In Levitt v. J.P. Morgan Securities, Inc., No. 10-4596, 2013 WL 1007678 (2d Cir. Mar. 15, 2013), the United States Court of Appeals for the Second Circuit reversed a district court order certifying a class of shareholder fraud plaintiffs in a lawsuit against J.P. Morgan Securities, Inc. and J.P. Morgan Clearing Corporation (“J.P. Morgan”). The decision reaffirms that a clearing broker generally owes no fiduciary duty to the owners of securities that pass through its hands. According to the Second Circuit, absent evidence that the clearing broker instigated or directed the alleged fraud by the securities issuer through high involvement, a plaintiff cannot establish a class-wide presumption of investor reliance sufficient to satisfy the predominance requirement of Rule 23(b)(3) of the Federal Rules of Civil Procedure.
Continue Reading Second Circuit Reverses Class Certification Order, Holding That a Clearing Broker’s Alleged Knowledge of Fraud Against Shareholders, Absence Direct Involvement, Is Insufficient to Create a Duty of Disclosure
United States Supreme Court Holds that Class Action Securities Fraud Plaintiffs Need Not Prove the Materiality of the Alleged False Statements or Omissions to Support Certification of a Class, Resolving Circuit Split
In Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, No. 11-1085, 2013 WL 691001 (U.S. Feb. 27, 2013), the United States Supreme Court affirmed the decision of the United States Court of Appeals for the Ninth Circuit holding that a securities fraud plaintiff need not prove that the alleged false statements made by defendants were material in order to invoke the fraud-on-the-market presumption of reliance established by Basic, Inc. v. Levinson, 485 U.S. 224 (1988), at the class certification stage of the proceedings. The 6-3 majority opinion, written by Justice Ginsburg, resolved a split in the Circuits, which had pitted the First, Second, Fifth and, to a certain extent, Third Circuits against the Seventh and Ninth Circuits on this point. The Supreme Court’s decision deprives securities fraud defendants a means of limiting or effectively defeating a securities class action lawsuit at an early stage in the case before the bulk of fact discovery has begun.
Continue Reading United States Supreme Court Holds that Class Action Securities Fraud Plaintiffs Need Not Prove the Materiality of the Alleged False Statements or Omissions to Support Certification of a Class, Resolving Circuit Split
Ninth Circuit Clarifies Rule 23 Class Certification Standard
In Dukes v. Wal-Mart Stores, Inc., Nos. 04-16688, 04-16720, 2010 WL 1644259 (9th Cir. Apr. 26, 2010), the United States Court of Appeals for the Ninth Circuit, sitting en banc, affirmed in part and reversed in part an order certifying what is likely the largest class of employment claims in the history of the United States. The decision is highly significant for class action practitioners in all areas of the law because it clarifies the standard in the Ninth Circuit for determining whether a party has met its burden under Rule 23 of the Federal Rules of Civil Procedure to certify a class.
Continue Reading Ninth Circuit Clarifies Rule 23 Class Certification Standard