Opinion ID: 50242
Heading Depth: 1
Heading Rank: 5

Heading: conclusion

Text: 71 In my opinion, the new rule applied by the majority is an unjustified revision of securities class action procedure, based in large part upon the majority's dramatic remolding of this court's already problematic decision in Greenberg. In essence, the majority's revised standard both incorrectly deprives plaintiffs of the benefit of the fraud-on-the-market presumption of reliance afforded them by Basic and inexplicably requires them to prove the separate element of loss causation at the class certification stage. 72 Regardless, however, the majority does not, and cannot, show that the district court abused its discretion in certifying the class in this case, even under the majority's novel rules. The district court carefully considered the evidence before it and concluded that the plaintiffs had established that it was more likely than not that Allegiance's restatement of its line-count numbers caused a significant portion of the subsequent decline in Allegiance's share price. The majority nevertheless finds the district court's decision untenable, and reverses simply because it is not in keeping with the majority's de novo assessment of the conflicting evidence. 73 Because I disagree with both the substance of the majority's new rule and the legal reasoning by which it was derived, and because I can discern no abuse of discretion in the district court's decision, I respectfully dissent. Notes: 1 I have recently argued at length that Greenberg irreconcilably conflicts with both Basic and this court's prior fraud-on-the-market case law. See Regents of the Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372, 401-03 (5th Cir. 2007) (Dennis, J., concurring in the judgment). 2 Unlike this case, Greenberg did not involve a motion for class certification, but was instead an appeal from a grant of summary judgment. See Greenberg, 364 F.3d at 661. 3 In Regents of the University of California, I explained why Greenberg is not a correct interpretation of this court's precedent. See 482 F.3d at 401-03 (Dennis, J., concurring in the judgment). 4 Greenberg purported to find that requirement in this court's earlier decision in Nathenson, which, on a motion to dismiss, held that where the facts properly considered by the district court reflect that the information in question did not affect the price of the stock then the district court may properly deny fraud-on-the-market based recovery. Nathenson, 267 F.3d at 415. As I explained in Regents of the University of California, Nathenson does not actually support the Greenberg panel's decision to give plaintiffs the affirmative burden of showing that the misrepresentation moved the market price. See 482 F.3d at 402 (Dennis, J., concurring in the judgment). 5 Incidentally, it is undisputed, as the majority acknowledges, that Allegiance's share price increased substantially immediately after each of defendants' allegedly false statements about the company's line count See supra at 263. The majority fails utterly to explain why that price movement is insufficient to trigger the fraud-on-the-market presumption under Greenberg. 6 See Dura, 544 U.S. at 341-42, 125 S.Ct. 1627 (In cases involving publicly traded securities and purchases or sales in public securities markets, the action's basic elements include .... (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as `transaction causation,' see Basic, supra, at 248-49, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (non-conclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence); .... and (6) `loss causation,' i.e., a causal connection between the misrepresentation and the loss.). 7 Moreover, I further disagree with the majority to the extent that its opinion can be read to suggest that loss causation can be established only by showing a drop in the market price of the security in response to an explicit corrective disclosure. Although this will frequently be the method through which plaintiffs attempt to prove loss causation, the Dura court specifically refrained from setting rigid requirements as to how plaintiffs might prove loss causation. See Dura, 544 U.S. at 346, 125 S.Ct. 1627 ([W]e find the Ninth Circuit's approach inconsistent with the law's requirement that a plaintiff prove that the defendant's misrepresentation (or other fraudulent conduct) proximately caused the plaintiff's economic loss. We need not, and do not, consider other proximate cause or loss-related questions.). 8 Even in cases where the defendant asserts that loss causation is an individual issue, peculiar to each plaintiff, that defeats the Rule 23 requirements of commonality or predominance, the district court need not require plaintiffs to actually prove loss causation at the class certification stage. Rather, the district court must only find either that all of the plaintiffs can prove loss causation in the same way or that any individual issues do not defeat commonality or predominance