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Gay Parks Rainville and Robert Hickok of Pepper Hamilton. Gay Parks Rainville and Robert L. Hickok of Pepper Hamilton.

On Nov. 6, a three-judge panel of the U.S. Court of Appeals for the Second Circuit issued an opinion in Waggoner v. Barclays, No. 16-1912, 2017 U.S. App. LEXIS 22115 (2d Cir. Nov. 6, 2017), that—if allowed to stand—will make it significantly easier for plaintiffs to obtain class certification in actions alleging violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78j(b), and Securities and Exchange Commission Rule 10b-5 (10(b) actions) against large, publicly traded companies. In Waggoner, the court affirmed the district court’s class certification order, holding, inter alia, that “direct evidence of price impact is not always necessary to demonstrate market efficiency, as required to invoke [the fraud-on-the-market presumption of reliance permitted under Basic v. Levinson, 485 U.S. 224 (1988)];” and “defendants seeking to rebut the Basic presumption must do so by a preponderance of the evidence.” The court also agreed with the district court that the plaintiffs’ damages methodology—which the defendants had challenged—“posed no obstacle to certification.” And while the court rejected the district court’s application of the presumption of reliance adopted by the Supreme Court in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), where, unlike the plaintiffs’ claims in Waggoner, the claims of fraud were based primarily on omissions, the court determined that such error was harmless.

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