class certification

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I have had this perception for several years now that the U.S. Supreme Court recently has been particularly keen to take up securities cases. It turns out that this perception has a basis in objective fact. A recent paper by University of Toledo law school Professor Eric Chafee confirms that since John Roberts became Chief Justice in 2005, the Court has averaged two securities opinions per court term, twice the number of the prior Rehnquist Court. Indeed, as the number of cases overall on which the Court has granted cert has continued to shrink, the securities cases have become an increasingly significant component of the Court’s docket. The current term is no exception; the Court began the term with three securities cases on its docket (although a recent settlement in one of the cases reduced the number to two).

The Court is showing its securities law proclivities once again. On Friday, December 8, 2017, the Court granted cert in yet another securities law case. The Court’s December 8, 2017 Order granting the petition for a writ of certiorari in China Agritech Inc. v. Resh can be found here. As Professor Chafee notes in his recent paper, many of the securities cases the Roberts court has taken up in recent years have involved issues “at the periphery of securities laws.” The new case the Court has taken up arguably is no exception to this generalization. The China Agritech case is in fact the second case the Court has taken up in successive terms involving statute of limitations tolling issues under the Court’s American Pipe tolling doctrine.
Continue Reading U.S. Supreme Court Grants Cert in Yet Another Case Securities Law Case

A recurring issue in securities cases involves the question of when plaintiffs may rely on the presumption of reliance under the fraud on the market doctrine. To invoke the presumption plaintiffs must show that the defendant company’s securities trade on an efficient market, which in turn raises the question of what the plaintiffs must show in order to demonstrate market efficiency. In the following guest post, attorneys from the Paul Weiss law firm review a recent Second Circuit decision on this issue, Waggoner v. Barclays PLC (here). I would like to thank the attorneys from the Paul Weiss law firm for allowing me to publish this article as a guest post. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the Paul Weiss attorneys’ guest post.
Continue Reading Guest Post: Second Circuit: Price Impact Evidence Not Always Necessary to Establish Market Efficiency

Since the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank, the lower courts have wrestled with the issue of whether or not the transactions at issue in a particular securities suit were sufficiently “domestic” to bring them under the U.S. securities laws. These inquiries mostly have taken place at the motion to dismiss phase. However, as demonstrated in the Second Circuit’s July 7, 2017 decision in the Petrobras securities case, the “domestic” transactions inquiry is relevant at the class certification stage as well. The appellate court held that in determining whether or not Petrobras noteholders’ claims can proceed on a class-wide basis, the district court must, in light of the federal class action procedure’s “predominance” requirement, determine whether or not common questions outweigh individual questions of transactional domesticity. The appellate court’s ruling, which can be found here, could complicate class certification in cases involving non-U.S. companies whose securities do not trade on U.S. exchanges.  
Continue Reading Morrison Issues Cloud Class Certification in Petrobras Securities Litigation

us capitolIn the early days of the Trump presidency, the new administration has made it clear that it is going to tackle perceived regulatory excess. The new President has also made it clear that he intends to reform the Dodd-Frank Act. In keeping with these initiatives, a Republican congressman has now introduced a legislative proposal to reform class action litigation. According to his February 10, 2017 press release (here), Rep. Rob Goodlatte (R-Va.), the Chairman of the House Judiciary Committee, introduced the Fairness in Class Action Litigation Act (H.R. 985) to “keep baseless class action suits away from innocent parties, while still keeping the doors to justice open for parties with real and legitimate claims.” The Bill, which is a grab bag of proposed procedural reforms clearly intended make class action litigation more difficult, addresses a host of concerns and includes some surprising features, including, among other things, a provision that would address third party litigation funding.
Continue Reading Major Class Action Reform Legislation Introduced in Congress

paul weiss largeIn its June 2014 decision in Halliburton Co. v. Erica P. John Fund, Inc., the U.S. Supreme Court held, among other things, that in order to try to rebut the fraud-on-the-market presumption in order to defeat class certification, defendants can contend that the allegedly corrective disclosure did not impact the defendants company’s share price. In an April 12, 2016 decision in IBEW Local 98 Pension Fund v. Best Buy Co., Inc., the Eight Circuit, applying Halliburton, held that the defendants had successfully rebutted the presumption in the case by demonstrating absence of price impact. In the following guest post, attorneys from the Paul Weiss law firm takes a look at the Eighth Circuit’s decision and considers its significance. I would like to thank the attorneys from the Paul Weiss firm for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the Paul Weiss attorneys’ guest post.
Continue Reading Guest Post: Eight Circuit: Under Halliburton II, Defendants Successfully Rebut Fraud-on-the Market Presumption

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Noelle Reed
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Daniel Mayerfeld

On March 22, 2016, the U.S. Supreme Court held in Tyson Foods, Inc. v. Bouaphakeo (here) that claimants asserting Fair Labor Standards Act claims on half of a class of Tyson Foods employees could rely on statistical evidence to support their assertion that common issues of fact or law predominated among class members. In the following guest post, Noelle Reed and Daniel Mayerfeld of the Skadden Arps law firm take a closer look at the Supreme Court’s opinion and suggest that the decision may be a reflection of distinct circumstances involved in the Tyson Foods case, that the circumstances are highly unlikely to arise in securities cases, and therefore that the decision is unlikely to have a significant impact on securities cases. I would like to thank Noelle and Daniel for their willingness to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Noelle’s and Daniel’s guest post.
Continue Reading Guest Post: Supreme Court Upholds Class Certification in Tyson Foods

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Michael J. Biles

In the following guest post, Michael J. Biles of the King & Spalding law firm takes a look at the analysis of the materialization-of-the-risk issues in the Fifth Circuit’s September 8, 2015 decision in the BP Deepwater Horizon securities class action lawsuit. As Michael asserts below, the Fifth Circuit’s decision opinion essentially removes the risk of materialization-of-the-risk cases in the Fifth Circuit.

I would like to thank Mike for his willingness to publish his article on my site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you are interested in submitting a guest post. Here is Michael’s guest post.

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Materialization-of-the-risk cases are a favorite of the securities class action plaintiffs’ bar.  The basic theory of fraud in these cases is that a company misrepresented or withheld information, causing the market to miscalculate the company’s exposure to a particular risk.  Every company is susceptible to risks, whether it be natural or man-made disasters, competition, labor disputes, technological obsolescence, currency fluctuations, supply-chain disruptions, etc. –the risks are endless.  When a company’s stock price declines following a disclosure that you-name-the-risk has materialized – as every company must do on occasion – plaintiffs’ lawyers will scour the company’s prior disclosures concerning the risk and allege (with the benefit of hindsight) that the company and its executives did not accurately explain the company’s exposure to the risk.  The damages in such cases are usually easy to calculate – plaintiffs say that the stock was inflated by the amount of the share price decline following the revelation of the risk.  And if the case is certified as a class action, the damages typically run in the hundreds of millions, if not billions.

The securities class action filed against BP plc following the 2010 Deepwater Horizon explosion and oil spill is a classic materialization-of-the-risk  case.  Before the spill, according to plaintiffs, BP touted the company’s safety plans and procedures as being more advanced on paper than they were in practice.  These pre-spill statements lulled the market into believing that BP was a safer company than it actually was.  According to plaintiffs, BP thus understated the risk of the Deepwater Horizon catastrophe, and when that risk materialized, investors were damaged by the full value of the decline in BP stock caused by the materialization of the risk of the spill.  The Fifth Circuit recently affirmed the district court’s order denying class certification of plaintiffs’ materialization-of-the-risk claims.[1]  Ludlow v. BP, PLC, — F.3d —, 2015 WL 5235010 (5th Cir. Sept. 8, 2015).  This opinion essentially removes the risk of materialization-of-the-risk cases in the Fifth Circuit.
Continue Reading Guest Post: The Fifth Circuit Takes the Risk Out of Materialization-Of-The-Risk Cases

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Renzo Comolli
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Jorge Baez

In its June 2014 opinion in Erica P. John Fund, Inc. v. Halliburton Co., the United States Supreme Court held that in connection with a motion for class certification in a securities class action lawsuit, a defendant should have the opportunity to try to rebut the presumption of reliance by showing that the alleged misrepresentation did not impact the defendant company’s share price. The case itself was remanded to the district court for further proceedings in light of the Supreme Court’s ruling. On July 25, 2015, the District Court issued its ruling on the motion for class certification based on the principles the Supreme Court enunciated. A copy of the District Court ruling can be found here.

In the following guest post, Renzo Comolli and Jorge Baez of NERA Economic Consulting take a look at the district court’s ruling on the class certification motion. Renzo and Jorge are both Senior Consultants for NERA.

 

I would like to thank Renzo and Jorge for their willingness to allow me to publish their article as a guest post here. I welcome guest post submissions from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to submit a guest post. Here is Renzo and Jorge’s guest post.

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On 25 July 2015, the United States District Court for the Northern District of Texas issued the much-anticipated ruling on class certification in Erica P. John Fund, Inc. v. Halliburton Co. The economic analysis of price impact was front and center in the Court’s ruling.

This ruling follows the Supreme Court’s decision on price impact that is widely known as Halliburton II. Although this ruling involves facts that are unique to Halliburton’s particular disclosures, attorneys may look at it as a roadmap for guiding economic analysis of price impact in future cases in the post-Halliburton II world.
Continue Reading Guest Post: Update on Economic Analysis of Price Impact in Securities Class Actions Post-Halliburton II

stock pricesIn its June 2014 opinion in the Halliburton case, the U.S. Supreme Court held that securities lawsuit defendants may introduce evidence at the class certification stage to try to show that the alleged misrepresentation on which the plaintiffs rely did not impact the defendant company’s share price. To show the absence of price impact, defendants…