Fraud-on-the-Market Theory: Presumption and Other Significant Issues and Updates in 2016 and Beyond
In June 2014, the US Supreme Court issued its decision in Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”). Halliburton II reexamined, and ultimately upheld, the foundation of a securities class action — the presumption of class-wide reliance — which makes it easier for plaintiffs in securities fraud class actions to prove reliance and obtain class certification. The Court’s decision may give defendants new opportunities to rebut the presumption in the earlier stages of a case, which benefits defendants.
The Court confirmed the premise adopted in Basic Inc. v. Levinson that market prices will adjust to newly disclosed information, and that Halliburton’s challenges to Basic were not sufficiently compelling to overturn the presumption. A decision overruling Basic and the “fraud-on-the-market” presumption would have undermined pursuit of securities fraud cases on a class action basis.
This decision will heighten the importance of class certification in potential securities fraud class actions. Defendants will be able to introduce expert testimony to show that alleged misstatements did not affect stock prices. Plaintiffs may choose to present contrary expert testimony, which could result in increased focus on Daubert motions challenging the admissibility of expert testimony.
In a two-hour LIVE Webcast, a panel of thought leaders and practitioners assembled by The Knowledge Group will discuss the significant and latest issues relating to Fraud-on-the-Market Theory: Presumption and Other Significant Issues and Updates in 2016 and Beyond. The panel also will help the audience better understand the best practices to challenge and defend cases.
Key topics include:
- Fraud-on-the-Market Theory – An Overview
- Basic, Inc. v. Levinson Supreme Court Review
- Halliburton Co. v. Erica P. John Fund, Inc. - Presumption
- Challenges for Fraud-on-the-Market Theory
- Scope and Limitations of Fraud-on-the-Market Theory
- Reaffirming Presumed Reliance Doctrine
- Tool for Defendants to Contest Certification
- Implications of Arising Litigations
- Mitigating Risks and Threats
Wilson Elser Moskowitz Edelman & Dicker LLP
- History and development of fraud on the market theory to prove class-wide reliance in securities fraud cases
- Basic v. Levinson established efficient market hypothesis to create presumption
- Basic allows defendants to rebut presumption
- Halliburton I treats whether plaintiff has to prove loss causation at class cert stage to invoke fraud on the market presumption of reliance
- Halliburton II reaffirms efficient market hypothesis
- Extends defense bar opportunity to rebut at class cert stage
- Question remaining in Halliburton III is whether rebuttal efforts offend Eisen proscription against merits inquiry at class cert stage
Lieff Cabraser Heimann & Bernstein, LLP
- The relationship among, and potential analytical challenges raised by, the U.S. Supreme Court’s decisions in Halliburton I, Amgen, and Halliburton II. In particular, how are lower courts reconciling the Supreme Court’s holdings that plaintiffs need not demonstrate loss causation (Halliburton I) or materiality (Amgen) at the class-certification stage with the Court’s allowance of price-impact rebuttal evidence at that stage (Halliburton II)?
- Is “Halliburton III” on the horizon? The district court in the Halliburton securities case held earlier this year that with respect to all but one alleged corrective disclosure, Halliburton met its burden to demonstrate lack of price impact. The court determined that Halliburton’s argument that the one remaining alleged corrective disclosure was not in fact “corrective” could not be the basis for denying class certification, i.e., it was the province of summary judgment or trial. Halliburton petitioned for review by the Fifth Circuit under Federal Rule of Civil Procedure 23(f), which the court of appeals recently granted. When the Fifth Circuit rules on the merits, perhaps the case will make its third trip to the Supreme Court….
- The potential implications of the Court’s discussion in Halliburton IIregarding the ability of certain types of investors (e.g., “value investors”) to invoke the fraud-on-the-market presumption; do the Court’s statements significantly limit defendants’ arguments regarding whether particular investment strategies or types of investors (short-sellers, day traders, etc.) are encompassed by the FOM presumption?
- Overview of fraud on the market doctrine with Basic and Halliburton as well as the underlying arguments and rationale for the decisions
- Expansion of securities litigation to the non-US class action world
- Where class certification and motions to dismiss stages are unknown
- Where concepts of fraud on the market are just being introduced to help satisfy the burden of proof
- Where there is NO discovery and, hence, no access to internal documents or information
- Where the fraud-on-the-market concept may only be introduced on the basis of the underlying arguments and rationale (because there is no binding effect from US cases)
- Prediction: Introduction of concept by plaintiffs will lead to counter-introduction of arguments by defense bar, including rationale for restrictive interpretation of the fraud on the market presumption or concept, leading to higher burden outside the US.
Who Should Attend:
- Securities Attorneys
- Business Lawyers
- General Counsel
- Senior Management
- Legal Counsel
- In-House Counsel
- Top Level Management
- Other Related/Interested Professionals and Organizations
Michael McCloskey is a distinguished business trial lawyer recognized for his success in handling complex commercial matters involving federal securities fraud, state and federal derivative actions, and anticompetitive business practice claims. As a member of Wilson Elser's Securities and Commercial Litigation practices, he defends corporations as well as their officers and directors before the SEC and in shareholder litigation. He also defends clients in antitrust matters, trade secret and non-compete litigation, consumer class actions, and business dissolutions or other disputes among business partners.
In an effort to reduce litigation risk, McCloskey advises his clients on corporate governance measures and best business practices. Among his clients are the boards of directors and audit committees of consumer product companies, computer manufacturers, high tech communications companies, biotech and pharmaceutical companies, and household manufacturing companies.
McCloskey has taught Securities Regulation as an adjunct professor of law at the University of San Diego. He is also certified as an instructor by the National Institute of Trial Advocacy and frequently lectures on current securities litigation issues and corporate matters.
McCloskey retired as a Colonel in the Marine Corps Reserves after 30 years of service. Before his civilian practice, he spent six years prosecuting criminal cases and defending the Department of the Navy and the Secretary of the Navy in federal district courts and circuit courts of appeal.
Michael McCloskey is a distinguished business trial lawyer recognized for his success in handling complex commercial matters involving federal securities …
Michael Miarmi, a partner at Lieff Cabraser Heimann & Bernstein, LLP, devotes his practice almost entirely to representing individual and institutional investors in direct or class cases asserting claims under the federal securities laws or state law. Among his recent accomplishments, Michael was a member of the team serving as co-lead counsel for the proposed customer class in In re Bank of New York Mellon Corp. Foreign Exchange Transactions Litigation, arising from The Bank of New York Mellon’s alleged misconduct in connection with executing foreign-exchange transactions on behalf of its custodial clients. In September 2015, the court granted final approval to a $335 million settlement of the customer class cases against BNY Mellon. Combined with settlements with other government and regulatory agencies, the total compensation achieved for BNY Mellon’s customers is more than half a billion dollars.
Michael also currently represents numerous funds managed by large institutional investors asserting that Merck & Co., Inc. and certain individuals violated the federal securities laws by making false or misleading representations concerning the company’s former arthritis drug Vioxx.
Additionally, for the past several years, Michael has played a central role in representing The Charles Schwab Corporation and several of its related entities in litigation arising from alleged misconduct by some of the world’s largest financial institutions in setting the London InterBank Offered Rate (LIBOR).
Michael has also been involved in significant securities cases before the United States Supreme Court. He served as counsel of record on behalf of amicus curiae National Association of Shareholder and Consumer Attorneys (NASCAT) in Erica P. John Fund, Inc. v. Halliburton Co., et al., No. 09-1403, presenting NASCAT’s arguments to the Supreme Court regarding the standard for class certification in “fraud-on-the-market” securities cases. Most recently, Michael contributed to an amicus brief to the Supreme Court on behalf of Public Justice, P.C. in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.
Michael has been recognized as a leading thinker on salient issues in securities litigation. He has published articles and participated in panels with other prominent securities lawyers.
Michael received a B.A. in History, with honors, from Yale University, and received a J.D. from Fordham University School of Law.
Michael Miarmi, a partner at Lieff Cabraser Heimann & Bernstein, LLP, devotes his practice almost entirely to representing individual and …
Alexander Reus, J.D. (Germany/USA), LL.M. is a Board Certified International Lawyer with German and U.S. law degrees, licensed to practice law in the United States (NY, DC, FL) and in Europe as a solicitor in England and Wales and a European attorney in Germany. He is the founding partner of DRRT and has over 20 years of experience in advising and representing international investors around the world.
Mr. Reus focuses his practice on global investor protection and loss recovery for the world’s largest institutional investors. As a partner in both small and large international law firms, Mr. Reus has worked on many complex international matters and is currently involved in a variety of multi-billion dollar securities lawsuits across the world.
Mr. Reus is currently active in various committees and boards, including as member of the ICGN Shareholder Rights Committee, Totalbank’s Board of Directors as well as Chairman of Totalbank’s Audit Committee. He is also a Board Leadership and Governance Fellow of the National Association of Corporate Directors.
Mr. Reus has been published widely in Europe, the Middle East and the United States, is a frequent lecturer and speaker on various topics of international law, practice and procedure, and has served as arbitrator in the United States and Dubai.
Alexander Reus, J.D. (Germany/USA), LL.M. is a Board Certified International Lawyer with German and U.S. law degrees, licensed to practice …
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About Wilson Elser Moskowitz Edelman & Dicker LLP
Wilson Elser, a full-service and leading defense litigation law firm (www.wilsonelser.com), serves its clients with nearly 800 attorneys in 27 offices in the United States and one in London and through a network of affiliates in key regions globally. Founded in 1978, it ranks among the top 200 law firms identified by The American Lawyer and is included in the top 50 of The National Law Journal's survey of the nation’s largest law firms. Wilson Elser serves a growing, loyal base of clients with innovative thinking and an in-depth understanding of their respective businesses.
About Lieff Cabraser Heimann & Bernstein, LLP
From its offices in San Francisco, New York, Nashville, and Seattle, Lieff Cabraser Heimann & Bernstein, LLP represents investors across the country in class, direct/opt-out, derivative, and other actions. The firm’s clients have included public pension funds, union funds, and non-public institutional investors including mutual funds, as well as individual investors. Recognized by The American Lawyer as “one of the nation’s premier plaintiffs’ firms,” Lieff Cabraser is committed to advancing the rights of investors and promoting corporate responsibility. Lieff Cabraser securities attorneys have tried two federal securities class actions to jury verdicts—prevailing in both, including a $170 million verdict. The firm has achieved verdicts, judgments, and settlements in excess of $2.6 billion for its clients in securities and other financial-misconduct cases.
DRRT is an international law firm, institutional claims filing provider and litigation funder in non-class action jurisdictions. DRRT counsels and assists global institutional investors with over $10 trillion in AuM. The main focus of DRRT is to help investors recover losses resulting from false, misleading or omitted information by publicly listed companies.
In investor terms, DRRT helps its clients generate “Legal AlphaSM” through uncompromising pursuit of loss recovery in private and class actions, shareholder derivative suits, appraisal disputes, and in the class action and semi-class action settlement claims filing area through Pro-Active Portfolio MonitoringSM. DRRT has a long track record of successfully representing institutional investors in more than a dozen countries around the world and has recovered over $1 billion for institutional investors. DRRT is widely recognized as one of the world leaders in global class-action alternatives for loss recovery.