Blockbuster Video may be extinct, but an obscure law designed to protect the privacy of video-tape renters is very much alive—the Video Privacy Protection Act (“VPPA”), 18 U.S.C. § 2710, et seq. Enacted in 1988 after The Washington Post published a profile of Supreme Court nominee Robert Bork’s video-rental history, VPPA prohibits any “video tape service provider” from knowingly disclosing a consumer’s personally identifiable information (“PII”) to a third party without the consumer’s express consent. The VPPA entitles prevailing plaintiffs to liquidated damages of $2,500 per violation.
In Erica P. John Fund, Inc. v. Halliburton Co., No. 12-10544, 2013 WL 1809760 (5th Cir. Apr. 30, 2013), the United States Court of Appeals for the Fifth Circuit held that a defendant in a securities fraud class action is not entitled to rebut the fraud-on-the-market presumption of reliance at the class certification stage by showing the alleged misstatement caused no market price impact. The Fifth Circuit adopted the same analysis the United States Supreme Court used in Amgen Inc. v. Connecticut Ret. Plans and Trust Funds, 133 S. Ct. 1184 (2013) [blog article here]. There, the Court held that class certification procedures afford securities fraud defendants no right to rebut the presumption through evidence showing the alleged misstatements were not material. The Fifth Circuit’s opinion now extends Amgen by further narrowing the range of rebuttal evidence a district court may consider at the class certification stage.
Continue Reading Fifth Circuit Holds That Securities Fraud Defendants May Not Rebut the Fraud-on-the-Market Presumption at the Class Certification Stage Through Evidence of No Price Impact
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
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
In In re DVI Inc. Securities Litigation, Nos. 08-8033 & 08-8045, 2011 WL 1125926 (3d Cir. Mar. 29, 2011), the United States Court of Appeals for the Third Circuit affirmed an order granting in part a motion under Rule 23 of the Federal Rules of Civil Procedure to certify a class in a securities fraud action. In this decision, the Court made important determinations regarding the application of the fraud-on-market presumption of investor reliance and the role of loss causation at the class certification stage, holding that, in the Third Circuit, a plaintiff need not establish loss causation as a prerequisite to invoking the fraud-on-the-market presumption, but also holding that, once established, the presumption may be rebutted by showing that the misleading statements or corrective disclosures at issue did not affect the market price of the security. This decision is significant because it aligns the Third Circuit with the Second Circuit in allowing a defendant the opportunity to rebut the fraud-on-the-market presumption at the class certification stage.
Continue Reading Third Circuit Follows The Second Circuit Permitting Defendants To Rebut The Fraud-On-The-Market Presumption At The Class Certification Stage
In In re Cohen, No. 09-70378, 2009 WL 3681701 (9th Cir. Nov. 5, 2009), the United States Court of Appeals for the Ninth Circuit reversed an order by the United States District Court for the Northern District of California that rejected co-lead plaintiff’s selection of counsel and instead appointed a firm selected by the district court. Calling the district court’s selection of counsel “clearly erroneous,” the Ninth Circuit took the unusual step of issuing a writ of mandamus vacating the district court’s appointment of counsel and holding that, under the plain language of the Private Securities Litigation Reform Act of 1995 (“Reform Act”), the district court has the power to reject, but not to select, lead counsel in a securities fraud class action.
Continue Reading Ninth Circuit Holds that District Courts May Reject, But May Not Select, Lead Plaintiffs’ Counsel in Class Actions Brought Under the Private Securities Litigation Reform Act