Fraud on the market

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Short sellers have a complicated relationship to securities class action litigation, as several prior posts on this site have noted (most recently here). Among the more unusual roles short sellers can play in a securities suit is to serve as lead plaintiff. One recent high-profile case where a short seller acted as lead plaintiff is the suit filed against Overstock, its founder and former CEO, Patrick Byrne, and other executives. The short seller alleged, with some plausibility, that Overstock and Byrne had attempted to mount a “short squeeze” targeted at the short sellers. The district court granted the defendants’ motion to dismiss, and in an interesting October 15, 2024, opinion, the Tenth Circuit affirmed the district court. The appellate court’s opinion has several interesting features, as discussed below.Continue Reading Tenth Circuit Affirms Dismissal of Short Seller’s Securities Suit Against Overstock

Matthew L. Mustokoff

Margaret E. Mazzeo

Since the U.S. Supreme Court’s 2014 decision in Halliburton II, the lower courts have wrestled with questions on how to address the “price impact” of corrective disclosures. In the following guest post, Matthew L. Mustokoff and Margaret E. Mazzeo, partners at the Kessler Topaz Meltzer & Check LLP law firm, examine several critical unanswered questions concerning price impact. I would like to thank Matt and Margaret 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: Price Impact, the Speed of Information, and Securities Class Certification

As I have noted on this site (most recently here), many of the SPAC-related securities class action lawsuits filed in 2021 arose after the target company’s share price declined following a short-seller report. In the following guest post, Nessim Mezrahi, Stephen Sigrist, and Carolina Doherty review the extent to which plaintiffs’ lawyers generally are relying on short-seller research to try to substantiate fraud-on-the-market claims.  Mezrahi is cofounder and CEO, Sigrist is VP of data science, and Doherty is VP of business development at SAR. A version of this article previously was published on Law360. I would like to thank the authors 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: More Securities Class Actions May Rely On Short-Seller Data

When the U.S. Supreme Court granted the petition for a writ of certiorari to take up class certification questions raised in the long-running Goldman Sachs securities class action lawsuit, some commentators thought the case might give the Court the opportunity to reconsider fundamental issues about the presumption of reliance under the “fraud on the market” theory in connection with class certification in securities suits. However, as the case has turned out, the Court’s consideration of the case has not produced any fundamental recasting of any key issues; instead, the Court on June 21, 2021 issued a narrow decision that the majority opinion itself acknowledged, with respect to the most significant substantive part of the Court’s opinion, will not be “outcome determinative” in many cases. The Court’s June 21, 2021 decision can be found here.
Continue Reading Supreme Court Vacates Class Certification in Goldman Sachs Securities Suit on Narrow Grounds

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

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

skaddenFollowing the U.S. Supreme Court’s ruling earlier this week in the Halliburton case, questions have continued to swirl about the implications of the court’s decision. In the following guest post, Jennifer Spaziano of the Skadden law firm, takes a look at the impact the Halliburton decision will have on securities class action procedures, outcomes and …

skaddenlogoThe Halliburton case now before the U.S. Supreme Court could potentially change the securities class action litigation landscape in the United States, as the Court considers whether or not to dump the fraud on the market theory.  However, based upon the oral argument in the case on Wednesday, March 5, 2014, it appears that the …