Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-03178/USCOURTS-ca8-14-03178-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-3178

___________________________

IBEW Local 98 Pension Fund, et al.

lllllllllllllllllllll Plaintiffs - Appellees

v.

Best Buy Co., Inc., et al.

lllllllllllllllllllll Defendants - Appellants

___________

Securities Industry and Financial Markets Association;

Chamber of Commerce of the United States

lllllllllllllllllllllAmici on Behalf of Appellants

____________

Appeal from United States District Court 

for the District of Minnesota - Minneapolis

____________

 Submitted: October 22, 2015

 Filed: April 12, 2016

____________

Before LOKEN, MURPHY, and COLLOTON, Circuit Judges.

____________

LOKEN, Circuit Judge.

Appellate Case: 14-3178 Page: 1 Date Filed: 04/12/2016 Entry ID: 4387474 
Best Buy Co., Inc., is a leading retailer of consumer electronic products and

services. Plaintiffs sued Best Buy and three of its executives (collectively,

“defendants”) alleging they violated Rule 10b-5 of the federal securities laws by 1

making fraudulent or recklessly misleading public statements. Plaintiffs alleged that

statements in a press release and ensuing conference call with securities analysts on

September 14, 2010, artificially inflated and maintained Best Buy’s publicly traded

stock price until the misstatements were disclosed when Best Buy reported its

quarterly earnings on December 14. After the district court dismissed claims relating

to the press release, plaintiffs moved to certify their claims relating to the conference

call as a class action. Plaintiffs relied on the fraud-on-the-market presumption to

satisfy the Rule 23 requirement that common questions predominate in proving their

Rule 10b-5 claim. See Basic, Inc. v. Levinson, 485 U.S. 224, 241-47 (1988). 

Defendants contended they rebutted the presumption; plaintiffs responded that

rebuttal evidence was not admissible at the class certification stage. 

The district court stayed the class certification motion until the Supreme Court

resolved that issue in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398,

2414-16 (2014) (Halliburton II). The district court then certified a class consisting

of all purchasers of Best Buy stock between September 14 and December 14, 2010,

concluding that common questions predominate because defendants failed to rebut

the Basic presumption by establishing that the challenged statements did not impact

Best Buy’s publicly-traded stock price. We granted defendants permission to appeal

this interlocutory ruling. See Fed. R. Civ. P. 23(f). Addressing an issue of first

impression, we conclude the district court misapplied the price impact analysis

mandated by Halliburton II and therefore reverse.

See § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b); 1

Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5.

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I. Factual Background.

On September 14, 2010, Best Buy issued a press release summarizing its

reported financial performance for the second quarter of its 2011 fiscal year, which

ended on August 28. The press release, issued at 8:00 A.M., before the stock market

opened, announced that Best Buy was increasing its full-year earnings per share

(EPS) guidance by ten centsto $3.55-$3.70. Best Buy’s common stock (BBY), which

closed the prior day at $34.65, opened at 9:30 A.M at $37.25, up 7.5%. 

At 10:00 A.M. on September 14, Best Buy’s Chief Executive Officer, Brian J.

Dunn, and its Chief Financial Officer, Jim Muehlbauer, held a conference call with

analysts. The call began with a reminder to investors that the executives’ discussion

“may contain forward-looking statements, which are subject to risks and

uncertainties,” and that the company’s SEC filings contained additional information

about these factors. During the call, Muehlbauer said: (1) “looking at the results for

the first half of fiscal 2011, while there are many moving pieces that we manage, like

always, we are pleased that our earnings are essentially in line with our original

expectations for the year”; and (2) “Overall, we are pleased that we are on track to

deliver and exceed our annual EPS guidance.” (Emphases added.) BBY closed on

September 14 at $36.73; 21.3 million shares were traded that day. 

At 8:00 A.M. on December 14, Best Buy issued a press release reporting a

decline in fiscal third quarter sales and announcing that it had reduced the FY 2011

EPS guidance to $3.20-$3.40. In a conference call after the market opened that day,

Dunn and Muehlbauer discussed the “lower than expected” third quarter sales. 

BBY’s price, which had risen after September 14 (though not in a straight line) to

close at $41.70 on December 13, closed at $35.52 on December 14, down 14.8%;

64.7 million shares were traded that day.

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Plaintiffs filed this action on February 18, 2011. On March 20, 2012, the

district court dismissed the Amended Complaint with prejudice, concluding that

plaintiffs failed to allege sufficient facts showing that misrepresentations on

September 14, specifically including the conference call statement that Best Buy was

“on track to deliver and exceed our annual EPS guidance,” were not forward looking

statements protected by the PLSRA’s Safe Harbor provision. The court denied 2

plaintiffs’ request to further amend their complaint. However, in October 2012, after

a further hearing, the court granted plaintiffs’ motion for leave to file a First Amended

Class Action Complaint.

The First Amended Class Action Complaint alleged that defendants made three

actionable false and misleading statements on September 14, 2010: the statement in

the press release increasing Best Buy’s FY 2011 EPS guidance to $3.55-$3.70, and

two statements in the conference call: “we are on track to deliver and exceed our

annual EPS guidance,” and “our earnings are essentially in line with our original

expectations for the year.” In an Order dated August 5, 2013, the district court

dismissed the claimbased on the EPS guidance statement in the press release because

it wasforward-looking and accompanied bymeaningful cautionary statementsinBest

Buy’s Form 8-K and Form 10-K SEC filings. However, the court denied defendants’

motion to dismiss the claim based on the conference call statements because they

were “not forward-looking and are, therefore, actionable as a statement of present

condition.” The court denied defendants’ request to certify that interlocutory ruling

for immediate appeal. Thus, not presently before us is the question whether those

statements, “when read in context, cannot meaningfully be distinguished from the

“The Safe Harbor provision, 15 U.S.C. § 78u-5(c), immunizesfrom[Rule 10b- 2

5] liability any forward-looking statement, provided that: the statement is identified

assuch and accompanied by meaningful cautionary language; or isimmaterial; or the

plaintiff fails to show the statement was made with actual knowledge of its

falsehood.” Institutional Inv’rs Grp. v. Avaya, Inc., 564 F.3d 242, 254 (3d Cir. 2009).

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future projection of which they are a part.” Avaya, 564 F.3d at 255. Plaintiffs then 3

filed the motion for class certification here at issue. 

II. Framing the Price Impact Issue.

Plaintiffs in Rule 10b-5 fraud actions must prove six elements: “(1) a material

misrepresentation or omission by the defendant; (2) scienter; (3) a connection

between the misrepresentation or omission and the purchase or sale of a security; (4)

reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss

causation.” Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 133 S. Ct. 1184, 1192

(2013) (quotation omitted). To be certified, a proposed class must show that

“questions of law or fact common to class members predominate over any questions

affecting only individual members.” Fed. R. Civ. P. 23(b)(3). Defendants contest the

district court’s Rule 23 predominance ruling. A district court abuses its discretion

4

if it certifies a class that does not meet this requirement. Halvorson v. Auto-Owners

Ins. Co., 718 F.3d 773, 780 (8th Cir. 2013). We review the grant of class certification

for abuse of discretion, but review legal questions de novo. In re St. Jude Med., Inc.,

425 F.3d 1116, 1119 (8th Cir. 2005). 

In Basic, 485 U.S. at 245, the Supreme Court observed that requiring each

investor to prove individual reliance on an alleged fraudulent misrepresentation

“would place an unnecessarily unrealistic evidentiary burden on the Rule 10b-5

plaintiff who has traded on an impersonal market,” because each investor would have

As the court said in Gissin v. Endres, 739 F. Supp. 2d 488, 506 (S.D.N.Y. 3

2010), “Defendants’ statement was made during an earnings conference call

discussing the financial results for the preceding quarter . . . . Defendants were not

making guarantees about the present; they were stating their educated guess about

what the preceding quarter’s financial data would mean for the Company’s future.” 

The other often-litigated prerequisites to Rule 23 certification are not at issue. 4

See generally Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2548-51 (2011). 

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to prove “how he would have acted . . . if the misrepresentation had not been made.” 

Concluding this would be contrary to the statutory purpose of protecting investors

trading on well-developed securities markets, the Court held that Rule 10b-5

plaintiffs may invoke a rebuttable fraud-on-the-market presumption of reliance. 

The presumption is based on the theory “that the market price of shares traded

on well-developed markets reflects all publicly available information,” and therefore

“[a]n investor who buys or sells stock at the price set by the market does so in

reliance on the integrity of that price.” Id. at 246-47. The presumption applies if a

Rule 10b-5 plaintiff demonstrates “(1) that the alleged misrepresentations were

publicly known, (2) that they were material, (3) that the stock traded in an efficient

market, and (4) that the plaintiff traded the stock between the time the

misrepresentations were made and when the truth was revealed.” Halliburton II, 134

S. Ct. at 2408; see Basic, 485 U.S. at 248-50. If a defendant rebuts the presumption,

“a Rule 10b-5 suit cannot proceed as a class action” because individual questions of

reliance will predominate over common questions oflaw and fact. Halliburton II, 134

S. Ct. at 2416. Thus, establishing the Basic presumption is critical to a Rule 10b-5

plaintiff’s Rule 23 burden to establish that a class action should be certified. 

Plaintiffs’ motion for class certification relied on Basic’s fraud-on-the-market

presumption to prove the reliance element of their Rule 10b-5 claims. In support,

plaintiffs submitted a report by their expert, Bjorn I. Steinholt, to demonstrate that

Best Buy’s stock traded in an efficient market. Based on an “event study,” he 5

concluded that the BBY stock price increased in reaction to the three allegedly

misleading statements on September 14. However, the report did not differentiate

between the effects of the 8:00 A.M. press release and the 10:00 A.M. conference

call. 

Defendants define an event study as “a regression analysis whichmeasuresthe

5

effect of a publicly reported event on a company’s stock price.”

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Defendants countered with an event study by their expert, Kenneth Lehn, who

found that the price increase on September 14 occurred after the press release but

before the call. As the price before the call was almost identical to the September 14

closing price, Lehn concluded the “on track” and “in line” conference call statements

“had no discernible impact on Best Buy’s stock price.” In response, Steinholt

submitted a revised opinion. He agreed that the conference call statements did not

immediately increase the stock price because “the economic substance” was disclosed

in the press release, and thus “by the time the 2Q11 conference call started, the

economic substance of the alleged misrepresentations was largely reflected in Best

Buy’s stock price.” However, he opined, “even if the 2011 EPS guidance given in

the 2Q11 [press] release is not actionable, this does not mean that investors did not

give it great weight.” He then concluded that the price decline on December 14

demonstrated that the conference call statements fraudulently maintained the BBY

stock price until the “corrective disclosure” on December 14.

Defendants do not contest that the alleged conference call misrepresentations

were publicly made, that Best Buy’s stock traded in an efficient public market, or that

the district court erred in defining the class time period. (The district court removed

from the certified class those who bought BBY stock after the non-actionable press

release but before the conference call.) Materiality is another “essential predicate”

to invoking the fraud-on-the-market presumption. Amgen, 133 S. Ct. at 1195. 

However, the Supreme Court concluded in Amgen, “[b]ecause the question of

materiality is common to the class, and because a failure of proof on that issue would

not result in questions ‘affecting only individual members’ predominating,” the Rule

10b-5 plaintiff “was not required to prove the materiality of [defendant’s] alleged

misrepresentations and omissions at the class-certification stage.” Id. at 1197. 

As Amgen left materiality for the merits stage of a Rule 10b-5 class action, it

is clear that plaintiffs made the prima facie showing required to invoke the

presumption of reliance for the purpose of class certification. But the protracted

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Halliburton litigation clarified that there is an additional question at the class

certification stage -- whether the Rule 10b-5 defendant can rebut the Basic

presumption with evidence showing an absence of price impact, that is, evidence that

“severs the link between the alleged misrepresentation and either the price received

(or paid) by the plaintiff, or his decision to trade at a fair market price.” Halliburton

II, 134 S. Ct. at 2408, quoting Basic, 485 U.S. at 248; see Local 703 v. Regions Fin.

Corp., 762 F.3d 1248, 1259 (11th Cir. 2014). 

In Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (2011)

(Halliburton I), the Supreme Court reviewed a circuit court ruling that Rule 10b-5

plaintiffs must prove loss causation to invoke the Basic presumption. In reversing,

the Court distinguished between price impact (“transaction causation”) and loss

causation. Id. at 2186. The Basic presumption addresses whether the plaintiff

investor relied on defendant’s publicly known misrepresentations “at the time of the

relevant [initial] transaction.” Loss causation, on the other hand, requires plaintiff to

prove that the misrepresentation “also caused a subsequent economic loss” that may

instead have in fact been caused by other factors. Id. (emphasis in original); see

generally Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 343 (2005) (listing factors such

as “changed economic circumstances, changed investor expectations, new industryspecific or firm-specific facts, conditions, or other events”). The Court concluded

that “[l]oss causation has no logical connection to the facts necessary to establish the

efficient market predicate to [Basic’s] fraud-on-the-market theory.” Halliburton I,

131 S. Ct. at 2186.

On remand from Halliburton I, the circuit court affirmed class certification,

concluding that defendant could not use price impact evidence to rebut the

presumption of reliance at the class certification stage because it does not bear on the

Rule 23(b)(3) predominance issue. The Supreme Court granted certiorari to consider

“whether we should overrule or modify Basic’s presumption of reliance and, if not,

whether defendants should nonetheless be afforded an opportunity in securities class

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action cases to rebut the presumption at the class certification stage, by showing a

lack of price impact.” Halliburton II, 134 S. Ct. at 2405. The Court unanimously

vacated the grant of class certification and remanded for further proceedings. 

Addressing the first question, the majority opinion by Chief Justice Roberts declined

to overrule Basic’s fraud-on-the-market presumption of reliance in Rule 10b-5 class

action cases. Id. at 2407-13. Three Justices, concurring in the judgment, concluded

that “Basic should be overruled.” Id. at 2418 (Thomas, J., concurring).

Turning to the second question, the Court partially rejected Halliburton’s

contention thatRule 10b-5 plaintiffs must “prove that a defendant’s misrepresentation

actually affected the stock price -- so-called ‘price impact’ -- in order to invoke the

Basic presumption” at the class certification stage:

Because market efficiency is not a yes-or-no proposition, a public,

material misrepresentation might not affect a stock’s price even in a

generally efficient market. But . . . Basic never suggested otherwise;

that is why it affords defendants an opportunity to rebut the presumption

by showing, among other things, that the particular misrepresentation at

issue did not affect the stock’s market price. 

Id. at 2413-14. The Court then reversed the circuit court’s holding that evidence of

lack of price impact, like evidence of materiality, should be left to the merits stage

because it does not bear on the predominance requirement:

Price impact is different [than materiality]. . . . [T]hat [a

misrepresentation] had price impact . . . is Basic’s fundamental premise. 

It thus has everything to do with the issue of predominance at the class

certification stage. That is why, if reliance is to be shown through the

Basic presumption, the publicity and market efficiency prerequisites

must be proved [by plaintiffs] before class certification.

* * * * *

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Our choice in this case, then, is not between allowing price impact

evidence at the class certification stage or relegating it to the merits. 

Evidence of price impact will be before the court at the certification

stage in any event. The choice, rather, is between limiting the price

impact inquiry before class certification to indirect evidence, or allowing

consideration of direct evidence as well. As explained, we see no reason

to artificially limit the inquiry at the certification stage to indirect

evidence of price impact. Defendants may seek to defeat the Basic

presumption at that stage through direct as well as indirect price impact

evidence. 

. . . [D]efendants must be afforded an opportunity before class

certification to defeat the presumption through evidence that an alleged

misrepresentation did not actually affect the market price of the stock.

Id. at 2416-17. In a brief concurring opinion, three Justices noted that “the Court

recognizes that it is incumbent upon the defendant to show the absence of price 

impact.” Id. at 2417 (Ginsburg, J., concurring).

III. Discussion.

On August 6, 2014, after awaiting the decision in Halliburton II, the district

court granted plaintiffs’ motion for class certification. The court recognized that

Halliburton II permits Rule 10b-5 defendants to rebut the fraud-on-the-market

presumption at the class certification stage with evidence of no price impact but

concluded that defendants did not adequately rebut the presumption. The court

agreed with expert Steinholt’s revised opinion: “Even though the stock price may

have been inflated prior to the earnings phone conference,” the court reasoned, “the

alleged misrepresentations could have further inflated the price, prolonged the

inflation of the price, or slowed the rate of fall.” The court held that “price impact

can be shown by a decrease in price following a revelation of the fraud,” and 

defendants “have not offered evidence to show that Best Buy’s stock price did not

decrease when the truth was revealed.” 

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We agree with the district court that, when plaintiffs presented a prima facie

case that the Basic presumption applies to their claims, defendants had the burden to

come forward with evidence showing a lack of price impact. See Fed. R. Evid. 301

(“the party against whom a presumption is directed has the burden of producing

evidence to rebut the presumption”). But what the district court ignored, in our view,

isthat defendants did present strong evidence on thisissue -- the opinion of plaintiffs’

own expert. Steinholt opined that the “economic substance” of the non-fraudulent

press release statements and the alleged misrepresentations in the immediately

following conference call was “virtually the same,” and that the two “would have

been expected to be interpreted similarly by investors.” His event study showed that

the forward-looking EPS guidance in the press release had an immediate impact on

the BBY market price, whereas the confirming statements in the conference call two

hours later had no additional price impact. 

Steinholt opined that investors gave the EPS guidance in the press release

“great weight.” Combined with the absence of further price impact following the

conference call, this was direct evidence that investors did not rely on the executives’

confirming statements two hours later. Defendants’ expert, Lehn, agreed with this

analysis. And it is consistent with common sense. In the September 14 conference

call, CFO Muehlbauer said Best Buy was “on track” to meet the EPS guidance

announced just two hours earlier. This was not a case where a third party

professional confirmed the accuracy of a company’s inaccurate financial statements,

as in McIntire v. China MediaExpress Holdings, Inc., 38 F. Supp. 3d 415, 434

(S.D.N.Y. 2014). Earnings projections are statements of what a company is “on

track” to do; thus, the Best Buy executives’ conference call statements added nothing

to what was already public. As in In re Moody’s Corp. Securities Litigation, 274

F.R.D. 480, 493 (S.D.N.Y. 2011), “Plaintiffs’ own expert conclude[d] that there is no

link between the price of[Best Buy’s]stock and any ofthe alleged misrepresentations

because these misrepresentations just reflected the ‘status quo.’”

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This overwhelming evidence of no “front-end” price impact rebutted the Basic

presumption. Plaintiffs’ contrary theory -- that the conference call statements effected

a gradual increase in stock price between September and December -- was contrary

to the efficient market hypothesis on which the Basic presumption of reliance is

based. See, e.g., In re Xcelera.com Sec. Litig., 430 F.3d 503, 508 (1st Cir. 2005) (an

efficient market rapidly reflects all publicly available information). Plaintiffs further

argued, and the district court agreed, that BBY’s price drop after the December 14

“corrective disclosure” was evidence of the requisite price impact -- maintaining an

inflated stock price. Cf. FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282,

1314 (11th Cir. 2011); Schleicher v. Wendt, 618 F.3d 679, 683 (7th Cir. 2010). But

that theory provided no evidence that refuted defendants’ overwhelming evidence of

no price impact. The allegedly “inflated price” was established by the non-fraudulent

press release. Expert Steinholt attributed the entire September 14 price impact to the

non-fraudulent EPS guidance in the press release. The substance of the conference

call statementstwo hours later was “virtually the same” and had no immediate impact

on that price, impact the Basic presumption would otherwise presume. 

A district court abusesits discretion if itfailsto conduct the “rigorous analysis”

Rule 23 requires. Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567, 569 (8th Cir.

2015) (quotation omitted). The court “must conduct a limited preliminary inquiry,

looking behind the pleadings” to determine whether common issues predominate,

which “extends to the resolution of expert disputes concerning the import of

evidence.” Blades v. Monsanto Co., 400 F.3d 562, 566, 575 (8th Cir. 2005). “The

class determination generally involves considerations that are enmeshed in the factual

and legal issues comprising the plaintiff’s cause of action.” Wal-Mart, 131 S. Ct. at

2551-52 (quotation and alteration omitted). Here, defendants rebutted the Basic

presumption by submitting direct evidence (the opinions of both parties’ experts) that

severed any link between the alleged conference call misrepresentations and the stock

price at which plaintiffs purchased. As plaintiffs presented no contrary evidence of

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price impact, they failed to satisfy the predominance requirement of Rule 23(b)(3),

and the district court abused its discretion by certifying the class.

IV. Conclusion.

The district court’s Order dated August 6, 2014, is reversed and the case is

remanded for further proceedings not inconsistent with this opinion.

MURPHY, Circuit Judge, dissenting.

Because the majority has misapplied the presumption of reliance standard at

this class certification stage, I dissent. In order to show reliance atsuch a stage IBEW

Local 98 Pension Fund (IBEW) would have to demonstrate "(1) that [Best Buy's]

alleged misrepresentations were publicly known, . . . [2] that the stock traded in an

efficient market, and [3] that the plaintiff traded the stock between the time the

misrepresentations were made and when the truth was revealed." Halliburton Co. v.

Erica P. John Fund, Inc. (Halliburton II), 134 S. Ct. 2398, 2408 (2014); see also

Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194–97 (2013). 

As the majority has recognized, "it is clear that plaintiffs made the prima facie

showing required to invoke the presumption of reliance for the purpose of class

certification." Best Buy could have rebutted that presumption by producing evidence

that "sever[ed] the link between the alleged misrepresentation and either the price

received (or paid) by the plaintiff, or his decision to trade at a fair market price." 

Halliburton II, 134 S. Ct. at 2408 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 248

(1988)). A securities fraud plaintiff typically alleges that a misrepresentation

fraudulently increased the stock price on the day the statement was made. See, e.g.,

Erica P. John Fund, Inc. v. Halliburton Co. (Halliburton I), 131 S. Ct. 2179, 2183

(2011). That presumption can then be rebutted by evidence showing that the

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misrepresentation did not increase the stock price. See Halliburton II, 134 S. Ct. at

2415. 

IBEW has relied in this case on a "price maintenance" theory. It contends that

Best Buy disclosed "confirmatory information" on September 14 which fraudulently

maintained its stock at a constant price and counteracted expected price declines. See

e.g., FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1313–15 (11th Cir.

2011). Similar cases have been recognized as cognizable by at least two other circuit

courts. See e.g., id.; Schleicher v. Wendt, 618 F.3d 679, 683–84 (7th Cir. 2010). 

Neither the Supreme Court nor any circuit court has however discussed the type of

showing needed to rebut such a presumption of reliance in a price maintenance case. 

The Supreme Court has had reason to explain that the "'fundamental premise'

underlying the presumption 'is that an investor presumptively relies on a

misrepresentation so long as it was reflected in the market price at the time of his

transaction.'" Halliburton II, 134 S. Ct. at 2414 (quoting Halliburton I, 131 S. Ct. at

2186). 

If the misrepresentation were not reflected in the market price, "Basic's

fraud-on-the-market theory and presumption of reliance collapse." See id. The

reason a misrepresentation in a price maintenance suit is presumed to be reflected in

the market price of the stock is because the stock's price was fraudulently prevented

from declining. See e.g., FindWhat, 658 F.3d at 1313–15. In this case Best Buy

could have rebutted the presumption of reliance by producing evidence showing that

the alleged misrepresentations had not counteracted a price decline that would

otherwise have occurred. Best Buy produced no such evidence, and the presumption

was not rebutted.

The majority ignores IBEW's theory that the conference call statements

prevented the stock price from declining and focuses instead on its additional theory

that the "statements effected a gradual increase in stock price between September and

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December." The majority rejects this gradual increase theory because it views it as

contrary to the efficient market hypothesis and because Best Buy's stock price was

inflated by the September 14 press release rather than the two statements made during

the conference call later that day. That analysis may be correct, but it does not

address IBEW's theory that the conference call maintained Best Buy's stock price at

its inflated level. The majority has thus not joined the circuit courts that have

recognized price maintenance theories to be cognizable under the Securities

Exchange Act. 

Finally, the majority claims that Best Buy rebutted IBEW's presumption of

reliance because the company's statements during the conference call were "virtually

the same" as those made in its press release earlier that morning. Best Buy's press

release stated that it had increased its earnings per share (EPS) guidance by ten cents. 

In the conference call defendants stated: (1) "We are on track to deliver and exceed

our annual EPS guidance;" and (2) "our earnings are essentially in line with our

expectations for the year." As the district court correctly noted, the statements in the

conference call were not identical to those in the press release because the conference

call also contained "statements of current facts reflecting upon Best Buy's current

position and historical performance up until that point in the fiscal year." 

By contrast, the press release contained forward looking numerical projections. 

The majority's claim that the company's statements during the call and in the press

release were nearly identical is thusfactually incorrect. Moreover, we are foreclosed

by Supreme Court precedent from considering at thisstage whether these conference

call statements, when viewed by a reasonable investor, "significantly altered the 'total

mix' of information made available," because this is a materiality question. 

Halliburton II, 134 S. Ct. at 2413 (quoting Basic, 485 U.S. at 231-32). Defendants

can of course proceed to present evidence at the summary judgment stage regarding

the materiality of the statements made during the conference call.

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Since the district court did not err in certifying the class, its decision should be

affirmed.

_____________________

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