Overview
In an opinion yesterday, Judge Forrest rejected a proposed securities class action settlement in which the settlement class was defined identically to a class that she had earlier ruled could not be certified. The earlier certification denial was based in part on the plaintiffs’ failure to show class-wide reliance under the “fraud-on-the-market” presumption. The parties pointed Judge Forrest to the Second Circuit’s 2012 decision in In re AIG, Inc. Sec. Litig., which held that “[b]ecause settlement eliminates the need for trial, a settlement class ordinarily need not demonstrate that the fraud-on-the-market presumption applies to its claims in order to satisfy the predominance requirement." But Judge Forrest ruled that the AIG case did not altogether eliminate the requirement that class-wide issues predominate, even for purposes of a settlement class, and that the parties had not made the necessary showing:
At no point during this litigation, including most significantly after the Court's ruling on class certification for litigation purposes, did plaintiffs sufficiently support predominance by showing that the question of reliance can be demonstrated on a representative (e.g. class) basis. If this Court were to certify the proposed settlement class in light of the evidentiary findings it previously made and without anything more from plaintiffs, it would effectively allow plaintiffs who potentially did not rely on materials setting forth the alleged misstatements to collect from the settlement fund. . . . [D]oing so would prevent those plaintiffs with real claims from obtaining the maximum amount to which they may be entitled.”(H/T Alison Frankel, who provides more detailed coverage here.)
