Precarious Presumption: Class Reliance in Uniform Misrepresentations Cases


Twenty years ago, the Supreme Court created a device by which class treatment could be allowed in cases alleging fraud affecting publicly-traded securities. In Basic, Inc. v. Levinson, 485 U.S. 224 (1988), the Supreme Court approved a “fraud-on-the-market” doctrine by which a presumption of reliance might be available to satisfy the predominance prong of Rule 23. The doctrine applies in cases in which allegedly fraudulent statements were publicly made and shown to be efficiently incorporated into the market price of the affected company’s shares.

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