US Supreme Court Decides Closely Watched Case On Class Certification In Securities Fraud Matters

In a decision authored by Chief Justice Roberts, the US Supreme Court yesterday reversed the Fifth Circuit's decision certifying a class in a securities fraud class action brought under section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5. In reversing the Fifth Circuit, the Court let stand the "presumption of reliance," which permits plaintiffs in securities fraud class actions to satisfy the statutory reliance requirement by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information, including material misstatements. See Basic Inc. v. Levinson, 485 U.S. 224 (1988). However, the Court concluded that defendants could rebut this presumption of reliance at the class certification stage by introducing evidence that an alleged misrepresentation did not actually affect the market price of the stock. This decision helps clarify what evidence a court may consider in