310 F.R.D. 69
S.D.N.Y.2015Background
- Securities-fraud suit against Barclays (three corporate entities) and individual Robert E. Diamond Jr.; alleged LIBOR manipulation (Aug 2007–Jan 2009) and two false analyst-call statements by Diamond (Oct 31, 2008).
- Plaintiffs seek class certification for all purchasers of Barclays PLC ADR/ADS from July 10, 2007 to June 27, 2012, and appointment of Lead Plaintiffs and counsel.
- Key contested legal issues at certification: whether common issues predominate under Rule 23(b)(3) given reliance, market efficiency (Basic presumption), and individualized damages (Comcast), and whether plaintiffs’ market-efficiency expert (Dr. Finnerty) is admissible under Rule 702/Daubert.
- Plaintiffs rely on the Basic fraud-on-the-market presumption of reliance (and assert Affiliated Ute as alternative), supported by a Cammer/Krogman factor analysis and an event study by Dr. Finnerty; defendants challenge market efficiency, the event study, and damages model.
- Court concludes (1) Cammer 5 (event-study evidence) is not dispositive in the ordinary case; (2) Dr. Finnerty’s testimony is admissible; (3) the market for Barclays ADS was efficient during the Class Period; (4) defendants failed to rebut price-impact (Halliburton II) at certification; (5) Affiliated Ute does not apply; (6) class certification is granted and class counsel/ representatives appointed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Market-efficiency for Basic presumption | Market for Barclays ADS was efficient (Cammer/Krogman factors, event study, NYSE listing, high volume, analyst coverage) | Event-study results are thin/unreliable; Cammer 5 is essential and plaintiffs’ study fails; expert testimony should be excluded | Market efficient by preponderance; Cammer 1–4 and Krogman factors strongly favor efficiency; Cammer 5 helpful but not dispositive; Dr. Finnerty admissible |
| Admissibility of plaintiffs’ expert (Daubert / FRE 702) | Finnerty used standard Cammer/Krogman analyses and event-study methodology; results and qualitative review sufficient for certification-stage purposes | Event-study methods subjective, underpowered, produced limited statistically significant days; opinions unreliable | Daubert motion denied; challenges go to weight, not admissibility; methodology sufficiently reliable and applied |
| Rebuttal of Basic presumption (price impact under Halliburton II) | Plaintiffs not required to prove price impact at certification; defendants must present compelling direct evidence to rebut | Plaintiffs’ event study shows no reaction to many LIBOR dates, so price impact lacking; June 28, 2012 drop was due to settlements, not disclosures | Defendants failed to present direct evidence of lack of price impact; June 28 price reaction supports market responsiveness; Basic presumption stands |
| Use of Affiliated Ute (omission presumption) | LIBOR submissions and Diamond statements involved omissions (failure to disclose manipulation) and thus Affiliated Ute should apply | Claims are mainly affirmative misstatements; recognizing Affiliated Ute here would collapse reliance requirement in manipulation cases | Affiliated Ute does not apply; plaintiffs’ claims are principally misstatements and any omission merely exacerbates misstatements |
| Individualized damages (Comcast) | Plaintiffs propose constant-dollar inflation model anchored to corrective disclosure (June 28, 2012); damages model ties to liability theory | Comcast requires a damages model measuring classwide damages from the asserted theory; individualized issues will predominate | Plaintiffs’ damages theory aligns with liability and survives Comcast at certification; individualized damages questions do not defeat predominance |
| Class representative / counsel adequacy | Lead plaintiffs are experienced institutional investors; Robbins Geller is qualified | (No meaningful contest on adequacy) | Proposed class representatives and Robbins Geller appointed; adequacy satisfied |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (establishes fraud-on-the-market presumption of reliance)
- Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) (omission-based presumption of reliance)
- Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), 573 U.S. 258 (2014) (defendants may rebut Basic by offering direct evidence of lack of price impact)
- Erica P. John Fund, Inc. v. Halliburton Co. (Halliburton I), 563 U.S. 804 (2011) (loss causation is not required at class-certification; Basic presumption remains viable)
- Comcast Corp. v. Behrend, 569 U.S. 27 (2013) (class damages model must measure damages attributable to the class’s asserted theory)
- Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) (trial judge as gatekeeper for expert admissibility under FRE 702)
- Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455 (2013) (predominance inquiry begins with merits elements; materiality need not be proven at certification)
- Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008) (Cammer factors may be used as analytical tools; no single-factor rule adopted)
- Stoneridge Inv. Partners v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008) (limits on scheme liability and reliance principles)