X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

stock-chartNearly three decades after the U.S. Supreme Court embraced the “fraud on the market” presumption of reliance in securities fraud class actions (Basic v. Levinson, 485 U.S. 224 (1988)), significant recalibrations have been made. In two recent decisions, In re Petrobras Sec. Litig., 862 F.3d 250 (2d Cir. 2017) and Waggoner v. Barclays PLC, No. 16-1912-cv, 2017 U.S. App. LEXIS 22115 (2d Cir. Nov. 6, 2017), en banc petition pending, the Second Circuit held:

• In cases involving large cap, actively traded and well followed stocks (such as most listed on the NYSE and NASDAQ), plaintiffs need not present an “event study” to demonstrate that the stock traded in an “efficient” market. Petrobras, 862 F.3d at 278.

• When considering the efficiency of smaller cap stocks, district courts should “holistically” consider indirect factors of efficiency (e.g., trading volume, analysts and bid/ask spreads) along with event studies, rather than elevate event studies to a sine qua non status. Id. at 277.

• Plaintiffs need not show price movements when the alleged misrepresentations were first made, but rather may proceed on a “price maintenance theory,” i.e., that the misstatements “merely maintained inflation already extant in a company’s stock price.” Barclays, 2017 U.S. App LEXIS 22115, at *48, quoting In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 256 (2d Cir. 2016).

• Courts indeed should be wary of excessive reliance on event studies, given that such studies were intended for analysis of massive amounts of data involving multiple stocks, not individual firms with few “events.” Petrobras, 862 F.3d at 278.

• While Halliburton II afforded defendants an opportunity to rebut the reliance presumption by demonstrating that the alleged fraud had no impact on the price of the stock, defendants must do so by a “preponderance of the evidence.” 2017 U.S. App. LEXIS 22115, at **41-42.

This premium content is locked for
New York Law Journal subscribers only.

  • Subscribe now to enjoy unlimited access to New York Law Journal content,
  • 5 free articles* across the ALM Network every 30 days,
  • Exclusive access to other free ALM publications
  • And exclusive discounts on ALM events and publications.

*May exclude premium content
Already have an account?
Interested in customizing your subscription with Law.com All Access?
Contact our Sales Professionals at 1-855-808-4530 or send an email to groupsales@alm.com to learn more.

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2018 ALM Media Properties, LLC. All Rights Reserved.