295 F.R.D. 423
D. Ariz.2013Background
- This is a securities-fraud class action on behalf of purchasers of First Solar, Inc. securities between April 30, 2008 and February 28, 2012, alleging violations of §10(b), Rule 10b-5 and §20(a).
- Plaintiffs moved to certify a Rule 23(b)(3) class; Defendants conceded Rule 23(a) but opposed certification on predominance grounds, focusing on whether market efficiency (and thus classwide reliance under the fraud-on-the-market doctrine) had been proven.
- Plaintiffs relied on trading on NASDAQ plus Cammer-factor evidence (high volume, analyst coverage, market makers/arbitrageurs, S-3 eligibility, and event studies linking news to price moves) and an expert event study showing significant price reactions on specific dates and to earnings releases.
- Defendants primarily contested market efficiency: arguing (1) no presumption from NASDAQ listing, (2) impediments to arbitrage/short-selling during part of the class period, and (3) weaknesses in Plaintiffs’ event-study evidence (selection, limited days, serial correlation, some non-responses).
- The court conducted a rigorous Rule 23 analysis, weighing Cammer factors and competing expert evidence, and ultimately found Plaintiffs had shown market efficiency by a preponderance of the evidence and granted class certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 23(a) prerequisites are met | Plaintiffs: numerosity, commonality, typicality, adequacy satisfied | Defendants: conceded Rule 23(a) | Court: Rule 23(a) satisfied (class representatives adequate; numerosity, commonality, typicality met) |
| Whether reliance can be proven classwide via fraud-on-the-market without further proof at certification | Plaintiffs: exclusive reliance on fraud-on-the-market suffices; no need for additional inquiry | Defendants: plaintiffs must prove market efficiency at certification; reliance cannot be presumed without evidence | Court: Plaintiffs cannot rest on pleading alone; must prove market efficiency at certification to invoke fraud-on-the-market |
| Whether First Solar stock traded in an efficient market (market-efficiency proof) | Plaintiffs: NASDAQ listing supports a presumption of efficiency; Cammer factors and event-study evidence (5 event days; 81.25% of earnings days) establish efficiency | Defendants: no automatic presumption from NASDAQ; short-sale constraints/arbitrage impediments, weak event-study methodology, serial correlation rebut efficiency | Court: Plaintiffs proved market efficiency by a preponderance (NASDAQ listing + 3 Cammer factors met, partial support for third, and persuasive event-study evidence); Defendants’ short-sale and limited empirical rebuttal did not outweigh Plaintiffs’ showing |
| Whether Rule 23(b)(3) superiority is satisfied | Plaintiffs: class action is superior and manageable; no competing suits; central forum appropriate | Defendants: did not contest superiority | Court: Superiority satisfied; class certification granted |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (recognizes fraud-on-the-market presumption)
- Halliburton Co. v. Erica P. John Fund, 131 S. Ct. 2179 (2011) (plaintiffs must demonstrate market efficiency at certification to invoke fraud-on-the-market)
- Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 660 F.3d 1170 (9th Cir. 2011) (district court may require proof of market efficiency at certification)
- Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. 1184 (2013) (affirming aspects of Amgen and discussing class-certification standards in securities cases)
- Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) (rigorous Rule 23 analysis; class certification is not a mere pleading standard)
- Cammer v. Bloom, 711 F. Supp. 1264 (D.N.J. 1989) (articulates five-factor test for market efficiency used at certification)
- Binder v. Gillespie, 184 F.3d 1059 (9th Cir. 1999) (discusses market segments and certification considerations)
- In re DVI, Inc. Sec. Litig., 639 F.3d 623 (3d Cir. 2011) (listing on major exchange weighs in favor of market efficiency)
- In re PolyMedica Corp. Sec. Litig. (PolyMedica I), 432 F.3d 1 (1st Cir. 2005) (discusses short-sale, put-call parity and efficiency considerations)