In In re Goldman Sachs Group, Inc. Sec. Litig., the Second Circuit confirmed that, at the class-certification stage in a securities-fraud class action, the defendant bears the burden of persuasion to rebut the presumption of reliance under Basic v. Levinson by a preponderance of the evidence. The decision follows on the heels of a separate Second Circuit panel’s similar decision in Waggoner v. Barclays PLC and clarifies that a defendant need not provide “conclusive evidence” to rebut the presumption. Goldman Sachs is one of several federal court decisions interpreting Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), which declined to dispense with the Basic presumption of reliance – which is premised on the “fraud-on-the-market” theory – but held that the presumption can be rebutted by “any showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a fair market price.” Since Halliburton II was handed down, courts have wrestled with the proof a defendant must offer to rebut the presumption. In Waggoner v. Barclays PLC, issued in November 2017, the Second Circuit resolved the question by holding that a defendant bears the burden of persuasion to rebut the Basic presumption by a preponderance of the evidence. In Goldman Sachs,...
Tagged: Class Certification
With the close of the United States Supreme Court’s 2015-16 term, we offer this wrap up of the Court’s term, focusing on decisions of special interest from the business and commercial perspective (excluding patent cases): Upon being granted a discharge from a Bankruptcy Court, a bankrupt’s debts are discharged unless a particular debt falls within one of the Bankruptcy Code’s statutory exclusions. One of those exclusions is for debts arising from “false pretenses, a false representation, or actual fraud.” Husky Int’l Elecs., Inc. v. Ritz asked whether a debt arising from a fraudulent transfer made for the purpose of frustrating a creditor, but accomplished without making a false representation, is subject to this exclusion.
With the close of the United States Supreme Court’s 2013-14 term, we offer this wrap-up of the Court’s term, focusing on the Court’s most important business and commercial cases (excluding intellectual property opinions): Halliburton Co. v. Erica P. John Fund: The Court upheld the fraud-on-the-market theory first set forth in Basic Inc. v. Levinson, which allows investors to satisfy the reliance element of a section 10b-5 securities fraud claim by invoking a presumption that the price at which stock is purchased in an efficient market reflects all public, material information — including material misstatements.
Third Circuit Holds that Injunctive-Relief-Only Class Cannot Be Certified Where Plaintiffs Based the Threat of Future Harm on Irrational Consumer Behavior
In McNair v. Synapse, a precedential opinion, the Third Circuit held that former customers could not certify an injunctive-relief-only class asserting consumer fraud claims against defendant Synapse, Inc., the largest marketer of magazine subscriptions in the United States, because they lacked Article III standing. In short, the Third Circuit concluded that plaintiffs could not show a likelihood of future injury based on their claim that they might be deceived by the same conduct twice.
No Class Certification in Consumer Fraud Case When Lead Plaintiff Seeks to Recant Critical Allegations in Complaint
A lead plaintiff in a consumer class action who attempts to recant allegations in her complaint concerning the date she purchased the product at issue places her credibility in issue and, therefore, subjects her claim to unique defenses. Such a plaintiff may not be an adequate class representative under Rule 23(a)(4) and therefore may not be able to certify a class.
AT&T Mobility Permits Nullification of Arbitration Agreements Containing Class-Action Waivers When Agreements are so Ambiguous and Internally Inconsistent that Mutual Assent is Lacking
In AT&T Mobility LLC v. Concepcion, the United States Supreme Court held that the Federal Arbitration Act preempted state laws providing that arbitration agreements containing class-action waivers are unconscionable and therefore unenforceable. But the Supreme Court also stated that “generally applicable contract defenses” continue to apply to arbitration agreements, so long as such defenses do not conflict with the FAA or frustrate its purposes.
No Class Certification When Class Members Can Obtain Adequate Statutory Damages in Small Claims Court
In Local Baking Prods., Inc. v. Kosher Bagel Munch, Inc., the New Jersey Appellate Division held that private causes of action under the Telephone Consumer Protection Act (TCPA), which prohibits the sending of unsolicited faxes, cannot be prosecuted as class actions under Rule 4:32. The court reasoned that a class action is not a “superior” method for adjudicating such claims, as required by Rule 4:32-1(b)(3), because the TCPA entitles victims to at least $500 in statutory damages which can be recovered in the Small Claims section of the Special Civil Part in a matter of months.