July 28, 2011 Articles

Class Certification Requirements in 10b-5 Cases

What does it take to certify a securities fraud class? Three circuits have varying views on the prudential and equitable concerns invoked by securities fraud class certifications.

By Scott B. Schreiber, Kavita Kumar Puri, and Robert Alexander Schwartz

On October 4, 2010, the Supreme Court invited the acting solicitor general to file a brief expressing the views of the United States in Erica P. John Fund, Inc. v. Halliburton Co., in which plaintiff seeks certiorari regarding the Fifth Circuit’s decision in Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co. 597 F.3d 220 (5th Cir. 2010) (AMS Fund)AMS Fund challenged three general kinds of purported misstatements by Halliburton from June 3, 1999 to December 7, 2001. In AMS Fund, the Fifth Circuit confirmed that it requires plaintiffs to establish loss causation, by a preponderance of the evidence, to trigger the fraud-on-the-market presumption. Id. at 335. The Fifth Circuit is the lone circuit requiring such affirmative proof by securities fraud plaintiffs at the class certification stage.

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