The Investor’s Insider:
Protecting Against Securities Fraud

United States Supreme Court Considers Corporations’ “Beliefs”

Posted on: November 4th, 2014 by Scott Shorr

The United States Supreme Court considered yesterday whether a corporation, which states that it “believes” a certain fact, is only subject to liability under the federal securities law if it did not believe subjectively in the existence of that fact, even if the underlying fact was objectively false. Read more…

No Violation of PSLRA Discovery Stay for Use of Documents Received After Stay Allegedly in Effect

Posted on: September 3rd, 2014 by Mark Friel

The central question in the Ninth Circuit’s recent opinion in Petrie v. Electronic Game Card, Inc., No. 12-55620, slip op. (9th Cir. July 30, 2014), was whether plaintiffs who issued subpoenas during a time in which no Private Securities Litigation Reform Act (“PSLRA”) discovery stay was in effect violated the PSLRA by using responsive documents received after a stay allegedly had come into existence. The court answered with an unqualified “no.” Read more…

Domestic Transaction Necessary But Not Sufficient to Invoke U.S. Securities Laws

Posted on: August 20th, 2014 by Nadine Gartner

The Court of Appeals for the Second Circuit has ruled that a domestic transaction is necessary to invoke U.S. securities laws but that, on its own, a domestic transaction is not sufficient. Read more…

ESOP Beneficiaries Are Entitled to More than “Coach Class” Fiduciary Duties

Posted on: June 25th, 2014 by Keith Dubanevich

Today, the U.S. Supreme Court ruled that Employee Stock Ownership Plan (“ESOP”) fiduciaries are not entitled to a special presumption of prudence.  Rather, they should be held to the same duty of prudence as other ERISA fiduciaries. Read more…

U.S. Supreme Court Upholds the Fraud-on-the-Market Doctrine

Posted on: June 23rd, 2014 by Keith Dubanevich

On June 23, 2014, the U.S. Supreme court issued its opinion in Halliburton Co. v. Erica P. John Fund, Inc. and upheld the fraud-on-the-market doctrine.  The doctrine sets forth that the market, including Wall Street analysts and other professional investors, reviews the material public information about the company and sets the price for a security based on that information. Read more…

Oregon Court of Appeals Decides Case Defining What Is a “Security” Under Oregon Securities Law

Posted on: June 12th, 2014 by Scott Shorr

In an opinion issued last week, Amerivest Financial, LLC v. Malouf, the Oregon Court of Appeals examined whether a particular investment, a “senior life policy settlement,” was a security under the Oregon Securities Law. Read more…

Class Action Waiver Violates FINRA Rules

Posted on: April 28th, 2014 by Nadine Gartner

The Board of Governors of the Financial Industry Regulatory Authority (“FINRA”) has held that Charles Schwab & Co., Inc. (“Schwab”) violated FINRA rules when the firm attempted to keep investors from participating in class actions by adding waiver language to customer account agreements. Read more…

London Whale Class Action Proceeding Against JPMorgan

Posted on: April 24th, 2014 by Nadine Gartner

Steve Larson describes a shareholder class action against JPMorgan on our class actions blog.  Read about it here.

“What’s Right With Securities Class Action Lawsuits”

Posted on: March 18th, 2014 by Nadine Gartner

Public Citizen, a national nonprofit organization that represents consumer interests, recently published a report extolling the benefits and advantages of securities class action lawsuits.  Read more…

Stoll Berne Investigates Galena Biopharma

Posted on: February 20th, 2014 by Nadine Gartner

Our firm is investigating potential claims concerning whether Galena Biopharma, Inc. (“Galena”) (NASDAQ: GALE), its board of directors and/or officers violated state or federal securities laws, or breached fiduciary duties owed to shareholders. Read more…

U.S. Supreme Court to Review Stock Drop Case

Posted on: January 14th, 2014 by Nadine Gartner

The United States Supreme Court has granted certiori in Fifth Third Bancorp v. Dudenhoeffer, No. 12-751.  The question before the court is whether plaintiffs must allege that the fiduciaries of a stock plan abused their discretion by remaining invested in employer stock to overcome the presumption that the decision to invest in employer stock was reasonable. Read more…

U.S. Supreme Court Examines the Fraud-on-the-Market Doctrine

Posted on: November 19th, 2013 by Scott Shorr

Last week, the United States Supreme Court accepted review (certiorari) of the Fifth Circuit’s decision in Halliburton Co. v. Erica P. John Fund, Inc.  The Supreme Court will consider whether to overrule or limit its prior holding in Basic Inc. v. Levinson, 485 U.S. 224 (1987).

In Basic, the Supreme Court held that a plaintiff asserting a federal securities fraud claim under SEC Rule 10b-5 does not have to prove individual reliance on a particular misrepresentation to recover.  Instead, investors are presumed to rely on the market price of an actively traded security because the price reflects the material public information known about the company.  The presumption is rebuttable under certain circumstances.

This is known as the “fraud-on-the-market” doctrine.   Essentially, the market, including Wall Street analysts and other professional investors, reviews the material public information about the company and set the price for the security based on that information.

Basic has been established precedent for over twenty-five years.   The Supreme Court has cited and relied upon Basic in a number of subsequent securities fraud cases.  Just this year, a majority of the Supreme Court reaffirmed its commitment to Basic in Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, 113 S. Ct 1184, 1192-93 (2013).

Halliburton will test the Supreme Court’s adherence to precedent and the principle of stare decisis.  The case is significant because, without a presumption of reliance, it will be more difficult to certify federal securities 10b-5 class cases and hold companies accountable for fraud.  Without the fraud-on-the-market doctrine, companies could, with relative impunity, provide fraudulent financial statements to the market – and thus increase their stock price – with almost no risk of being held fully accountable for the cost of that fraud.

Interestingly, the Oregon Supreme Court recently held that the Oregon Securities Law, ORS 59.137, also incorporates the fraud-on-the-market doctrine as a matter of state securities law.   Oregon v. Marsh & McLennan Co’s, Inc, 353 Or. 1 (2012).*  The United States Supreme Court’s decision in Halliburton, which interprets federal law, can have no impact on the Oregon Supreme Court’s decision in Marsh, which interprets what the Oregon legislature intended with respect to state law when it enacted ORS 59.137 in 2003.  Marsh is based on state statutory interpretation and not principles of federal law.



* Along with the Oregon Department of Justice, Stoll Berne represents the State of Oregon in this matter.

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The information contained in this blog does not constitute legal advice, and does not create an attorney-client relationship. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this blog.

About this blog

The purpose of this blog is to provide information to the general public and to practitioners about developments that may impact Oregon investors.

About the authors

  • Scott Shorr

  • Scott Shorr
  • Scott Shorr, one of the firm's managing shareholders, is a trial and appellate attorney who handles a variety of complex business, securities and consumer class action litigation. Scott was the arguing counsel before the United States Supreme Court in GEICO General Ins. Co. v. Edo and Safeco Ins. Co. of America v. Burr. Scott practices in state and federal trial court, all appellate courts and before the Financial Industry Regulatory Authority (FINRA (formerly the NASD)).
  • Mark Friel

  • Scott Shorr
  • Mark Friel is a litigation attorney who practices in the areas of complex business, consumer, securities, antitrust, and class action litigation. He is a shareholder at the law firm of Stoll Berne in Portland, Oregon.
  • Nadine Gartner

  • Scott Shorr
  • Nadine Gartner’s practice focuses on complex business litigation and class actions. Prior to becoming a lawyer, Nadine worked as an investment banking analyst.
  • Keith Dubanevich

  • Scott Shorr
  • Keith Dubanevich has extensive experience handling antitrust, consumer and securities cases. Until joining the Portland, Oregon law firm Stoll Berne as a shareholder, he was the Associate Attorney General and Chief of Staff at the Oregon Department of Justice.
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