Eighth Circuit Identifies Damages Hurdle for Payment for Order Flow Class Certification

In Ford v. TD Ameritrade Holding Corp., No. 18-3689, 2021 U.S. App. LEXIS 12008, at *15 (8th Cir. Apr. 23, 2021), the Eighth Circuit weighed in on whether individual loss determinations may predominate over issues common to the class. The court reviewed an order certifying an investor class under Federal Rule of Civil Procedure 23(b)(3), which sought damages in connection with the routing of trades. To establish damages common to the class, the class representative offered an algorithm prepared by a damages expert that analyzed “hundreds of millions of data points” to assess whether the brokerage firm secured the max.

The Eighth Circuit reversed the order certifying the investor class. Experts for both parties agreed that certain transactions would be excluded from an appropriate damages calculation because the brokerage firm could not have prevented execution of trades at a price lower than the NBBO during “unusual market conditions.” Id. at *10-11. Since the brokerage firm executed trades during “unusual market conditions,” which require individualized value judgments, those transactions could not be captured within the expert’s algorithm.  More broadly, Ford signals that expert algorithms are not a panacea for plaintiff classes faced with thousands, or even millions, of individualized damages data points—welcome news for brokerage firms facing similar “best execution” class allegations in the aftermath of the GameStop trading frenzy in January and February 2021.