The availability of the fraud on the market presumption of reliance is a linchpin to class certification in most securities fraud suits. If the presumption does not apply, reliance on alleged misrepresentations is an individual issue that in most cases will overwhelm any common issues and preclude class certification. What is the evidentiary predicate for presuming class-wide reliance on alleged material misrepresentations? There is consensus that plaintiffs invoking the fraud on the market theory must establish that the defendants made public misrepresentations that were material, that the relevant security traded on an efficient market, and that the plaintiffs traded in the stock between the time the misrepresentations were made and the time the truth was publicly revealed.
For several years, the U.S. Court of Appeals for the Fifth Circuit has also required securities plaintiffs seeking to trigger the presumption to establish loss causation at the class certification stage. A certiorari petition filed last month from the Fifth Circuit’s decision in Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co.1 deserves attention from securities law practitioners, as it spotlights the important intersection of the elements of a securities fraud claim and the consensus among the U.S. Courts of Appeal that district courts considering class certification must consider evidence, resolve factual disputes that are relevant to Rule 23′s criteria, and make determinations under a preponderance standard as to satisfaction of those criteria even if those determinations overlap with merits issues.
Triggering the Presumption
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