Document: 485 U.S. 224 108 S.Ct. 978 99 L.Ed.2d 194 BASIC INCORPORATED, et al., Petitioners,v.Max L. LEVINSON, al. No. 86-279. Argued Nov. 2, 1987. Decided March 7, 1988. Syllabus The Securities and Exchange Commission's Rule 10b-5, promulgated under § 10(b) of the Act 1934 (Act), prohibits, in connection with purchase or sale any security, making untrue statement a material fact omission that would render statements made not misleading. In December 1978, Combustion Engineering, Inc., Basic Incorporated agreed to merge. During preceding two years, representatives companies had various meetings conversations regarding possibility merger; during time three public denying merger negotiations were taking place it knew corporate developments account for heavy trading activity its stock. Respondents, former shareholders who sold their stock between Basic's first denial suspension just prior announcement, filed class action against some directors, alleging been false misleading, violation respondents injured by selling shares at prices artificially depressed those statements. District Court certified respondents' class, but granted summary judgment petitioners on merits. Appeals affirmed certification, agreeing "fraud-on-the-market" theory, reliance petitioners' misrepresentations could be presumed, thus common issues predominated over questions pertaining individual plaintiffs. reversed grant remanded, rejecting Court's view preliminary discussions are immaterial as matter law, holding even might otherwise have material, become so virtue existence. Held: 1. standard set forth TSC Industries, Inc. v. Northway, 426 438, 96 2126, 48 757 (1976), whereby an omitted is if there substantial likelihood disclosure considered significant reasonable investor, expressly adopted 10b-5 context. Pp. 230-232. 2. "agreement-in-principle" test, which do until would-be partners reached agreement price structure transaction, rejected bright-line materiality test. Its policy-based rationales justify exclusion information from definition materiality. 232-236. 3. Appeals' concerning insignificant becomes solely because affirmative existence also rejected: requires misleading fact. 237-238. 4. Materiality context depends probability transaction will consummated, significance issuer securities. Thus, facts determined case-by-case basis. 238-241. 5. courts below properly applied presumption reliance, supported part fraud-on-the-market instead requiring each plaintiff show direct Such relieves unrealistic evidentiary burden, consistent with, supportive of, Act's policy full fostering market integrity. sense probability: investor trades impersonal does integrity price. Because most publicly available reflected price, investor's may presumed purposes action. 241-247. 6. rebutted: defendants attempt was affected misrepresentation, did trade 248-249. 786 F.2d 741 (CA6 1986), vacated remanded. BLACKMUN, J., delivered opinion Court, BRENNAN, MARSHALL, STEVENS, JJ., joined, Parts I, II, III WHITE O'CONNOR, joined. WHITE, concurring dissenting part, post, p. ----. REHNQUIST, C.J., SCALIA KENNEDY, took no consideration decision case. Joel W. Sternman, New York City, petitioners. Wayne A. Cross, respondents. Justice BLACKMUN Court. 1 This case us apply requirement 1934, (1934 Act), Stat. 881, amended, 15 U.S.C. 78a seq. 17 CFR 240.10b-5 (1987), thereunder, discussions. We must determine whether person traded corporation's securities exchange after issuance materially corporation invoke rebuttable that, trading, he relied market. 2 * Prior 20, company primarily engaged business manufacturing chemical refractories steel industry. As early 1965 1966, producing mostly alumina-based refractories, expressed interest acquiring Basic, deterred pursuing this inclination seriously antitrust concerns then entertained. See App. 81-83. 1976, however, regulatory opened way renewal Combustion's interest.1 "Strategic Plan," dated October 25, Industrial Products Group included objective: "Acquire $30 million." 337. 3 Beginning September telephone officers including here,2 merger.3 1977 negotiations.4 On 18, asked Stock suspend issued release stating "approached" another merger. Id., 413. 19, board endorsed offer $46 per share stock, id., 335, 414-416, following day announced approval tender all outstanding shares. 4 Respondents 21, 1977, before 1978. brought asserting thereby 10b-5. alleged they thereon. 5 members upon enabled court conclude law particular Fed.Rule Civ.Proc. 23(b)(3). therefore class.5 merits, defendants. It held misstatements immaterial: ongoing statement, although when second third issued, "destined, certainty, principle." Pet. Cert. 103a. 6 United States Sixth Circuit judgment, remanded (1986). reasoned while general duty disclose Combustion, voluntarily released " 'so incomplete mislead.' 746, quoting SEC Texas Gulf Sulphur Co., 401 833, 862 (CA2 1968) (en banc), cert. denied, sub nom. Coates SEC, 394 976, 89 1454, 22 756 (1969). view, where place, activity, With respect materiality, argument "once discussions, absence make untrue." F.2d, 749. 7 joined number other Circuits accepting "fraud-on-the-market theory" create misrepresentations, noting without impractical certify Federal Civil Procedure 750-751. 8 certiorari, 479 1083, 107 1284, 94 142 resolve split, see Part III, infra, among Courts applicable certifying rather than member II 9 designed protect investors manipulation prices. S.Rep. 792, 73d Cong., 2d Sess., 1-5 (1934). Underlying adoption extensive requirements legislative philosophy: "There cannot honest markets publicity. Manipulation dishonest practices thrive mystery secrecy." H.R.Rep. 1383, 11 "repeatedly has described 'fundamental purpose' implementing 'philosophy disclosure.' Santa Fe Green, 430 462, 477-478, 97 1292, 1303, 51 480 (1977), Capital Gains Research Bureau, 375 180, 186, 84 275, 280, 237 (1963). 10 Pursuant authority Act, 78j, Commission 10b-5.6 Judicial interpretation application, acquiescence, passage removed doubt private cause exists constitutes essential tool enforcement requirements. See, e.g., Ernst & Hochfelder, 425 185, 196, 1375, 1382, 47 668 (1976); Blue Chip Stamps Manor Drug Stores, 421 723, 730, 95 1917, 1923, 44 539 (1975). previously addressed positive common-law supra ("manipulative deceptive" statute); ("in sale" Rule); Dirks 463 646, 103 3255, 77 911 (1983) (duty disclose); Chiarella States, 445 222, 100 1108, 63 348 (1980) (same); (scienter). Carpenter 484 316, 98 275 (1987) (confidentiality). explicitly defined laws, concluding proxy-solicitation "[a]n shareholder consider important deciding how vote." 449, S.Ct., 2132.7 Acknowledging certain well "dubious significance," 448, 2132, careful too low materiality; concerned minimal bring overabundance within reach, lead management "simply bury avalanche trivial information—a result hardly conducive informed decisionmaking." 448-449, 2132. further explained fulfill "there viewed having significantly altered 'total mix' available." now adopt Industries context.8 12 application self-evident. Where impact development target's fortune clear, admits straightforward application. Where, hand, event contingent speculative nature, difficult ascertain "reasonable investor" time. Merger negotiations, ever-present contemplated effectuated, fall into latter category.9 13 Petitioners urge Third test resolving difficulty.10 Brief 20-22. Under approach, partners. Greenfield Heublein, 742 751, (CA3 1984), 469 1215, 105 1189, 336 (1985). By definition, then, yet agreement-in-principle stage withheld misrepresented 14 Three offered support derives concern overwhelmed excessively detailed information, focuses risk collapse: such inherently tentative, itself mislead foster optimism. 756; Reiss Pan American World Airways, 711 11, 1983). justifications based concerns: limits scope obligations, helps preserve confidentiality earlier prejudice negotiations; provides usable, rule determining made. 757; Flamm Eberstadt, 814 1169, 1176-1178 (CA7), 853, 157, 112 (1987). None these rationales, purports explain why drawing line reflects decision. rationale, only one connected stands soundly rejected, accepted wisdom "It assumes nitwits, unable appreciate—even told—that mergers risky propositions up closing." 1175. Disclosure, paternalistic withholding accurate chosen Congress. recognized again, "fundamental purpose" Acts, "was substitute philosophy caveat emptor achieve high ethics industry." U.S., 280. Accord, Affiliated Ute Citizens 406 128, 151, 92 1456, 1471, 31 (1972); 477, 1303. role "attribute child-like simplicity, inability grasp probabilistic negotiations," 1175, filter out essentially useless significant, larger "mix" factors his investment 16 importance secrecy stages seems irrelevant assessment investor. To avoid "bidding war" target, firm often insist remain confidential, see, re Car- nation Release 22214, 33 S.E.C. Docket 1025 (1985), least stated "silence pending settlement deal beneficial investors, time." 1177.11 need ascertain, necessarily maximizes wealth—although we note proposition disputed theory empirical research12—for timing disclosure; accuracy completeness.13 face here narrow question status Arguments premise "premature" more rubric issuer's disclose. "secrecy" rationale simply inapposite 18 final justification directed comfort managers. A indeed easier follow exercise light circumstances. But ease alone excuse ignoring Acts Congress' decisions. Any approach designates single occurrence always determinative fact-specific finding overinclusive underinclusive. explained: "The determination [of materiality] delicate assessments inferences 'reasonable shareholder' draw given him. . ." 450, 2133. After much study, Advisory Committee Corporate Disclosure cautioned administratively confining rigid formula.14 heed advice. 19 find valid excluding merely parties representatives. B 20 today, taken literally, equally insensitive, our distinction elements 10b-5: 21 "When whose makes did, 'no negotiations' underway, knows reason stock's activity,' 'management unaware present abnormally acquisition 23 ". analyzing affirmatively disclosed progress primary considerations. However, once 748-749 (emphasis original).15 24 fails recognize order prevail claim, enough incomplete, insignificant. C 25 Even Second events, manner gave term meaning independent provisions Rule. circumstances, "will depend balancing both indicated occur anticipated magnitude totality activity." 849. Interestingly, neither adopting nor take issue standard. Rather, suggest good reasons structure. 26 subsequent decision, late Judge Friendly, writing panel, probability/magnitude specific negotiations. acknowledging something basis case, stated: 27 "Since bought can small life, wit, death, think inside regards sort, lesser transactions—and though mortality rate formative doubtless high." Geon 531 39, 47-48 (1976). agree analysis.16 28 Whether facts. Generally, assess occur, factfinder look indicia highest levels. Without attempting catalog possible factors, example resolutions, instructions bankers, actual principals intermediaries serve interest. allegedly manipulated, size entities potential premiums value. No factor short closing either necessary sufficient material.17 29 clarify information.18 inquiry endorse assessing negotiations.19 differs used below, remand reconsideration appropriate record.20 IV 30 turn theory. Succinctly put: fraud hypothesis open developed market, company's business. Misleading defraud purchasers directly rely misstatements. causal defendants' plaintiffs' less misrepresentations." Peil Speiser, 806 1154, 1160-1161 1986). 32 Our task, course, validity proper Cf. comments dissent, 252-255. required resolution several falsity nature presence scienter, any. amended complaint, named plaintiffs created Amended Complaint C79-1220 (ND Ohio), &Par; 27, 29, 35, 40; ¶ (alleging effect statements). Requiring proof individualized proposed effectively prevented proceeding action, since ones. found provided "a practical problem substantive cases procedural requisites [Federal Procedure] 23." concluded reference shares, questions, Rules 23(a)(2) (b)(3). 34 amici complain eliminates claim prove reliance. They long element fraud, Restatement (Second) Torts 525 (1977); Keeton, D. Dobbs, R. Owen, Prosser Keeton Law (5th ed. argue analogous express right includes requirement, 18(a) 78r(a), implied 10(b). 35 206, 1387 (quoting Senate Report). Reliance requisite defendant's misrepresentation plaintiff's injury. Wilson Comtech Telecommunications Corp., 648 88, 1981); List Fashion Park, 340 457, 462 (CA2), denied Lerner, 382 811, 86 23, 60 (1965). There is, demonstrate connection. Indeed, dispensed breached, nexus injury wrongful conduct established. 153-154, 1472. Similarly, require omissions proxy decisively voting, solicitation itself, defect materials, served link transaction. Mills Electric Auto-Lite 396 375, 384-385, 90 616, 621-22, 593 (1970). 36 modern markets, literally involving millions changing hands daily, differ face-to-face transactions cases,21 understanding 10b-5's encompass differences.22 37 "In transactions, subjective pricing interposed seller buyer and, ideally, transmits processed form Thus performing valuation process performed acting unpaid agent informing him it, value worth price." LTV Litigation, 88 F.R.D. 134, 143 Tex.1980). 38 1161 ("In dissemination typically affects generally reflection value"); Blackie Barrack, 524 891, 908 (CA9 1975) ("[T]he same adequately established indirectly, coupled purchaser ordinarily seek loss inflated stock"), 429 816, 57, 50 75 39 Presumptions assist managing circumstances proof, another, rendered difficult. Louisell C. Mueller, Evidence 541-542 (1977). presumption, subject rebuttal petitioners, persons done fraudulently depressed. state facts, i.e., acted disclosed, 1472, made, Sharp Coopers Lybrand, 649 175, 188 1981), 455 938, 102 1427, 71 (1982), unnecessarily burden 385, 622. 40 Arising considerations fairness, policy, probability, judicial economy, presumptions useful devices allocating burdens parties. E. Cleary, McCormick 968-969 (3d 1984); Evid. 301 Notes, U.S.C.App., 685. employed facilitating litigation, supports, congressional embodied Act. drafting Congress enacted legislation facilitate markets: 41 "No speculator, safely buy sell exchanges intelligent forming buys sells. idea free built competing judgments buyers sellers fair security brings [sic] about situation nearly Just artificial tends upset true function hiding secreting obstructs operation indices real value." 11. 42 Lipton Documation, 734 740, 748 (CA11 1132, 814, 83 807 (1985).23 43 probability. Recent studies tended confirm well-developed hence, misrepresentations.24 noted "it hard imagine ever Who knowingly roll dice crooked crap game?" Schlanger Four-Phase Systems 555 F.Supp. 535, 538 (SDNY 1982). every disseminated impersonal, securities, presumed.25 Commentators applauded variation theory.26 An sells therefore, "made public, [respondents] efficient district court, threshold proving loss." 751.27 acknowledged rebut giving rise distortion despite knowing false. 750, n. 45 showing severs received (or paid) plaintiff, For example, "market makers" privy truth broken: transmitted through gone.28 if, fraudulent manipulate news credibly entered dissipated effects misstatements, corrective indirect fraud.29 divested themselves relying believed consequently underpriced, nevertheless unrelated concerns, problems, political pressures divest businesses, said manipulated. V summary: 46 specifically adopt, context, reject "agreement-in-principle structure" "information it." 49 inappropriate That rebuttable. 7. certification adjustment, any, developing demand. 52 vacated, proceedings opinion. 53 ordered. 54 Chief Justice, SCALIA, KENNEDY 55 whom O'CONNOR joins, part. 56 I join I-III opinion, should actions dissent remainder 57 compared relatively youthful cause-of-action 10(b), Kardon National Gypsum 69 512 (ED Pa.1946), mere babe.1 Yet embraces sweeping confidence usually reserved mature legal doctrines. doing, fear many adverse, unintended interpreted years come. 58 At outset, portions am agreement. Most importantly, rejects version heretofore courts,2 equates "causation" "reliance," permits recovery claims harmed notwithstanding Ante, 248. left content all, capable being rebutted "rely" decides, months advance stock; price; actually "short" days made—surely none people Yet, federal allowed stand variety theory.3 59 Happily, majority puts rest prospect nonrebuttable worse, allowing "affirmative evidence nonreliance," Zweig Hearst 594 1261, 1272 1979) (Ely, dissenting)—would convert scheme insurance." Shores Sklar, 647 469, (CA5 1981) 459 1102, 722, 74 949 (1983). Rule, result. attempts limit endorses pitfalls revealed previous uses lower broader versions Confusion contradiction rulings inevitable traditional analysis replaced economic theorization courts. 61 general, doctrines we, judges, familiar: deceit. 471-477, 1299-1302, extended civil liability reach permitted, ante, 224, 22, retained familiar principles guideposts. Herman MacLean Huddleston, 389-390, 683, 691, 548 proved adept evolving jurisprudence manner. staff economists, experts schooled "efficient-capital-market hypothesis," ability studies, equipped embrace novel constructions statute contemporary microeconomic theory.4 62 "wrong turns" decisions implicitly going far ample illustration dangers theories replace rules recovery. today ventures area beyond expertise, beyond—by own admission—the confines cases. 243-244. "modern daily" "understanding requirement" changed, ibid., prefer changes come amending Congress, superior resources better task global financial notions modified. choosing fear, embarks course genuinely understand, consequences foresee.5 economists' underpin appeal mathematical exactitude scientific are—in end—nothing consideration. earnest advocates this. Easterbrook, Afterword: Knowledge Answers, 85 Colum.L.Rev. 1117, 1118 states reaching modest assumptions professionals generally" jobs, prices, 246, position aptly describe functioning 64 Consequently, effort reconfigure recent theories, fit what perceives new realities markets. leave others job we. 65 bottom conclusion sustains assumption individuals "on price" buying "impersonal, market[s] securities." 247. prepared accept (as understanding) response goes further. "presumption reliance," rely—not price—but "integrity aspect mystifies me. 66 define price," quotes approvingly entitled 'rely value.' 244 1986)). phrase eludes me, suggests stocks "true value" measurable While scholastics medieval times professed means commodity's "worth,"6 similarly equipped. 67 "value"—knowable distinct stock—investors "reflection [this] "many believe inaccurately worth." Black, Fraud Market: Criticism Dispensing Requirements Certain Open Market Transactions, N.C.L.Rev. 435, (1984) added). If really "value," never sell, (given cost associated executing transaction). few ago: "[I]nvestors act inevitably inaccurate [consequently] winners losers; 'lost' defrauded." 667, 3268, allows recover little been.7 68 propose retreat protections cases, provide investors. extension closer insurance scheme, passed today. abstain doing so. troubling extent inferred contrary reaches. 70 past, scant history led intent endeavor discern causes 204-206, 1386-87, similar undertaking reveals flatly provision Section 78r(a). When predecessor section initial draft "who shall purchased [misleading] statement." S. 2693, 17(a) initially drafted, precursor permitted suits misrepresentation: closely akin 72 roundly criticized hearings failed include "reliance" requirement.8 Subsequent drafts modified original proposal, debates redrafted bill, then-Chairman House Committee, Representative Sam Rayburn, "bill originally written very challenged ground required. objection met." 78 Cong.Rec. 7701 Moreover, quoted revised provision, emphasized strict prerequisite supra, (citing 12-13 (1934)). 73 meaningful majority's eviscerates negates ignores strong preference laws display widespread distribution congressionally numerous varied scheme. §§ 78m, 78o(d) (1982 Supp. IV). observers field odds favoring disclosure. N.C.L.Rev., 457-459. conflict jurist give force former: 76 "[D]isclosure crucial function. [T]he intended put help disclosures obligated make. system furthered monetary refuse themselves. say read disclosures, pay attention method objective defeated." 483 (Randall, dissenting). surprise, voices calling acceptance favor dismantling mandates choice preserving effective trumpeting hypothesis, spoken clearly—favoring current prodisclosure policy. interpreting Finally, exceedingly poor candidate illustrate illogic achieved theory's 79 14-month period. period began, $20 (at time, all-time high); last got share. 363, 423. indisputable virtually money her 80 oddities applying manifest. First, lengthy—both precedent cases.9 discuss margin, apt hypothesis. 81 Second, petitioner officials troublesome purpose manipulating engage underhanded period, appear whatsoever. 27a. amicus argues "[i]mposition damages defendant Counsel Association Amicus Curiae 13. fact, committed issue. 736, 8, 1926 And square 10(b)'s prohibits "in security." 78j(b) 82 Third, peculiarities kinds able order, 123a-126a; 228—229, 5, potentially (October 1977), nonetheless heard misstatement disbelieved it—i.e., someone thinking false—may still plaintiff-class remand. How undertook stock-investing strategy—and $10 (if 15, 1978)—can "defrauded" "integrity" me.10 speculators uncommon, 125a. casual observer almost inescapable "materially misleading." Despite hit record-high quite like Casca's disbelief Caesar's "thrice refusal" Crown,11 clever skeptical denials talks on. savviest savvy, (between 1978).12 hearing won actions? suspect "lead large judgments, payable innocent benefit lawyers." 867 banc) (Friendly, concurring), "inexorably broadening plaintiff[s] sue ultimately harm good." 747-748, 1931. 214, 1391; Ultramares Corp. Touche, 255 N.Y. 170, 179-180, 174 N.E. 441, 444-445 (1931) (Cardozo, C.J.). bitter harvest likely reaped seeds sewn sum, embracement represents departure ill suited commence—and control proceeds. result, respectfully dissent. known Kaiser-Lavino proceedings, Trade 1976 basic separate nonbasic acidic alumina refractories; remove barrier subsidiary. 12, Initial Decision Administrative confirmed position. Kaiser Aluminum Chemical 93 F.T.C. 764, 771, 809-810 (1979). 741, 745 addition directors 1979: Anthony M. Caito, Samuel Eels, Jr., John Gelbach, Harley Lee, Max Muller, H. Chapman Rose, Edmund G. Sylvester, Wilson, Jr. Another director, Mathew J. Ludwig, party died July 17, 1986, here. ii. disposition characterization await remand, item appeared Cleveland Plain Dealer: "[Basic] President Muller He Flintkote recently Wall Street rumors $25 Cleveland-based maker 363. reply Exchange, increased "management fluctuation experienced past days." 401. November 6, "Nine Months Report 1978." "With regard Company's volume fluctuations months." 403. sought represent 1, extending date commenced. subsequently excluded them 1978 123a-124a, close Friday, 137a. relevant provides: unlawful person, use instrumentality interstate commerce, mails facility national exchange, "(b) omit ., arose 14(a), 78n(a), 14a-9, 240.14a-9 14(a) disputed. 12; 30, 10; McGrath Zenith Radio 651 458, 466, 454 835, 136, 114 (1981), Goldberg Meridor, 567 209, 218-219 434 1069, 1249, 771 (1978). address earnings forecasts projections. Hiler, Courts' Approach Earnings Projections, Asset Appraisals, Other Soft Information: Old Problems, Changing Views, Md.L.Rev. 1114 Staffin Greenberg, 672 1196, 1207 1982) (defining triggered reached); 751 1984) (applying inquiry), Citing Staffin, obligation events related 13-14 Seventh 1174-1179 (describing structure), unclear reveal Reasoning backwards goal efficiency, "Rule off. 1177. Brown, Secrecy, Laws, Ongoing Negotiations, Cath.U.L.Rev. 93, 145-155 (1986); Bebchuk, Case Facilitating Competing Tender Offers, Harv.L.Rev. 1028 (1982); 1177, scholarly debate). Carnation 1025, 1030 (1985) ("The complete overemphasized. completeness statements, invest, reducing liquidity detriment issuers alike"). ("Rule violated whenever assertions here, reasonably calculated influence investing mislead. ."), "Although believes ideally desirable absolute certainty concept, illusory unrealistic. concept judgmental translate numerical formula. Committee's advice [SEC] quest continue problems identified." Interstate Foreign Commerce, Commission, 95th 1st 327 (Comm.Print 1977). Subsequently, petition rehearing en banc 144a. Concurring separately, Wellford, panel members, panel's "conclusive undisclosed claimed discussions." 145a. Ibid. highly fact-dependent Sulphur. explains: immediate takes place." 10. SEC's insights helpful, accord due deference. 10, actionable, Silence, absent disclose, comment" functional equivalent silence. Listed Company Manual 202.01, reprinted CCH Fed.Sec.L.Rep. 23,515 (premature announcement delayed adequate maintained); Guide 401-405, 23,124A-23,124E (similar provisions). suggested practices, "no tantamount admission underway. 1178. hold truthfully issuing midst are, policies firms adopt; advise kind practice follow, range law. Perhaps creating exception founded philosophy, complying regulation "bad business," 1182 (opinion part). statute, history, varying depending insiders profited. Pavlidis England Patriots Football Club, 737 1227, 1231 (CA1 ("A shareholder's insider, insider profit it"); cf. Aaron 446 680, 1945, 1953, 611 ("[S]cienter regardless identity relief sought"). (and making) indication 851; General Portland, LaFarge Coppee S.A., [1982-1983] 99,148, 95,544 Tex.1981) [Available WESTLAW, 1981 WL 1408]. agree, "[i]n favored few, different inaccuracy press release." 1976). Devising standards situations abrogation breached), covering (but mislead), collapse duties. Shapiro, 494 1301, 1306-1307 1974) (in projected increase share, probable); Holmes Bateson, 583 542, 558 1978) (merger point discussing terms); Gaspar, [1984-1985] 92,004, pp. 90,977-90,978 1985) 1985 521] proceed offer); Dungan Colt 532 832, 837 Ill.1982) (fact exploring material); Ins. Co. Equitable 493 721, 744-745 Va.1980) four reached). Susquehanna 423 1075, 1084-1085 1970) (holding "unilateral negotiate" target repudiated later); Berman Gerber 1310, 1316, 1318 (WD Mich.1978) (mere "overtures" immaterial). reading developments" 4, focused aware leaks 747. Comment, Preliminary Negotiations Wash.L.Rev. 81, 82-84 (noting prevalence demonstrating immediately announcements "rule, exception"). natural one, emphasizing management's knowledge opposed leaks) unusual activity. 92-93; 862-863. 726 [the tort nondisclosure], peculiar limitations, historical, great bargaining Consequently colored considerable distrustful adversaries") (footnote omitted). Actions deceit claims, 744-745, 1929-30, (1975), add 388-389, 690-91, Contrary dissent's suggestion, incentive "pay attention" issuers' comes motivation profit, consistently expectations, calls "dismantling disclosure." 259. 144 Tex.1980) studies); Fischel, Use Modern Finance Theory Cases Involving Actively Traded Securities, Bus.Law. (1982) literature efficient-capital-market theory); Dennis, Efficient Model: Recipe Total Mix, Wm. Mary L.Rev. 373, 374-381, (1984). adjudication economists social scientists debated sophisticated statistical companies, affecting 1986); Harris Union 787 355, 367, (CA8), 823, 94, 740 (1985); T.J. Raney Sons, Fort Cobb, Oklahoma Irrigation Fuel Authority, 717 1330, 1332-1333 (CA10 1983), Linde, Thomson, Fairchild, Langworthy, Kohn Van Dyke 465 1026, 104 1285, 687 (1984); Panzirer Wolf, 663 365, 367-368 Price Waterhouse Panzirer, 1027, 434, Ross A.H. Robins 607 545, 553 1979), 946, 2175, 802 (1980); 905-908 1975), 435 Note, Fraud-on-the-Market Theory, 1143 Emerging Recovery Geo.Wash.L.Rev. 627 (1982). allege prove: (1) misrepresentations; (2) material; (3) market; (4) induce reasonable, misjudge shares; (5) revealed. 750. Given today's one. intend conclusively quickly completely Furthermore, addressing measure litigation kind. incongruity well-developed, efficient, information-hungry allegation misinformed, depressed, months, Proof sort trial, throughout retains amend appropriate. Fed.Rules 23(c)(1) (c)(4). 7B Wright, Miller, Kane, Practice 128-132 factual manifests "oddities" 259-263. earliest cited 891 placed five six ago. 246—247, 24; 24. 1268-1271 1979); Arthur Young 549 686, 694-695 (CA9), 829, 109, Pellman Cinerama, 386, 388 1981). illustrating respectively, 1271 dissenting); Abrams Johns-Manville [1981-1982] 98,348, 92,157 1700]; Fausett Resources Management 542 1234, 1238-1239 (Utah illustrates pliability presumption. Abrams, represented misled annual reports. deposition shortly suit, she testified thought favorable Tax Code boost sales product (insulation). Two later, moved failure resuscitated affidavit "certainly [had] assumed company" paid then-going otherwise. 92,157. Based affidavit, demonstrates easily post hoc enable action—even rare frank foolhardy admit commentators wrote "Of economics, capital ('ECMH') widest culture. "Yet culture's remarkably rapid broad exist twenty ago matched degree understanding." Gilson Kraakman, Mechanisms Efficiency, Va.L.Rev. 549, 549-550 (footnotes omitted; emphasis gained 1984, greater understanding. Posner Economic Analysis 15.8, 423-424 submits produces "economically correct result" observes problematic. Notwithstanding "[a]t blush seem obvious," calculation "assumptions" "social costs" "difficult quantify." Of answers implementation Not surprisingly, declines 248, 27. Salin, Price, Encyclopaedia Social Sciences 504-506 (1932); de Roover, Thought: Ancient Medieval Thought, International Encyclopedia 433-435 (1968). boils down terms. while, reliance"—a proviso 251, realize, have, impossible extraordinary 906-907, 22; 143, considers 242, implicit rejection "pure causation" rings hollow. operate causation would, future actions. Practices, Hearings S.Res. 84, 56, Banking Currency, pt. 6638 (1934) (statement Richard Whitney, Exchange); Regulation, Hearing H.R. 7852 8720, 226 Whitney). cites endorsing 24, involved seller-plaintiffs. act) issuer, falsely permissible thereafter, surely attenuated September, later. sellers, long, distinguish poorer Cf., 535 (permitting eight long). recognizes believing 249. clear me belief hoping uncertainty plans either. Shakespeare, Julius Caesar, Scene II. "reliance gain trial illustrated discussed 3, supra.

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