- Court: United States Supreme Court
- Area(s) of Law: Civil Procedure
- Date Filed: February 27, 2013
- Case #: 11-1085
- Judge(s)/Court Below: Ginsburg, J., delivered the Court's opinion, which Roberts, C.J., Breyer, Alito, Sotomayor and Kagan, JJ., joined. Alito, J., filed a concurring opinion. Scalia, J., filed a dissenting opinion. Thomas, J., filed a dissenting opinion which Kennedy, J., joined and Scalia, J., joined except for Part I-B.
- Full Text Opinion
Respondents sought class-action certification against Petitioner under Federal Rule of Civil Procedure 23(b)(3), claiming Petitioner made material misrepresentations which artificially inflated the price of its stock when Respondents purchased it, and that they were harmed when the fraud came to light and the price fell. To meet the predominance requirement in Rule 23(b)(3), Respondents invoked the "fraud-on-the-market" rebuttable presumption, which presumes that an efficient market informs the price of a security with all publicly available information about a company, and that a buyer purchases a security in reliance on that information, and thus a particular public, material misrepresentation will be reflected in the security's price on which investors rely.
Petitioner argued that to obtain class certification, Respondents must prove the materiality of misrepresentations, since an immaterial misrepresentation would not affect the stock price in an efficient market. Petitioner also contended it should be allowed to rebut the presumption at class certification with evidence that public information about the misrepresentation was in the price of the stock at the time Respondents purchased it.
The District Court certified the class and held that Respondents did not need to prove fraud existed to certify the class and refused to allow Petitioner to present evidence to rebut the applicability of the fraud-on-the-market theory because rebuttal was a trial issue. The Court of Appeals for the Ninth Circuit affirmed the class certification on interlocutory appeal.
The Court held that proof of materiality is not a prerequisite for class certification because Rule 23(b)(3) merely requires a showing that questions common to the class predominate, and not that they be answered on the merits in favor of the class. The question can be proved by evidence common to the class, and there is no risk that a failure to prove materiality would result in individual questions predominating. The Court also affirmed the Ninth Circuit's decision that Petitioner may rebut the presumption when it is adjudicated on the merits rather than at class certification.