312 F.R.D. 307
S.D.N.Y.2016Background
- Securities fraud suit alleging Barclays PLC/Barclays Capital and William White made misleading statements and concealed material omissions about operation of Barclays’ dark pool (LX), including extent of high-frequency trading and routing practices.
- NY Attorney General sued Barclays under the Martin Act on June 25, 2014; Barclays ADS fell ~7.38% on that disclosure day.
- Putative class: purchasers of Barclays American Depositary Shares from August 2, 2011 through June 25, 2014.
- Plaintiffs seek class certification under Fed. R. Civ. P. 23(b)(3) relying on both the Affiliated Ute omissions presumption and Basic fraud-on-the-market presumption of reliance.
- District court previously denied defendants’ motion to dismiss on Section 10(b) claims but held two categories of statements inactionable; remaining claims center on LX-related statements/omissions.
- Court grants class certification, finds both Affiliated Ute and Basic presumptions applicable, finds market for Barclays ADS efficient, rejects defendants’ rebuttal attempt, and appoints Pomerantz LLP as class counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Affiliated Ute (omission) presumption | Affiliated Ute applies because omissions about LX were central and material; defendants had duty to disclose to avoid misleading statements | Affiliated Ute inapplicable because plaintiffs also allege affirmative misstatements and there was no duty to disclose alleged illegal conduct | Affiliated Ute applies at class certification stage; affirmative statements do not preclude reliance on omissions presumption and duty can arise to avoid misleading statements |
| Applicability of Basic (fraud-on-the-market) presumption | Basic applies: misstatements public, material, ADS traded in efficient market, class members traded during misrepresentation-to-correction window | Defendants concede most Cammer/Krogman factors but argue plaintiffs failed on Cammer 5 (event-study showing price reaction) and thus failed to prove market efficiency; they also argue lack of price impact on corrective-disclosure date | Court finds market efficiency established indirectly (high volume, NYSE listing, heavy analyst coverage, other Cammer/Krogman factors); event study not required here; defendants failed to rebut by preponderance (no convincing event-study rebuttal offered) |
| Rebuttal of Basic presumption via lack of price impact | Plaintiffs use price-maintenance theory (misstatements/omissions prevented price decline); corrective disclosure and NYAG suit show price drop tied to fraud disclosure | Defendants argue decline was caused by the mere existence of government investigation or other confounders and submitted no event-study; challenge timing of alleged inflation | Defendants bear burden to show absence of price impact but failed to carry it; multiple possible contributors to post-disclosure drop do not preclude class certification; Basic presumption stands |
| Predominance and damages under Comcast | Plaintiffs will use event study + constant dollar method tied to theory; individualized damages issues manageable and do not defeat predominance | Defendants contend Comcast requires classwide damages model and disaggregation of confounding events; plaintiffs haven’t shown damages measurable classwide | Court applies narrow Comcast reading: plaintiffs need a damages methodology linked to theory (they have one); individualized damage calculations do not defeat predominance; class certification proper |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (recognizes fraud-on-the-market presumption of reliance)
- Affiliated Ute Citizens v. United States, 406 U.S. 128 (establishes presumption of reliance in omissions-based securities claims)
- Erica P. John Fund, Inc. v. Halliburton Co., 134 S. Ct. 2398 (Halliburton II) (permits defendants to rebut Basic at certification by showing lack of price impact)
- Comcast Corp. v. Behrend, 133 S. Ct. 1426 (class damages model must measure damages resulting from plaintiffs' theory of liability)
- Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. 1184 (materiality and merits issues need not be resolved at class-certification)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (Rule 23 requires rigorous analysis; commonality/predominance standards)
- Cammer v. Bloom, 711 F. Supp. 1264 (factors commonly used to assess market efficiency)