Here, plaintiffs allege that defendants' material

misrepresentations and omissions represented to investors in SEC filings and press releases

artificially inflated the price ofBelo's common stock, thereby injuring each individual class member

that purchased it. This allegation ultimately rests upon common questions oflaw and fact, and thus

the commonality requirement for class certification has been achieved.

-10-


3. The Proposed Class Representative the Operating EngineersConstruction Industry and Miscellaneous Pension Fund's(Local 66) Claims Are Typical

Rule 23(a)(3) demands the Class Representative 5 assert claims that are typical of the class.

"The test for typicality, like the test for commonality, is not demanding. Lightbourn, 118 F.3d at

426; see also Elec. Data, 226 F.R.D. at 565. "The court focuses on the legal and remedial theories

of the named plaintiffs and the class members they seek to represent . Henry, 199 F.R.D. at 569.

However, the typicality "requirement ... does not mean that all claims must be identical. Phillips

v. Joint Legislative Comm. on Performance & Expenditure Review, 637 F.2d 1014, 1024 (5th Cir.

1981 ). See Elec. Data , 226 F.R.D. at 565 ("Typicality does not require complete identity of claims,

but requires that the representatives' claims share the same essential characteristics with the class

members' claims. ).

The proposed Class Representative' s claims are typical of the class because they arise from

defendants' common scheme and course of conduct designed to artificially inflate the value of

Belo's publicly-traded common stock. Furthermore, this action is based upon facts and legal

theories that are not unique to the proposed Class Representative, because all ofthe class members'

and Class Representative's claims arise from their investment in Belo securities. "Factual

differences do not defeat typicality ifthe claims arise from a similar course ofconduct and share the

same legal theories. Id. Here, the proposed Class Representative and all other class members

allege their purchase of artificially inflated Belo common stock was due to defendants' scheme to

overstate DMNcirculation figures , as well as the material misrepresentations and omissions made by

5 "Class Representative refers to the proposed Class Representative, the Operating EngineersConstruction Industry and Miscellaneous Pension Fund (Local 66) ("Operating Engineers PensionFund ).

-11-


defendants in connection with this course of conduct. Thus, the requirement of typicality of the

Class Representative 's claims has been satisfied.

4. The Proposed Class Representative Will Adequately Protectthe Interests of the Class

a. The Legal Standard for Adequacy

The "`standard' for the adequacy determination ... requires "an inquiry into [1] the zeal and

competence of the representative [s'] counsel and . . . [2] the willingness and ability of the

representatives to take an active role in and control the litigation and to protect the interests of

absentees [.] Feder v. Elec. Data Sys., 429 F.3d 125, 130 (5th Cir. 2005).6 The Fifth Circuit has

acknowledged that the Private Securities Litigation Reform Act of 1995 ("PLSRA ) did not

"`create[] an additional requirement under [F .R.C.P] 23 (a)(4) that . . . the putative Class

Representative possess[] a certain level of experience, expertise, wealth or intellect, or a level of

knowledge and understanding of the issues, beyond that required' by the traditional standard.

Feder, 429 F.3d at 130. Therefore, the determination of adequacy involves the proposed "` class

representatives , their counsel , and the relationship between the two.' Stirman v. Exxon Corp., 280

F.3d 554, 563 (5th Cir. 2002).

b. The Proposed Class Representative

(1) Lead Plaintiff and Proposed ClassRepresentative the Operating Engineers PensionFund

Lead Plaintiff, Operating Engineers Pension Fund, seeks to serve as Class Representative.

Lead Plaintiff purchased Belo common stock during the Class Period at artificially inflated prices

and was damaged thereby. ¶64. This Court granted the motion to appoint Operating Engineers

Pension Fund as Lead Plaintiff on November 23, 2004. This Court's Order also appointed Coughlin

6 Citations and footnotes are omitted and emphasis is added unless otherwise noted.

-12-


Stoia Geller Rudman & Robbins LLP ("Coughlin Stoia ) (formerly "Lerach Coughlin Stoia Geller

Rudman & Robbins LLP ) as Lead Counsel.

Lead Plaintiff Operating Engineers Pension Fund was established in 1957. Participating

employers make monthly contribution payments according to a Collective Bargaining Agreement.

The pension fund is administered by a Joint Board ofTrustees, consisting often members, and is run

by a Fund Administrator that was hired by the Joint Board of Trustees.? The Operating Engineers

Pension Fund has $540,000,000 in funds under management for the benefits of its members, and

suffered significant losses in connection with its investment in Belo Corp.8

Lead Plaintiff, directing the litigation through Lead Counsel, has vigorously prosecuted this

action and diligently exercised its fiduciary responsibilities on behalf of the proposed class.

• Lead Plaintiff actively monitors the litigation and Lead Counsel's activities,reviewing all pleadings and motion papers submitted to this Court.

• Lead Plaintiff has had in-person meetings with Lead Counsel at Lead Plaintiff'sheadquarters in Pittsburgh, Pennsylvania, to discuss litigation strategy and to providedirection to Lead Counsel regarding the ongoing prosecution of the action.

• Lead Plaintiff receives quarterly updates from Lead Counsel regarding mattersrelevant to the case in order to maintain mutual and continual contact.

• The Complaint filed on behalfofthe class represents a comprehensive effort by LeadPlaintiff and its counsel to maximize recovery for the entire class, pursuing allmeaningful claims and seeking compensation from all probable sources.

• Lead Plaintiff's Fund Administrator has submitted a declaration concurrently withthis filing which demonstrates the Fund's suitability to serve as Class Representative.Lead Plaintiff will also participate in any necessary discovery regarding certificationissues.

See Bernay Decl., Ex. 4 (printout re: Operating Engineers Pension Fund).

° See Declaration of Robert T. Jack in Support of Lead Plaintiff's Motion for ClassCertification filed concurrently herewith.

-13-


Lead Plaintiff continues to demonstrate its commitment to fair representation and recovery for all

class members by diligently prosecuting this action and exercising its fiduciary responsibilities on

behalf of the class , and as such, the Operating Engineers Pension Fund is more than adequate to

serve as Class Representative.

Moreover, the interests ofthe proposed Class Representative are aligned with the interests of

all class members, each having a significant motive in seeing that each defendant is found liable for

the fraudulent scheme alleged in the Complaint. "` [S]o long as all class members are united in

asserting a common right, such as achieving the maximum possible recovery for the class, the class

interests are not antagonistic for representation purposes.' In re Corrugated Container Antitrust

Litig., 643 F.2d 195, 208 (5th Cir. 1981). Consequently, no conflicts exist between the class and the

proposed Class Representative, who intend, along with class counsel , to avidly pursue the interests

of all class members.

As declared in Lead Plaintiff's sworn Certification, the proposed Class Representative has

attested to its agreement to serve as representative , if appointed by this Court, and to provide

testimony if necessary.9 Lead Plaintiff and proposed Class Representative also certified that it did

not purchase Belo stock at the direction of counsel . Id. Lead Plaintiffhas affirmed it will not accept

payment for serving as a representative beyond its pro rata share of any recovery, except such

reasonable costs and expenses directly relating to its representation as ordered or approved by the

Court. Id.

See Bernay Decl., Ex. 5 (Certification ofNamed Lead Plaintiff).

-14-


c. The Proposed Class Representative Will VigorouslyProsecute the Interests of the Class Through QualifiedCounsel

The proposed Class Representative has personally demonstrated its familiarity with the facts

and allegations of the case, understands the nature of its claims and responsibilities as Class

Representative, and will zealously represent the class. The proposed Class Representative is well

informed about the ongoing status oflitigation and is prepared to continue its active role in the case.

The proposed Class Representative is represented by Lead Counsel, Coughlin Stoia, whose lawyers

have been appointed class counsel in hundreds of securities class actions, as well as additional

counsel who are qualified and experienced in securities class actions.10 Courts in this Circuit have

repeatedly recognized the expertise and ability of Coughlin Stoia lawyers to effectively litigate

complicated securities proceedings . See In re Enron Corp. Secs. Litig., 206 F.R.D. 427, 458 (S.D.

Tex. 2002) (finding Coughlin Stoia attorneys "fully capable of representing Lead Plaintiff and the

class , especially in light of the "magnitude and complexity of that litigation); see also In re

Dynegy, Inc. Secs. Litig., 226 F.R.D. 263, 280-281 (S.D. Tex. 2004) (finding plaintiffs submissions

"demonstrate [] that ... Lead Plaintiff has selected competent counsel ). See also Bernay Decl., Ex.

6.

Liaison counsel Provost Umphrey Law Firm, LLP ("Provost Umphrey ) is also qualified and

experienced in the prosecution of securities of class actions ." See Dynegy, 226 F.R.D. at 280.

Judge Kinkeade has recognized the firm's "long standing, well recognized expertise in complex

class actions . Schwartz v. TXU Corp., No. 3:02-CV-2243-K, 2005 U.S. Dist. LEXIS 28453, at* 18-

* 19 (N.D. Tex. Nov. 8, 2005 ). See also Bernay Decl., Ex. 7.

10 See Bernay Decl., Ex. 6 (Firm resume of Coughlin Stoia).

11 See Bernay Decl., Ex. 7 (Firm resume of Provost Umphrey).

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Lead Plaintiff and proposed Class Representative, along with qualified Lead Counsel, will

adequately protect the interests of the class, and thus have satisfied the requirements of Rule

23(a)(4).

5. This Action Satisfies Fed. R. Civ. P. 23(b)(3)

Plaintiffs seek certification under Rule 23(b)(3), which states a class action is appropriate

if.

[T]he court finds that the questions of law or fact common to the members of theclass predominate over any questions affecting only individual members, and that aclass action is superior to other available methods for the fair and efficientadjudication of the controversy. The matters pertinent to the findings include: (A)the interest of members of the class in individually controlling the prosecution ordefense of separate actions; (B) the extent and nature ofany litigation concerning thecontroversy already commenced by or against members of the class; (C) thedesirability or undesirability of concentrating the litigation of the claims in theparticular forum; (D) the difficulties likely to be encountered in the management ofaclass action.

The issues of importance in a Rule 23(b)(3) examination are predominance and superiority. See

Henry, 199 F.R.D. at 570. These aspects of Rule 23(b)(3) are satisfied by the proposed class.

a. Common Questions of Law or Fact Predominate

Predominance, in the context of Rule 23, requires that the issues or defenses claimed on

behalf ofthe class be superior to, and unencumbered by, any individual claims or defenses that may

affect the lawsuit. "Predominance does not require all questions of law or fact to be common, but

only that common questions predominate over individual questions ... [and] `is a test readily met in

certain cases alleging ... securities fraud.' Elec. Data, 226 F.R.D at 570. Plaintiffs ' asserted

claims, affecting all proposed class members, arise from the same fraudulent scheme. The class was

subjected to the same alleged misrepresentations and omissions that were part of a common course

of conduct, and therefore common questions predominate. Durrett v. John Deere Co., 150 F.R.D.

555, 560 (N.D. Tex. 1993).

-16-


(1) Class-Wide Reliance Predominates OverIndividual Reliance

Plaintiffs have provided competent evidence to justify their dependence on the fraud-on-the-

market presumption to establish class-wide reliance . "The fraud-on-the-market theory . . .

`interpret[s] the reliance requirement to mean reliance on the integrity ofthe market price rather than

reliance on the challenged disclosure .' Bell v. Ascendant Solutions, Inc., 422 F.3d 307, 310 (5th

Cir. 2005). This presumption is permitted in a securities fraud action ifthe plaintiffs can show: "(1)

[T]he defendant made public material misrepresentations, (2) the defendant's shares were traded in

an efficient market, and (3) the plaintiffs traded shares between the time the misrepresentations were

made and the time the truth was revealed . Greenberg v. Crossroads Sys., Inc., 364 F.3d 657, 661

(5th Cir. 2004) (summarizing the fraud-on-the-market prerequisites developed in Basic Inc. v.

Levinson, 485 U.S. 224 ( 1988)).

(i) Defendants Made Public MaterialMisrepresentations

The first prong of the fraud-on-the-market presumption is met because defendants made

public material misrepresentations in the company's SEC filings and press releases during the Class

Period. ¶187-193, 251-260. Defendant Decherd prepared and signed Belo 's SEC filings and issued

statements in press releases that contained material misrepresentations. ¶168, 87-193. Defendants

Moroney and Peckham were directly responsible for the material misrepresentations contained in

Belo's SEC filings during the Class Period. ¶187-193.

This Court held that plaintiffs satisfied Rule 9(b) and the PSLRA in a sufficient manner to

avoid dismissal,12 and plaintiffs expect further evidence demonstrating the misleading nature of

defendants other public material misrepresentations will be produced in the discovery phase of this

12 See this Court's Memorandum Opinion and Order denying defendants' motion to dismiss asto Belo, Decherd, Moroney, and Peckham, dated May 18, 2007 ("May 18 Order ) at 9.

-17-


litigation . This Court' s conclusion was based in part upon plaintiffs' allegations that "[e]very public

statement by Belo , Decherd, Moroney and Peckham regarding [DMN's] circulation was derived

from the Newspaper Publisher ' s Statement filed with the ABC and/or the meetings Moroney and

Peckham had with their subordinates and each other. Thus, Moroney and Peckham were responsible

for every public statement made by Belo or Decherd regarding [DMN's] circulation - including

documents filed with the SEC. ¶231. Regarding Moroney and Peckham, the Complaint includes

"specific factual allegations [that] link the individual[s] to the statement at issue . Southland Sec.

Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 365 (5th Cir. 2004).13

Recent Fifth Circuit case law addressing the fraud-on-the-market presumption as a means to

establish class-wide reliance supports the suitability of class certification in this case . In Regents of

the Univ. of Cal. v. Credit Suisse First Boston, 482 F.3d 372 (5th Cir . 2007), the Fifth Circuit held

that plaintiffs could not establish the requisite class-wide reliance via the fraud-on-the-market theory

in their claims of securities fraud against investment banks, sued in connection with the massive

stock fraud perpetrated upon investors by Enron and its bankers, lawyers, accountants and insiders.

Id. at 377, 3 85-86 . The court reasoned that plaintiffs had failed to show the banks "made public and

material representations ; i.e., the type of fraud on which an efficient market may be presumed to

rely, because, the court held, the banks had no duty to disclose material information to investors.

Id. at 385-87. "Enron committed fraud by misstating its accounts, but the banks only aided and

abetted that fraud by engaging in transactions to make it more plausible. Id. at 386.

This case is entirely distinguishable, as plaintiffs here allege securities fraud against Belo and

three of its top executives, rather than an outside entity that participated in the fraud. There is no

13 See also May 18 Order at 9.

-18-


doubt that Belo was under a constant duty to disclose the truth of its financial status and not make

material misrepresentations upon which the investing public would rely.

(ii) Belo Stock Traded in an Efficient Market

As to the second prong ofthe fraud-on-the-market theory, Bell described seven factors to be

considered in determining whether defendant's shares were traded in an efficient market.

These factors include (1) the average weekly trading volume expressed as apercentage of total outstanding shares; (2) the number of securities analystsfollowing and reporting on the stock; (3) the extent to which market makers andarbitrageurs trade in the stock; (4) the company's eligibility to file SEC registrationForm S-3 (as opposed to Form S-1 or S-2); (5) the existence of empirical factsshowing a cause and effect relationship between unexpected corporate events orfinancial releases and an immediate response in the stock price'; (6) the company'smarket capitalization; (7) the bid-ask spread for stock sales ; and (8) float, the stock'strading volume without counting insider-owned stock.

Bell, 422 F.3d at 313 n.10. See also Unger v. Amedisys Inc., 401 F.3d 316, 323 (5th Cir. 2005). An

examination ofthe facts and evidence in this case unequivocally demonstrates that Belo stock traded

in an efficient market.

The Company's stock traded on the NYSE,14 a major and particularly efficient market.

Belo's total outstanding shares ofcommon stock as ofFebruary 29, 2004 was 115,712,264.15 Belo's

average weekly trading volume during the Class Period was 1,872,609 shares.16 Therefore, evidence

shows the Company's average weekly trading volume accounted for 1 .62% ofits outstanding shares,

demonstrating a considerable amount of turnover. Id. This "suggest[ed] market efficiency since it

implie[d] `significant investor interest in the company' and `a likelihood that many investors are

14 See infra §II.A.1.n.2.

15 See Bernay Decl., Ex. 1 (Belo's SEC Form 10-K for the fiscal year ending December 31,2003).

16 See Bernay Decl., Ex. 3 (printout showing weekly volume, as well as stock price, during theClass Period).

-19-


executing trades on the basis of newly available or disseminated corporate information' . . . [and

met] the 1% or 2% figures suggested by several courts as the benchmark for supporting a

presumption of efficiency. In reXcelera.com Sec. Litig., 430 F.3d 503, 514 (1st Cir. 2005). The

evidence showing a 1.62% turnover ofBelo stock during the Class Period, with an average weekly

trading volume of 1,872,609 shares, is compelling evidence that a very large number of informed

investors made decisions to buy or sell based upon data regarding the Company's financial status

and potential.

Belo's market capitalization as of March 1, 2004 was $3.23 billion, a substantial value

among companies with publicly-traded stock.17 Furthermore, Belo was eligible to and did file with

the SEC Form(s) S-3 Registration Statement(s), rather than Forms S-1 or S-2, during the Class

Period.18 Although mentioned as a factor that may be considered, the Bell court stated, "both the

caselaw and economic literature suggest `the mere number ofmarket makers ... has little to do with

market efficiency.' Bell, 422 F.3d at 315. More relevant is Belo's float, which is currently 88.93

million, with only 0.02% of shares being held by insiders.19

Also, there is evidence that numerous key analysts followed and reported on Belo stock

during and shortly after the Class Period, including Citigroup Smith Barney, Davenport Equity

Research, Prudential Equity Group, LLC, Bear Stearns, and Credit Suisse First Boston. See, e.g.,

11138-139 , 163-164, 175-176, 209-210.

17 See Bernay Decl., Ex. 8. (printout of historical Belo Corp. stock price as of March 1, 2004,the next business day after outstanding stock data was issued on February 29, 2004). Marketcapitalization is determined by multiplying share price by outstanding shares.

18 Belo Corp. filed with the SEC Forms S-3 on May 24, 2006; Aril 21, 1997; A30, 1996;Y p April 1996;April 30, 1996; April 2, 1996; and February 28, 1996. See Bernay Decl., Ex. 9.

19 See Bernay Decl., Ex. 10 (printout re: Yahoo! Finance data for Belo Corp. as of September 7,2007).

-20-


Empirical facts and evidence exist that show a "cause and effect relationship between Belo's

release of financial data or unexpected announcements regarding newspaper circulation

overstatement and an abrupt response in the price of its stock during the Class Period. Bell, 422 F.3d

at 313 n. 10. "This relationship is, of course, `the essence of an efficient market and the foundation

for the fraud on the market theory.' In reXcelera.com, 430 F.3d at 512. On August 5, 2004, Belo

admitted that DM1V had been intentionally overstating circulation figures, and that it had advised

ABC of its intention to restate previously inflated circulation numbers . ¶194. On the same day,

Belo reported that it expected to report a decline in DMN circulation figures of approximately 5%

daily and 11.5% Sunday, with the percentage directly related to the circulation overstatement scheme

to be about 1.5% daily and 5% Sunday. ¶198. Belo's stock price immediately responded to these

statements, showing a direct cause and effect relationship. On August 6, 2004, the Company's stock

price dropped to a 52-week low of $21.55, down $1.66 a share. ¶202. Stock analysts lowered their

ratings on Belo and earnings estimates were greatly reduced. ¶1203-205. The immediate drop in

Belo's stock price following the Company's announcement ofthe circulation overstatement scheme

shows the "cause and effect relationship that is the key inquiry in the market efficiency

determination.

(iii) Plaintiffs Traded Shares During the ClassPeriod

Finally, the third requirement to be met for plaintiffs to rely upon the fraud-on-the-market

theory is satisfied. The class is defined, in part, as persons that purchased shares of Belo stock

between the time misrepresentations were made and the truth regarding DM1V circulation

overstatement was revealed. Therefore, having met the three requirements identified in Basic,

plaintiffs may rely upon the fraud-on-the-market presumption to show class-wide reliance.

-21-


(2) Loss Causation Has Been Established

The immediate and negative response ofBelo's stock price to defendants' announcement of

circulation overstatement at DMN serves as compelling evidence of loss causation . Belo made no

additional or unrelated statements in conjunction with this announcement , and thus the only

reasonable conclusion is that the decline ofBelo's stock price within one day ofDechard revealing

DMN's circulation figures were artificially inflated was caused by Dechard's statements. This

reaction demonstrates empirically that Belo's corrective disclosure was the cause ofsome percentage

of the drop in the Company's stock price. See Bernay Decl., Ex. 11 (Daily Share Price Chart with

corrective disclosure).

In Oscar Private Equity Invs. v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir. 2007), the

Fifth Circuit held that plaintiffs were entitled to invoke the fraud-on-the-market presumption at the

class certification stage if, in addition to meeting the three prongs identified in Basic, they could

demonstrate loss causation by a preponderance of all admissible evidence. Id. at 264-65, 269.

Defendants in Oscar made several announcements in conjunction with their corrective disclosure,

and plaintiffs were unable to establish the price of Allegiance stock declined due to its

announcement amounting to a corrective disclosure. "[W]hen unrelated negative statements are

announced contemporaneous of a corrective disclosure, the plaintiff must prove `that it is more

probable than not that it was this negative statement, and not other unrelated negative statements,

that caused a significant amount of the decline .' 20 Id. at 270.21

20 The court noted, "We will not attempt to quantify what fraction ofa decline is `significant.'Id. at 270.

21 Defendants have never, in all of the rounds ofbriefing on the motions to dismiss, raised losscausation as an issue in this case. That is because here, unlike the situation that may exist in othercases, the link between the culpable disclosures made by Belo and the Company's stock-pricemovement is clear.

-22-


This case is distinguishable from Oscar, as the evidence shows there is no loss causation

issue here similar to that in Oscar because Belo did not make "other unrelated negative statements

in addition to its announcement of DMN circulation overstatement , the effect of which must be

deciphered and compared to other announcements. Rather, on August 5, 2004 Belo made multiple

announcements , each related to the circulation overstatement problem at DMN. ¶¶194-195, 198-199.

Belo's stock price immediately responded to these statements verifying the existence ofa scheme to

artificially overstate circulation at DMN, and stock analyst ratings and earnings estimates were

reduced. ¶1202-205. These facts stand in stark contrast to those present in Oscar, in that Belo made

no contemporaneous announcements unrelated to the circulation overstatement scheme at DMNthat

may have played a role in the decline of its stock price. Thus , loss causation has been established.

b. The Class Action Is Superior to Other AvailableMethods for the Fair and Efficient Adjudication of ThisAction

A class action is the superior method for resolving plaintiffs' claims because it will provide

the most fair and efficient method of adjudication. Cases alleging securities fraud are best litigated

as a class action due to the manageability and cost effectiveness it provides. "[F]raud perpetrated on

numerous persons by the use of similar misrepresentations may be an appealing situation for a class

action ... The availability of the class action to redress such frauds has been consistently upheld.

Blackie v. Barrack, 524 F.2d 891, 903 (9th Cir. 1975).

Courts in the Fifth Circuit recognize the efficacy of the class action device for redressing

injury to large groups of individuals harmed by a common set of operative facts. "It is desirable that

securities fraud cases involving a large number ofplaintiffs with small individual claims proceed as

class actions . Keasler v. Natural Gas Pipeline Co., 84 F.R.D. 364, 368 (E.D. Tex. 1979); Longden

v. Sunderman, 123 F.R.D. 547, 551 (N.D. Tex. 1988). Class certification is the only way to afford

-23-


relief to those plaintiffs whose claims are too small to permit them to bring individual lawsuits.

Henry, 199 F .R.D. at 573.22

Four factors should be considered in a Rule 23(b)(3) analysis of superiority: "(A) the class

members' interest in individually controlling their separate actions, (B) the extent and nature of

existing litigation by class members concerning the same claims, (C) the desirability of

concentrating the litigation in a particular forum, and (D) the likely difficulties ofmanaging a class

action . Elec. Data Sys., 226 F.R.D at 570. Here, there is no indication that any class member

wishes to pursue their case individually, and no other individual actions are pending outside of this

consolidated claim.23 It is desirable to concentrate this securities litigation in a single forum when

such common questions of law and fact exist. Finally, "aside from the usual complexities

encountered in class action litigations, there are few exceptional difficulties from litigating these

claims as a class instead of individually. Id. at 571. Therefore, a class action is the superior method

through which plaintiffs should pursue their claims.

IV. CONCLUSION

Because the proposed class meets the requirements of Rule 23, and the proposed Class

Representative will adequately pursue common class interests , plaintiffs respectfully request this

Court appoint the proposed Class Representative and certify a class of all persons who purchased

22 Furthermore, certification of a class action promotes the goal ofjudicial efficiency because itallows for common claims and issues to be tried once, with the result having a binding effect on allparties. The "recognized purpose of the class action is to provide a mode of relief to those ...injured by a fraudulent scheme such as that alleged here. Weinberger v. Thornton, 114 F.R.D. 599,605 (S.D. Cal 1986) (referencing investors' claims of securities fraud).

23 This Court consolidated two other securities fraud claims with this case on October 18, 2004and November 12, 2004, designating this action as "lead case. No additional securities claims arepending against Belo Corp as of September 6, 2007.

-24-


Belo's publicly-traded common stock between May 12, 2003 and August 6, 2004, and who were

injured thereby.

DATED: September 17, 2007 Respectfully submitted,


HENRY ROSENBENNY C. GOODMAN IIIALEXANDRA S. BERNAYANDREA N. WILLIAMS


655 West Broadway, Suite 1900San Diego, CA 92101Telephone: 619/231-1058619/231-7423 (fax)


LAW OFFICE OF ROBERT E. JENKINS, P.C.ROBERT E. JENKINSState Bar No . 240368423010 LBJ Freeway, Suite 1200Dallas , TX 75234Telephone : 214/289-3797

PROVOST & UMPHREY LAW FIRM, LLPJOE KENDALLState Bar No. 11260700WILLIE C. BRISCOEState Bar No. 240017883232 McKinney Avenue , Suite 700Dallas , TX 75204Telephone : 214/744-3000214/744-3015 (fax)

Co-Liaison Counsel

S:\CasesSD\Belo\BRF00045358 Class Cert.doc

-25-


CERTIFICATE OF CONFERENCE

Pursuant to Local Rule 7.1, of the Northern District of Texas, counsel for Lead Plaintiff

Operating Engineers Construction Industry and Miscellaneous Pension Fund (Local 66), conferred

with defendants' counsel on Friday, September 14, 2007 in regard to Lead Plaintiffs' Motion for

Class Certification. The parties were unable to agree upon a stipulated class certification, and

counsel for defendants indicated an opposition to Lead Plaintiff's motion for class certification

would be filed with this Court.

DATED: September 17, 2007



655 West Broadway, Suite 1900San Diego , CA 92101-3301Telephone : 619/231-1058619/231-7423 (fax)




I hereby certify that on September 17, 2007, I electronically filed the foregoing with the






foregoing is true and correct . Executed on September 17, 2007.



655 West Broadway, Suite 1900San Diego, CA 92101-3301Telephone: 619/231-1058619/231-7423 (fax)E-mail: xanb(abcs rcom


Case 3 : 04-cv-01836 Document 108-3 Filed 09/17/2007 Page 34 of 35






. Willie [email protected],[email protected],provost_dallas@yahoo. com












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