On April 30, 2013, the U.S. Court of Appeals for the Fifth Circuit, on remand from the U.S. Supreme Court, issued a decision in the securities fraud case of Erica P. John Fund, Inc. v. Halliburton Co. In EPJ Fund, the Fifth Circuit rejected Halliburton’s attempt to defeat class certification by offering evidence of the absence of price impact. Relying on the earlier decision of the Supreme Court in Amgen v. Conn. Ret. Plans and Trust Funds, 133 S. Ct. 1184 (2013), the Fifth Circuit first explained that, while a misrepresentation’s materiality must at some point be proven in order to invoke the “fraud-on-the-market” presumption of reliance, the resolution of the question presents a common issue that affects all class members’ claims equally. Next, the court held that because Halliburton’s price impact evidence was offered only for the purpose of generally rebutting the presumption of reliance, and affected the ability of all class members to succeed on the merits of their claim, it could not be considered at class certification.
The Investor’s Insider:
Protecting Against Securities Fraud
Supreme Court Rules in Favor of Investors in Amgen Case
On February 27, 2013, the United States Supreme Court decided Amgen Inc., et al. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085. By a 6-3 majority, the Court held that investors in a securities class action do not need to prove the materiality of a company’s alleged misrepresentations at the class certification stage.
Tags: Fraud on the Market Theory, Materiality, Misrepresentation
Second Circuit Considers Statute of Repose
In December 2012, the Court of Appeals for the Second Circuit heard arguments on the following question: Do class actions serve to suspend or “toll” the federal securities law statute of repose? Read more…
Tags: Second Circuit, statute of limitations, statute of repose
Oregon Supreme Court Rules That Proof of Reliance in Oregon Securities Law Action Can Be Established Via the Fraud-on-the-Market Doctrine
On December 13, 2012, the Oregon Supreme Court ruled unanimously that a plaintiff who brings a claim for damages based on misrepresentations under ORS 59.137(1) must establish that the plaintiff relied on the misrepresentations, but that proof of reliance can be established through the rebuttable presumption available under the fraud-on-the-market doctrine. Read more…
Judge Grants Class Certification Over False Claims by Radient Pharmaceuticals
A federal judge in the Central District of California has certified a class of investors in a pending securities fraud lawsuit against Radient Pharmaceuticals. Read more…
Toyota Settles Investor Lawsuit for $25.5 Million
Toyota Motor Corp. (“Toyota”) has agreed to pay $25.5 million to settle a U.S. shareholder class action lawsuit. Read more…
Pfizer Settles Class Action Lawsuit by Former Wyeth Shareholders
Pfizer Inc. (“Pfizer”), the world’s largest pharmaceutical company, has agreed to pay $67.5 million to settle a class action lawsuit by shareholders of the former Wyeth Inc. (“Wyeth”), a pharmaceutical company bought by Pfizer in 2009. Read more…
Supreme Court Hears Case About Material Misstatements
In a previous post, we discussed that the Supreme Court had granted certiorari in Amgen Inc. v. Connecticut Retirement Plans. The Court heard that case on Monday, November 5, 2012. Read more…
District Court Upholds FINRA Arbitrators’ Ruling Against Merrill Lynch
The U.S. District Court for the Northern District of Georgia has upheld a $520,000 arbitration ruling against Merrill Lynch that led to the terminations – and rehiring – of three securities arbitrators. The court rejected arguments by Bank of America Corporation’s Merrill Lynch unit that the three arbitrators who made the initial ruling were biased toward the investors who initiated the case. Read more…
Public Corporations Use Foreign Tax Reserves to Manipulate Earnings
A recent study demonstrates that a little-known accounting rule not only allows companies to set aside billions of dollars in overseas profits free of United States’ tax, but also helps public corporations manipulate their earnings. Read more…
Business Groups Sue SEC Over Dodd-Frank Anti-Bribery Rule
A lawsuit filed by four business groups, including the U.S. Chamber of Commerce and American Petroleum Institute, alleges that the U.S. Securities and Exchange Commission (“SEC”) failed to adequately weigh the costs and benefits of a new rule requiring oil, mining, and gas companies to disclose payments made to foreign governments. The lawsuit is the latest in a string of legal challenges against regulators still finalizing dozens of rules included in the 2010 Dodd-Frank Wall street reform law. Read more…
Report Says 20% of Companies Manage Earnings, Causing Misrepresentations of Prices Per Share
According to a survey conducted by a group of finance professors, at least 20% of companies manage earnings and use aggressive accounting methods. The companies legally exploit accounting standards in order to “manage earnings to misrepresent [the company’s] economic performance,” according to the study’s authors, Ilia Dichev and Shiva Rajgopal of Emory University and John Graham of Duke University. Read more…
