No Presumption Of Reliance When Efficient Market Did Not Exist

The U.S. District Court for the Central District of California recently denied certification of a putative class of stock purchasers seeking damages for alleged securities fraud. In Dean v. China Agritech, 2012 WL 1835708 (C.D. Cal. May 3, 2012), the plaintiffs alleged that the defendant – a holding company publicly traded within the United States after a "reverse merger" in 2005 – materially misstated its revenue and income for fiscal years 2008 and 2009. The plaintiffs sought to certify a class of purchasers of Agritech stock over a 16-month period, asserting that the stock price had been artificially inflated by the alleged misrepresentations in violation of Section 10(b) of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933.