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Click here for the full text of this decision FACTS:In October 2000, Medicare implemented a new program that altered the way Medicare compensated home health care companies. Under the program, Medicare paid companies like Amedisys � a publicly traded company that provides home health care, nursing, home infusion therapy and ambulatory surgery services � a portion of their fees in advance, based on an estimate of the future cost of their services. After the service was provided, Medicare would pay the difference if the initial payment was too low, and the companies were required to reimburse the difference to Medicare if the initial payment was too high. Investors in Amedisys began to suspect that Amedisys was willfully manipulating the program to inflate the estimated costs for certain health services, thereby artificially fueling company earnings. Ultimately, these actions wrongfully enhanced the company’s stock prices, the investors theorized. Amedisys issued a curative statement, conceding that it had overstated its revenues, but maintained that the problem was with new software being used to implement the program. Nonetheless, the company’s stock price fell. Frances Unger filed a securities fraud case against Amedisys in August 2001. A potential class of plaintiffs was solicited over the Internet and advertisements. Eventually, class certification was requested for “all persons and entities who purchased the common stock of Amedisys, Inc. between November 15, 2000 through [sic] June 13, 2001.” The plaintiffs asserted a fraud-on-the-market theory for their presumed reliance on Amedisys’ misrepresentations. The district court certified the class under Federal Rule of Civil Procedure 23(b)(3). Amedisys bring an interlocutory appeal of the class certification ruling. HOLDING:Vacated and remanded. The court finds that circuit precedent indicates that a district court must perform sufficient analysis to determine that class members’ fraud claims are not predicated on proving individual reliance. If the circumstances surrounding each plaintiff’s alleged reliance on fraudulent representations differ, then reliance is an issue that will have to be proven by each plaintiff, and the proposed class fails Rule 23(b)(3)’s predominance requirement. The court adds that only by invoking a fraud-on-the-market theory can plaintiffs establish a classwide rebuttable presumption of reliance on Amedisys’ alleged misrepresentations. Where a suit involves small-cap stocks traded in less organized markets, a demonstration of an efficient market is a prerequisite for certification. Without an initial determination of market efficiency, there is no assurance that the available material information concerning the stock translates into an effect on the market price and supports a classwide presumption of reliance. Absent an market efficient market, individual reliance by each plaintiff must be proven, the court finds. The court continues by noting that because of the importance of the market efficiency issue to the class certification, district courts usually apply rigorous standards to this it. A district court cannot simply presume the facts in favor of an efficient market. The court provides a nonexhaustive list of eight factors to be considered when determining whether a stock traded in an efficient market. The list includes the extent to which market makers and arbitrageurs trade in the stock, the company’s market capitalization and the bid-ask spread for stock sales. The court finds the district court devoted “insufficient attention” to evaluating these types of factors, instead considering only the high stock-trading volume, market makers trading the stock and a cause-and-effect relationship between corporate events and price movement. The court also notes that the district court also seemed to rely primarily on Internet printouts without verifying any of the mathematical assertions. “Although we owe considerable deference to district courts in reviewing certification decisions, we cannot affirm the order as it is presently supported. After a more thorough inquiry, however, certification may ultimately prove correct.” OPINION:Jones, J.; Reavley, Jones and Dennis, JJ. SPECIAL CONCURRENCE:Dennis, J. The concurrence agrees with the district court’s holding � that the district court did not adequately weigh the factors for an against a finding of market efficiency � but disagrees that other cases support or suggest the adoption or application of degrees or standards of proof in efficient market determinations for purposes of class certification.

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