Damages and reliance under section 10(b) of the Exchange Act

Business Lawyer

Volumn 69, Issue 2, 2014, Pages 307-392

  Grundfest, Joseph A ^a  

^a STANFORD LAW SCHOOL   (United States)

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EID: 84973147985     PISSN: 00076899     EISSN: None     Source Type: Journal    
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References (543)

1. See CORNERSTONE RESEARCH, SECURITIES CLASS ACTION FILINGS, 2013 YEAR IN REVIEW 3 fig. 2 (2014) [hereinafter 2013 YEAR IN REVIEW], available at http://securities.stanford.edu/research-reports/1996-2013/Cornerstone-Research-Securities-Class-Action-Filings-2013-YIR.pdf.
2. See CORNERSTONE RESEARCH, SECURITIES CLASS ACTION SETTLEMENTS, 2012 REVIEW AND ANALYSIS 3 fig. 2 (2013) [hereinafter 2012, SETTLEMENTS YEAR IN REVIEW AND ANALYSIS], available at http://securities.stanford. edu/research-reports/1996-2012/Settlements-Through-12-2012.pdf.
3. See The Top Ten Class Action Settlements in U. S. History, CLASSACTION. ORG (Aug. 13, 2013), http://www.classaction.org/blog/the-top-ten-class-action-settlements-in-us-history.
4. See id.; Christie Smythe & Chris Dolmetsch, Visa, MasterCard $5.7 Billion Swipe Fee Accord Approved, BLOOMBERG. COM (Dec. 13, 2013), http://www.bloomberg.com/news/2013-12-13/visa-mastercard-swipe-fee-accord-approved-by-u-s-judge.html.
5. See About the Settlement, NATIONALMORTGAGESETTLEMENT. COM, http://www.nationalmortgagesettlement. com/about (last visited Feb. 25, 2014).
6. (citing John C. Coffee, Reforming the Securities Class Action: An Essay on Deterrence and Its Implementation, 106 COLUM. L. REV. 1534, 1546 and n. 38 (2006) [hereinafter Coffee, Reforming the Securities Class Action];
7. LAURA E. SIMMONS & ELLEN M. RYAN, SECURITIES CLASS ACTION SETTLEMENTS: 2007 REVIEW AND ANALYSIS 4(2008), available at http://securities.stanford.edu/researchreports/1996-2007/Settlements-Through-12-2007.pdf)).
8. See EMERY G. LEE III & THOMAS E. WILLGING, THE IMPACT OF THE CLASS ACTION FAIRNESS ACT OF 2005 ON THE FEDERAL COURTS, FOURTH INTERIM REPORT TO THE JUDICIAL CONFERENCE ADVISORY COMMITTEE ON CIVIL RULES 4, 19 (2008).
9. See CORNERSTONE RESEARCH SECURITIES CLASS ACTION FILINGS, 2012 YEAR IN REVIEW 2 (2013).
10. Coffee, Reforming the Securities Class Action, supra note 4, at 1540-41.
11. 2013 YEAR IN REVIEW, supra note 1, at 7 fig. 6.
12. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 736 (1975).
13. Urska Velikonja, The Cost of Securities Fraud, 54 WM. & MARY L. REV. 1887 (2013).
14. Basic Inc. V. Levinson, 485 U. S. 224, 248 n. 28 (1988).
15. Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1204 (2013).
16. Ferdinando Giugliano & John Aglionby, Fama, Hansen and Shiller Win Nobel Prize for Economics, FIN. TIMES ONLINE (Oct. 14, 2013), http://goo.gl/A1tXRc (same).
17. C. R., The Nobel Prize Is a Three-Way Split, THE ECONOMIST (Oct. 14, 2013, 4:39 PM), http://www.economist.com/blogs/freeexchange/2013/10/economics-nobel-prize
18. See Binyamin Applebaum, Economists Clash on Theory, but Will Still Share the Nobel, N. Y. TIMES, Oct. 15, 2013, at A1.
19. Basic, 485 U. S. at 248-49;
20. Basic, 485 U. S. at 242
21. CORNERSTONE RESEARCH, SECURITIES CLASS ACTION FILINGS: 2013 MID-YEAR ASSESSMENT 15-17(2013), available at http://securities. stanford.edu/clearinghouse-research/2013-YIR/Cornerstone-Research-Securities-Class-Action-Filings-2013-MYA.pdf;
22. see also 2013 FULL-YEAR REVIEW, supra note 4, at 36.
23. See, e.g., Cent. Bank, 511 U. S. at 168-69, 173.
24. See 15 U. S. C. § 78j (2012).
25. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilberston, 501 U. S. 350, 358 (1991)
26. Ernst & Ernst, 425 U. S. at 196.
27. Blue Chip Stamps, 421 U. S. at 729.
28. THOMAS L. HAZEN, THE LAW OF SECURITIES REGULATION § 13. 2 (2d ed. 1990).
29. The Supreme Court recounted the judicial evolution of the section 10 (b) implied private right of action in Herman & MacLean v. Huddleston, 459 U. S. 375, 380 n. 10 (1983).
30. See, e.g., Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 176 (2008)
31. see also Tex. & Pac. Ry. Co. V. Rigsby, 241 U. S. 33, 39 (1916).
32. see also Joseph A. Grundfest, Disimplying Private Rights of Action Under the Federal Securities Laws: The Commission's Authority, 107 HARV. L. REV. 963, 990 (1994).
33. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilberston, 501 U. S. 350, 358 (1991).;
34. Ernst & Ernst, 425 U. S. at 196-97.
35. Herman & MacLean v. Huddleston, 459 U. S. 375, 380 (1983);
36. Id.; see also Lampf, 501 U. S. at 359.
37. Musick, Peeler, 508 U. S. at 292;
38. Bateman Eichler, Hill Richards, Inc. V. Berner, 472 U. S. 299, 303-05 (1985)
39. The Wharf Holdings Ltd. V. United Int'l Holdings, Inc., 532 U. S. 588, 594-97 (2001).;
40. United States v. O'Hagan, 521 U. S. 642, 647 (1997).;
41. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 177-78 (1994).;
42. Musick, Peeler, 508 U. S. at 297-98.;
43. Lampf, 501 U. S. at 361;
44. Basic Inc. V. Levinson, 485 U. S. 224, 239-40, 247 (1988).
45. Randall v. Loftsgaarden, 478 U. S. 647, 667 (1986);
46. Bateman Eichler, 472 U. S. at 305.
47. Dirks v. SEC, 463 U. S. 646, 660, 662 (1983);
48. Chiarella v. United States, 445 U. S. 222, 235 (1980).
49. Aaron v. SEC, 446 U. S. 680, 691-95, 701 (1980);
50. Santa Fe Indus., Inc. V. Green, 430 U. S. 462, 473 (1977);
51. TSC Indus., Inc. V. Northway, Inc., 426 U. S. 438, 449 (1976);
52. Ernst & Ernst, 425 U. S. at 213-14;
53. Blue Chip Stamps, 421 U. S. at 725-49;
54. Affiliated Ute Citizens of Utah v. United States, 406 U. S. 128, 152-54 (1972);
55. Superintendent, 404 U. S. at 9-11
56. See, e.g., SEC v. Nat'l Sec., Inc., 393 U. S. 453, 465 (1969);
57. 2013 YEAR IN REVIEW, supra note 1, at 7 fig. 6.
58. Basic, 485 U. S. at 247.
59. Basic, 485 U. S. at 247.
60. Amgen, 133 S. Ct. at 1195-97.
61. Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau, 508 U. S. 286, 292-93 (1993).
62. (quoting Va. Bankshares, Inc. V. Sandberg, 501 U. S. 1083, 1104 (1991))).
63. Erez Reuveni, Extraterritoriality as Standing: A Standing Theory of the Extraterritorial Application of the Securities Laws, 43 U. C. DAVIS L. REV. 1071, 1106 (2010);
64. Musick, Peeler, 508 U. S. at 297.
65. Cent. Bank, 511 U. S. at 178
66. (citing Musick, Peeler, 508 U. S. at 294-97).
67. (citing Musick, Peeler, 508 U. S. at 294).
68. Lampf, 501 U. S. at 359.
69. (citing DelCostello v. Int'l Brotherhood of Teamsters, 462 U. S. 151, 171 (1983);
70. United Parcel Service, Inc. V. Mitchell, 451 U. S. 56, 69-70 (1981).
71. Blue Chip Stamps, 421 U. S. at 736.
72. Musick, Peeler, 508 U. S. at 294.
73. (citing Ernst & Ernst v. Hochfelder, 425 U. S. 185, 210 (1976);
74. Blue Chip Stamps, 421 U. S. at 737-44;
75. Santa Fe Indus., Inc. V. Green, 430 U. S. 462, 477-78 (1977)).
76. Cent. Bank, 511 U. S. at 173.
77. (quoting Ernst & Ernst, 425 U. S. at 197)).
78. Ernst & Ernst, 425 U. S. at 210.
79. The Court in Musick, Peeler, 508 U. S. at 296
80. In Herman & MacLean v. Huddleston, 459 U. S. 375, 380 n. 8 (1983).
81. In Central Bank, 511 U. S. at 179
82. and Lampf, 501 U. S. at 354-55, 359-60.
83. 15 U. S. C. § 77k (2012).
84. Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau, 508 U. S. 286, 296 (1993).
85. Musick, Peeler, 508 U. S. at 296
86. (quoting Randall v. Loftsgaarden, 478 U. S. 647, 664 (1986));
87. Lampf, 501 U. S. at 360-61
88. ("Section 9 of the 1934 Act, 15 U. S. C. § 78i
89. (quoting Ernst & Ernst v. Hochfelder, 425 U. S. 185, 195 (1976)));
90. Ernst & Ernst, 425 U. S. at 211 n. 31.
91. Herman & MacLean v. Huddleston, 459 U. S. 375, 382-87 (1983).
92. see also Robert A. Prentice, Scheme Liability: Does It Have a Future After Stoneridge?, 2009 WIS. L. REV. 351, 360;
93. Eric Berry, Stoneridge and the Short-Lived Experiment of Scheme Liability, 4 N. Y. U. J. L. & BUS. 355, 358 (2007).
94. See, e.g., Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 171 (1994);
95. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 752 (1975).
96. (citing 1 LOUIS LOSS, SECURITIES REGULATION 130-31 (2d ed. 1961)));
97. see also United States v. Naftalin, 441 U. S. 768, 777-78 (1979).
98. Musick, Peeler, 508 U. S. at 296;
99. and § 20A of the 1934 Act (15 U. S. C. § 78t-1).
100. See, e.g., Herman & MacLean, 459 U. S. at 381-82.
101. Demaria v. Andersen, 318 F.3d 170, 178 (2d Cir. 2003).;
102. Hertzberg v. Dignity Partners, Inc., 191 F.3d 1076, 1082 (9th Cir. 1999);
103. Barnes v. Osofsky, 373 F.2d 269, 273 (2d Cir. 1967);
104. Marc I. Steinberg & Brent A. Kirby, The Assault on Section 11 of the Securities Act: A Study in Judicial Activism, 63 RUTGERS L. REV. 1, 27 (2010);
105. Brian Murray, Aftermarket Purchase Standing Under § 11 of the Securities Act of 1933, 73 ST. JOHN'S L. REV. 633, 636 (1999).;
106. Harden v. Raffensperger, Hughes & Co., 933 F. Supp. 763, 766-67 (S. D. Ind. 1996).
107. See Escot v. BarChris Constr. Co., 283 F. Supp. 643, 684-703 (S. D. N. Y. 1968).
108. Herman & MacLean, 459 U. S. at 382;
109. In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 359 (2d Cir. 2010) (same).
110. 15 U. S. C. § 77k (b) (3) (2012);
111. Herman & MacLean, 459 U. S. at 382;
112. see also Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau, 508 U. S. 286, 296 (1993);
113. see also Ernst & Ernst v. Hochfelder, 425 U. S. 185, 208 (1976).
114. Ernst & Ernst, 425 U. S. at 201.
115. Herman & MacLean, 459 U. S. at 382.
116. Ernst & Ernst, 425 U. S. at 209-10.
117. (quoting Lewis v. Walston & Co., 487 F.2d 617, 621 (5th Cir. 1973))).
118. Laser Arms Corp. Sec. Litig., 794 F. Supp. at 481.
119. Dura Pharms., Inc. V. Broudo, 544 U. S. 336, 341-42 (2005).
120. Compare 15 U. S. C. § 77k (a) (2012);
121. see also In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 358.
122. Gustafson v. Alloyd Co., 513 U. S. 561 (1995);
123. Yung v. Lee, 432 F.3d 142, 147-48 (2d Cir. 2005).
124. See Lewis v. Fresne, 252 F.3d 352, 357-58;
125. Maldonado v. Dominguez, 137 F.3d 1, 8 (1st Cir. 1998).;
126. Whirlpool Fin. Corp. V. GN Holdings, Inc., 67 F.3d 605, 609 n. 2 (7th Cir. 1995);
127. Vannest v. Sage, Rutty & Co., 960 F. Supp. 651, 654-55 (W. D. N. Y. 1997);
128. In re JWP Inc. Sec. Litig., 928 F. Supp. 1239, 1259 (S. D. N. Y. 1996).
129. Thompson v. RelationServe Media, Inc., 610 F.3d 628, 676 (11th Cir. 2010);
130. Joseph v. Wiles, 223 F.3d 1155, 1161 (10th Cir. 2000)
131. Pinter v. Dahl, 486 U. S. 622, 623 (1988).
132. abrogated by statute on other grounds, 15 U. S. C. § 78u (4) (b) (2) (2012);
133. Smith v. Am. Nat'l Bank & Trust Co., 982 F.2d 936, 941-42 (6th Cir. 1992);
134. Ryder Int'l Corp. V. First Am. Nat'l Bank, 943 F.2d 1521, 1527-30 (11th Cir. 1991) (same);
135. Ackerman v. Schwartz, 947 F.2d 841, 844-45 (7th Cir. 1991) (same);
136. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 536 (9th Cir. 1989) (same);
137. Crawford v. Glenns, Inc., 876 F.2d 507, 510 (5th Cir. 1989).
138. In re Craftmatic Sec. Litig., 890 F.2d 628, 635 (3d Cir. 1989);
139. Wilson v. Saintine Exploration & Drilling Corp., 872 F.2d 1124, 1126 (2d Cir. 1989) (same).
140. See Pinter, 486 U. S. at 652.
141. 15 U. S. C. § 77o (2012);
142. Lewis D. Lowenfels & Alan R. Bromberg, Controlling Person Liability Under Section 20 (a) of the Securities Exchange Act and Section 15 of the Securities Act, 53 BUS. LAW. 1 (1997).
143. Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau, 508 U. S. 286, 296 (1993).
144. See, e.g., Ernst & Ernst v. Hochfelder, 425 U. S. 185, 208-10 (1976).
145. see also Laperriere v. Vesta Ins. Grp., Inc., 526 F.3d 715, 723 (11th Cir. 2008);
146. Wool v. Tandem Computers Inc., 818 F.2d 1433, 1441 (9th Cir. 1987)
147. Ernst & Ernst, 425 U. S. at 201;
148. Herman & MacLean v. Huddleston, 459 U. S. 375, 382 (1983).
149. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 179 (1994).
150. 4 THOMAS LEE HAZEN, TREATISE ON THE LAW OF SECURITIES REGULATION § 13. 2 (6th ed. 2009);
151. Magna Power Co. V. Dow Chem. Co., 136 F.3d 316, 320-21 (2d Cir. 1998).
152. Ernst & Ernst, 425 U. S. at 193 n. 12.
153. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 731-34 (1975).
154. 15 U. S. C. § 78t (2012).
155. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 179 (1994).
156. Santa Fe Indus., Inc. V. Green, 430 U. S. 462, 476 (1977)
157. (quoting Ernst & Ernst v. Hochfelder, 425 U. S. 185, 199 (1976)).
158. see also In re Fed. Corp., Exchange Act Release No. 34-3909, 25 S. E. C. 227 (Jan. 29, 1947)
159. Id.; see also Lewis D. Lowenfels, Sections 9 (a) (1) and 9 (a) (2) of the Securities Exchange Act of 1934: An Analysis of Two Important Anti-Manipulative Provisions Under the Federal Securities Laws, 85 NW. U. L. REV. 698, 707 (1991).
160. See, e.g., Phillips v. TPC Commc'ns, Inc., 532 F. Supp. 696, 698 (W. D. Pa. 1982);
161. ∗7 (S. D. N. Y. Jan. 6, 1978).
162. 15 U. S. C. § 78r (a).
163. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 211 n. 31 (1976)
164. 15 U. S. C. § 78r (a) (2012).
165. Cyber Media Grp., Inc. V. Island Mortg. Network, Inc., 183 F. Supp. 2d 559, 578 (E. D. N. Y. 2002);
166. Kennedy v. Nicastro, 503 F. Supp. 1116, 1118 (N. D. Ill. 1980);
167. Ross v. Warner, 480 F. Supp. 268, 272-73 (S. D. N. Y. 1979)
168. Jacobson v. Peat, Marwick, Mitchell & Co., 445 F. Supp. 518, 525 (S. D. N. Y. 1977);
169. Note, Accountants' Liabilities for False and Misleading Financial Statements, 67 COLUM. L. REV. 1427, 1445 n. 42 (1967).
170. (citing Basic Inc. V. Levinson, 485 U. S. 224, 257 (1988) (White, J., dissenting)).
171. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 170-71 (1994).
172. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 201-02 (1976).
173. Ernst & Ernst, 425 U. S. at 202-03
174. (quoting Stock Exchange Regulation: Hearings on H. R. 7852 and H. R. 8720 Before the H. Comm. on Interstate & Foreign Commerce, 73d Cong. 115 (1934).
175. Basic Inc. V. Levinson, 485 U. S. 224, 257 (1988).
176. see also Stock Exchange Practices, Hearings on S. Res. 84, 56, and 97 Before the S. Comm. on Banking & Auditing, 73d Cong. 6638 (1934).
177. 78 CONG. REC. 7701 (statements of Representative Sam Rayburn).
178. Basic Inc. V. Levinson, 485 U. S. 224, 258 (1988).
179. Alexander v. Sandoval, 532 U. S. 275, 287 (2001).
180. Janus Capital Grp., Inc. V. First Derivative Traders, 131 S. Ct. 2296, 2302 (2011)
181. (quoting Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 167 (2008)).
182. Stoneridge, 552 U. S. at 165.
183. SEC v. Zandford, 535 U. S. 813, 821 (2002).
184. SEC v. Tambone, 597 F.3d 436, 455 (1st Cir. 2010)
185. (quoting Merrill Lynch, Pierce, Fenner & Smith v. Dabit, 547 U. S. 71, 79-81 (2006)).
186. See, e.g., Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 737 (1975).
187. Randall v. Loftsgaarden, 478 U. S. 647, 656 (1986)
188. (quoting Aaron v. SEC, 446 U. S. 680, 695 (1980)).
189. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 188 (1994)
190. (citing Demarest v. Manspeaker, 498 U. S. 184, 191 (1991));
191. see also Pinter v. Dahl, 486 U. S. 622, 654 (1988).
192. Morse v. Republican Party of Va., 517 U. S. 186, 219, 224-25 (1996);
193. Cent. Bank, 511 U. S. at 185-86.
194. Cent. Bank, 511 U. S. at 185-86
195. (quoting Pub. Emps. Ret. Sys. of Ohio v. Betts, 492 U. S. 158, 168 (1989);
196. see also Weinberger v. Rossi, 456 U. S. 25, 35 (1982);
197. Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U. S. 102, 118 (1980)
198. (quoting United States v. Price, 361 U. S. 304, 313 (1960)));
199. United States v. Sw. Cable Co., 392 U. S. 157, 170 (1968).
200. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 163 (2008)
201. Herman & MacLean v. Huddleston, 459 U. S. 375, 384-86 (1983).
202. see also Merrill Lynch, Pierce, Fenner & Smith, Inc. V. Curran, 456 U. S. 353, 381-82 (1982).
203. James D. Gordon III, Acorns and Oaks: Implied Rights of Action Under the Securities Acts, 10 STAN. J. L. BUS. & FIN. 62, 87 (2004).
204. Stoneridge, 552 U. S. at 166;
205. see also Dura Pharms., Inc. V. Broudo, 544 U. S. 336, 346 (2005).
206. Cent. Bank, 511 U. S. at 186;
207. Patterson v. McLean Credit Union, 491 U. S. 164, 175 n. 1 (1989);
208. Aaron v. SEC, 446 U. S. 680, 694 n. 11 (1980).;
209. Helvering v. Hallock, 309 U. S. 106, 121 (1940).
210. Cent. Bank, 511 U. S. at 187.
211. (quoting Pension Benefit Guar. Corp. V. LTV Corp., 496 U. S. 633, 650 (1990).
212. Malack v. BDO Seidman, LLP, 617 F.3d 743, 754 (3d Cir. 2010)
213. ("In Stoneridge, [552 U. S. at 157,];
214. see also Morrison v. Nat'l Austl. Bank Ltd., 130 S. Ct. 2869, 2883 (2010).;
215. Stoneridge, 552 U. S. at 158;
216. Cent. Bank, 511 U. S. at 177.
217. See, e.g., Richard M. Phillips & Gilbert C. Miller, The Private Securities Litigation Reform Act of 1995: Rebalancing Litigation Risks and Rewards for Class Action Plaintiffs, Defendants and Lawyers, 51 BUS. LAW. 1009, 1009 (1996);
218. see also Merrill Lynch, Pierce, Fenner & Smith v. Dabit, 547 U. S. 71, 81 (2006).
219. See, e.g., Merrill Lynch, 547 U. S. at 81;
220. Pac. Inv. Mgmt. Co. V. Mayer Brown LLP, 603 F.3d 144, 162 (2d Cir. 2010);
221. Elliott J. Weiss & Janet E. Roser, Enter Yossarian: How to Resolve the Procedural Catch-22 that the Private Securities Litigation Reform Act Creates, 76 WASH. U. L. Q. 457, 500 (1998);
222. see also Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1200 (2013);
223. Tellabs, Inc. V. Makor Issues & Rights, Ltd., 551 U. S. 308, 313
224. Kircher v. Putnam Funds Trust, 547 U. S. 633, 636 (2006).
225. see also Stoneridge, 552 U. S. at 158;
226. Malack, 617 F.3d at 158.
227. Morrison v. Nat'l Austl. Bank Ltd., 561 U. S. 247, 130 S. Ct. 2869 (2010);
228. see Amanda M. Rose, Better Bounty Hunting: How the SEC's New Whistleblower Program Changes the Securities Fraud Class Action Debate 2 (Vanderbilt Pub. Law Research Paper No. 13-34, 2013), available at http://ssrn. com/abstract= 2305403
229. William W. Bratton & Michael L. Wachter, The Political Economy of Fraud on the Market, 160 U. PA. L. REV. 69, 139 (2011).
230. https://www.sec.gov/news/press/2006-4.htm (discussing corporate penalties).
231. see also Jon Carlson, Securities Fraud, Officer & Director Bars, and the Unfitness Inquiry After Sarbanes Oxley, 14 FORDHAM J. CORP. & FIN. L. 679, 684-87, 693-94 (2009).
232. H. CONF. REP. NO. 104-369
233. 1995 U. S. C. C. A. N. 730, 741.
234. See, e.g., Werner F. M. DeBondt & Richard Thaler, Does the Stock Market Overreact?, 40 J. FIN. 739 (1985);
235. Narasimhan Jegadeesh & Sheridan Titman, Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency, 77 J. FIN. 65 (1993);
236. accord Jeffrey L. Oldham, Taking "Efficient Markets" Out of the Fraud-on-the-Market Doctrine After the Private Securities Litigation Reform Act, 97 NW. U. L. REV. 995, 1027-28 (2003);
237. Michael Y. Scudder, Comment, The Implications of Market-Based Damage Caps in Securities Class Actions, 92 NW. U. L. REV. 435, 461 (1997).
238. See, e.g., STEPHEN A. ROSS, Randolph W. Westerfield & Jeffery Jaffe, Corporate Finance 431-35 (2010);
239. Bradford Cornell & James C. Rutten, Market Efficiency, Crashes and Securities Litigation, 81 TUL. L. REV. 443, 455-56 (2006).
240. see also Andrew W. Lo & A. Craig MacKinlay, Datasnooping Biases in Tests of Financial Asset Pricing Models, 3 REV. FIN. STUD. 175 (1990).
241. Basic Inc. V. Levinson, 485 U. S. 224, 249 n. 28 (1988).
242. See, e.g., James M. Patell & Mark A. Wolfson, The Intraday Speed of Adjustment of Stock Prices to Earnings and Dividends Announcements, 13 J. FIN. ECON. 223, 225 (1984);
243. Jeffrey A. Busse & T. Clifton Green, Market Efficiency in Real Time, 65 J. FIN. ECON. 415, 416 (2002);
244. Gregory Laughlin, Anthony Aguirre & Joseph Grundfest, Information Transmission Between Financial Markets in Chicago and New York, 49 FIN. REV. (forthcoming May 2014).
245. 15 U. S. C. § 78t-1 (a) (2012).
246. The House Report notes that the purpose of this provision was to reverse the holding in Moss v. Morgan Stanley Inc., 719 F.2d 5 (2d Cir. 1983).
247. H. R. REP. NO. 100-910, at 38-39 (1998).
248. Hearings Before the Subcomm.of Telecomms. & Fin. of H. Comm. on Energy & Finance, 100 Cong. 41, 42 (1988).
249. See, e.g., Dirks v. SEC, 463 U. S. 646, 653 (1983);
250. Chiarella v. United States, 445 U. S. 222, 227 (1980) (same).
251. See, e.g., Elkind v. Liggett & Meyers, Inc., 472 F. Supp. 123, 129 (1978).
252. Neil V. Shah, Section 20A and the Struggle for Coherence, Meaning and Fundamental Fairness in the Express Right of Action for Contemporaneous Insider Trading Liability, 61 RUTGERS L. REV. 791, 813 (2009).
253. Halliburton Co. V. Erica P. John Fund, Inc., No. 13-317 (U. S. Jan. 6, 2014);
254. 141 CONG. REC. H2760 (daily ed. Mar. 7, 1995).
255. 141 CONG. REC. H2769.
256. 141 CONG. REC. S9219-S9226 (daily ed. June 28, 1995).
257. Brief of Former Members of Congress, supra note 257, at 16-17;
258. see also 141 CONG. REC. H15223 (daily ed. Dec. 20, 1995);
259. 141 CONG. REC. S19180 (daily ed. Dec. 22, 1995).
260. H. R. CONF. REP. NO. 369, 104th Cong., 1st Sess. (1995).
261. Brief of Former Members of Congress, supra note 257, at 15, 17-18.
262. For the logic of legislative histories that are calculated to generate similar ambiguities, see Joseph A. Grundfest, Statutes with Multiple Personality Disorders: The Value of Ambiguity in Statutory Design and Interpretation, 54 STAN. L. REV. 627 (2002).
263. Patterson v. McLean Credit Union, 491 U. S. 164, 175 n. 1 (1989)
264. (quoting Johnson v. Clara Transp. Agency, Santa Cnty., 480 U. S. 616, 671-72 (1987) (Scalia, J., dissenting))
265. See also U. S. CONST. art. I, § 7.
266. See Solid Waste Agency of N. Cook Cnty. V. U. S. Army Corps of Eng'rs, 531 U. S. 159, 170 (2001).
267. Pension Benefit Guar. Corp. V. LTV Corp., 496 U. S. 633, 650 (1990).
268. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 191 (1994).
269. Morrison v. Nat'l Austl. Bank Ltd., 130 S. Ct. 2869, 2884 (2010).
270. (presenting the question "[w]hether the Court should overrule or substantially modify the holding of Basic Inc. V. Levinson, 485 U. S. 224 (1988).
271. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 159 (2008)
272. (citing Basic Inc. V. Levinson, 485 U. S. 224, 243 (1988));
273. Affiliated Ute Citizens of Utah v. United States, 406 U. S. 128, 154 (1972);
274. see also Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1192-93 (2013)
275. (quoting Halliburton, 131 S. Ct. at 2184);
276. see also Matrixx Initiatives, Inc. V. Siracusano, 131 S. Ct. 1309, 1317 (2011)
277. (outlining the elements of a section 10 (b) cause of action (citing Stoneridge, 552 U. S. at 157)).
278. Amgen, 133 S. Ct. at 1192
279. (citing Basic, 485 U. S. at 241-46);
280. but cf. Donald C. Langevoort, Basic at Twenty: Rethinking Fraud on the Market 198 (Georgetown Law & Econ. Research Paper No. 1026316, 2007).
281. Amgen, 133 S. Ct. at 1192;
282. Halliburton, 131 S. Ct. at 2185.
283. Basic, 485 U. S. at 250 ("that presumption, however, is rebuttable").
284. See, e.g., Panzirer v. Wolf, 663 F.2d 365, 368 (2d Cir. 1981).
285. Basic, 485 U. S. at 248-49.
286. See, e.g., Amgen, 133 S. Ct. at 1192;
287. Janus Capital Grp., Inc. V. First Derivative Traders, 131 S. Ct. 2296, 2301 n. 3 (2011);
288. Halliburton, 131 S. Ct. at 2184-85;
289. Matrixx Initiatives, Inc. V. Siracusano, 131 S. Ct. 1309, 1317 (2011);
290. Stoneridge, 552 U. S. at 157, 159;
291. Dura Pharms., Inc. V. Broudo, 544 U. S. 336, 341-42 (2005);
292. Cent. Bank, 511 U. S. at 178, 180;
293. Basic, 485 U. S. at 243;
294. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 770 (1975).
295. See, e.g., Roger A. Cooper, Matthew M. Bunda & Anthony M. Shults, Rebutting the Presumption of Reliance in Securities Class Actions, N. Y. L. J. ONLINE, June 10, 2013;
296. Patrick Hall, The Plight of the Private Securities Litigation Reform Act in the Post-Enron Era: The Ninth Circuit's Interpretation of Materiality in Employer-Teamster v. America West, 2004 BYU L. REV. 863, 870-71 and n. 46;
297. Andrew R. Simmonds, Kenneth A. Sagat & Joshua Ronen, Dealing with Anomalies, Confusion and Contradiction in Fraud on the Market Securities Class Actions, 81 KY. L. J. 123, 136 (1993);
298. Elliot J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L. J. 2053, 2077 (1995);
299. GAMCO Investors, Inc. V. Vivendi, S. A., Nos. 03 Civ. 5911 (SAS)
300. 09 Civ. 7962 (SAS)
301. ∗8 (S. D. N. Y. Feb. 28, 2013)
302. In re LTV Sec. Litig., 88 F. R. D. 134, 143 (N. D. Tex. 1980).
303. In part, this is because '[t]he finding of materiality by its very nature establishes that the information omitted would have been considered important by investors generally. It thus will be only the unusual case in which compatible findings of materiality and nonreliance can be made.' duPont v. Brady, 828 F.2d 75, 78 (2d Cir. 1987).").
304. Barbara Black, Behavioral Economics and Investor Protection: Reasonable Investors, Efficient Markets, 44 LOY. U. CHI. L. J. 1493, 1498 (2013).
305. See Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1202 (2013).
306. For example, in In re Apple Computer Securities Litigation, 886 F.2d 1109, 1116 (9th Cir. 1989)
307. TSC Indus., Inc. V. Northway, Inc., 426 U. S. 438, 449 (1976).
308. See, e.g., In re Seitel, Inc. Sec. Litig., 245 F. R. D. 263, 278 (2006).
309. See, e.g., Douglas A. Smith, Fraud on the Market: Short Sellers' Reliance on Market Price Integrity, 47 WM. & MARY L. REV. 1003, 1006 and n. 140 (2005);
310. Samuel Francis, Meet Two-Face: The Dualistic Rule 10b-5 and the Quandary of Offsetting Losses by Gains, 77 FORDHAM L. REV. 3045, 3054-55 (2009).
311. The four instances of rebuttal in a context not involving class certification are the following: (1) In Gamco Investors, Inc. V. Vivendi, S. A., 927 F. Supp. 2d 88, 97 (S. D. N. Y. 2013)
312. (quoting In re Am. Int'l Grp., Inc. Sec. Litig., 689 F.3d 229, 234 n. 3 (2d Cir. 2012)).
313. The court stated, "[a] successful rebuttal of this sort will be exceedingly rare." Id. at 104. (2) In Stark Trading v. Falconbridge Ltd., 552 F.3d 568, 571-73 (7th Cir. 2009).
314. In Jones v. Intelli-Check, Inc., 274 F. Supp. 2d 615, 633 (D. N. J. 2003).
315. ∗4 (S. D. N. Y. Apr. 16, 1987).
316. The two instances of arguably successful rebuttals in the context of class actions include the following: (1) In Rocco v. Nam Tai Electronics, Inc., 245 F. R. D. 131, 136 (S. D. N. Y. 2007);
317. see also Case Summary for Nam Tai Elecs., Inc. Sec. Litig., SEC. CLASS ACTION CLEARINGHOUSE, http://securities. stanford.edu/filings-case.html?id=102711 (last visited Jan. 27, 2014).
318. In In re Safeguard Scientifics, 216 F. R. D. 577, 582 (E. D. Pa. 2003)
319. In Stark Trading, Nam Tai Electronics, and Safeguard Scientifics, the plaintiffs' knowledge of the fraud can be reframed as suggesting that they were never subject to a material misrepresentation, hence the presumption of reliance should never have attached in the first instance.
320. Basic Inc. V. Levinson, 485 U. S. 224, 256 and n. 7 (1988).
321. Vivendi, 927 F. Supp. 2d at 102.
322. See Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1192 (2013).
323. (quoting Basic, 485 U. S. at 245));
324. Basic, 485 U. S. at 242
325. See, e.g., In re Safeguard Scientifics, 216 F. R. D. 577, 582 (E. D. Pa. 2003);
326. see also In re Pfizer Inc. Sec. Litig., 282 F. R. D. 38, 45-46 (S. D. N. Y. 2012);
327. In re WorldCom, Inc. Sec. Litig., 219 F. R. D. 267, 281 (S. D. N. Y. 2003);
328. ∗5 (S. D. N. Y. Aug. 21, 2000).
329. In re Cardinal Health, Inc. Securities Litigation, 226 F. R. D. 298 (S. D. Ohio 2005)
330. Similarly, in Rolex Employees Retirement Trust v. Mentor Graphics Corp., 136 F. R. D. 658 (D. Or. 1991).
331. See Rolex Emps. Ret. Trust v. Mentor Graphics Corp., Nos. 90-726, 90-931 (D. Or. July 24, 1991).
332. Basic, 485 U. S. at 252 (White, J., dissenting)
333. (citing Shores v. Sklar, 647 F.2d 462, 469 n. 5 (5th Cir. 1981)
334. cert. denied, 459 U. S. 1102 (1983)).
335. Basic, 485 U. S. at 242.
336. See, e.g., Langevoort, Basic at Twenty, supra note 276, at 198.
337. Even if this observation is analytically correct, the Court clearly rejected that approach in Basic, 485 U. S. at 241-47, 250.
338. See, e.g., Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1192 (2013);
339. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 159 (2008);
340. Dura Pharms., Inc. V. Broudo, 544 U. S. 336, 346 (2005).
341. Affiliated Ute, 406 U. S. at 155;
342. Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436-37 (9th Cir. 1987).
343. superseded by statute on other grounds as stated in Hockey v. Medhekar, 30 F. Supp. 2d 1209 (N. D. Cal. 1998);
344. Harris v. Union Elec. Co., 787 F.2d 355, 367 (8th Cir. 1986)
345. cert. denied, 479 U. S. 823 (1986);
346. Blackie v. Barrack, 524 F.2d 891, 909 (9th Cir. 1975).
347. cert. denied, 429 U. S. 816 (1976);
348. Hackbart v. Holmes, 675 F.2d 1114, 1121 (10th Cir. 1982).
349. For a discussion of some of the complexities that arise, see the following: In re Williams Sec. Litig., 496 F. Supp. 2d 1195, 1260-61 (N. D. Okla. 2007);
350. Nicholas I. Crew, Patrick G. Goshtigian, Marnie A. Moore & Atulya Sarin, Securities Act Violations: Estimation of Damages, in ROMAN L. WEIL, MICHAEL J. WAGNER & PETER B. FRANK, LITIGATION SERVICES HANDBOOK: THE ROLE OF THE FINANCIAL EXPERT 17-1 (3d ed. 2001);
351. Jeff G. Hammel & B. John Casey, Sizing Securities Fraud Damages: 'Constant Percentage' on Way Out?, N. Y. L. J., Jan. 21, 2009, at 5;
352. Jon Koslow, Estimating Aggregate Damages in Class-Action Litigation Under Rule 10b-5 for Purposes of Settlement, 59 FORDHAM L. REV. 811 (1991);
353. Bradford Cornell & R. Gregory Morgan, Using Finance Theory to Measure Damages in Fraud on the Market Cases, 37 UCLA L. REV. 883 (1990).
354. See, e.g., Sackett v. Beaman, 399 F.2d 884, 891 (9th Cir. 1968);
355. Myzel v. Fields, 386 F.2d 718, 745, 748-49 (8th Cir. 1967);
356. Janigan v. Taylor, 344 F.2d 781, 786-87 (1st Cir. 1965);
357. Estate Counseling Serv., Inc. V. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 303 F.2d 527, 533 (10th Cir. 1962).
358. See Arber v. Essex Wire Corp., 490 F.2d 414, 422 (6th Cir. 1974);
359. Occidental Life Ins. Co. of N. C. V. Pat Ryan & Assocs., Inc., 496 F.2d 1255, 1264-65 (4th Cir. 1974);
360. Wolf v. Frank, 477 F.2d 467, 478 (5th Cir. 1973).
361. cert. denied, 414 U. S. 975 (1973);
362. Swanson v. Am. Consumers Indus., Inc., 475 F.2d 516, 521 (7th Cir. 1973);
363. Rochez Bros., Inc. V. Rhoades, 491 F.2d 402, 411-12, 417 (3d Cir. 1973)
364. [Affiliated Ute Citizens v. United States, 406 U. S. 128, 155 (1972)]
365. [v. Taylor, 344 F.2d 781 (1st Cir. 1965)],;
366. Wolf v. Frank, 477 F.2d 467, 478 (5th Cir. 1973).
367. cert. denied, 414 U. S. 975 (1973);
368. Levine v. Seilon, Inc., 439 F.2d 328, 334 (2d Cir. 1971);
369. Sackett, 399 F.2d at 891;
370. Myzel, 386 F.2d at 745, 748-49;
371. Janigan, 344 F.2d at 786-87;
372. Estate Counseling Serv., 303 F.2d at 533.
373. See Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilberston, 501 U. S. 350, 359 (1991).
374. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 178 (1994).
375. (quoting Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau, 508 U. S. 286, 294 (1993))).
376. See, e.g., Strategic Diversity, Inc. V. Alchemix Corp., 666 F.3d 1197, 1208-09 (9th Cir. 2012);
377. Acticon AG v. China N. E. Petroleum Holdings Ltd., 692 F.3d 34, 38-39 (2d Cir. 2012);
378. DCD Programs, Ltd. V. Leighton, 90 F.3d 1442, 1446-47 (9th Cir. 1996);
379. Woods v. Barrett Bank of Ft. Lauderdale, 765 F.2d 1004, 1013 (11th Cir. 1985);
380. Sharp v. Coopers & Lybrand, 649 F.2d 175, 190 (3d Cir. 1981).
381. In re Network Equip. Techs., Inc., Litig., 762 F. Supp. 1359 (N. D. Cal. 1991).
382. See 15 U. S. C. § 78bb (a) (2012);
383. see also DCD Programs, 90 F.3d at 1446-47
384. ("In analyzing the appellants' damages claims [under section 10 (b)], we necessarily begin with Section 28 (a) of the Exchange Act, 15 U. S. C. § 78bb (a).");
385. McMahan & Co. V. Wherehouse Entm't, Inc., 65 F.3d 1044, 1049-50 (2d Cir. 1995);
386. Anixter v. Home-Stake Prod. Co., 977 F.2d 1549, 1553 (10th Cir. 1992);
387. Pelletier v. Stuart-James Co., 863 F.2d 1550, 1557 (11th Cir. 1989);
388. Feldman v. Pioneer Petroleum, Inc., 813 F.2d 296, 301-02 (10th Cir. 1987) (same).
389. Basic Inc. V. Levinson, 485 U. S. 224, 248 n. 28 (1988).
390. Randall v. Loftsgaarden, 478 U. S. 647, 661 (1986);
391. Gould v. Am.-Hawaiian Steamship Co., 535 F.2d 761, 784 (3d Cir. 1976);
392. Globus v. Law Research Serv., Inc., 418 F.2d 1276, 1286 (2d Cir. 1969)
393. cert. denied, 397 U. S. 913 (1970);
394. Weisberg v. Coastal States Gas Corp., 609 F.2d 650, 652 n. 1 (2d Cir. 1979).
395. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 188 (1994).
396. (quoting Demarest v. Manspeaker, 498 U. S. 184, 191 (1991)));
397. Randall, 478 U. S. at 656.
398. (quoting Aaron v. SEC, 446 U. S. 680, 695 (1980)));
399. see also Pinter v. Dahl, 486 U. S. 622, 654 (1988);
400. Santa Fe Indus., Inc. V. Green, 430 U. S. 462, 477 (1977).
401. See, e.g., Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 161 (2008);
402. Basic, 485 U. S. at 245;
403. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 202-09 (1976).
404. See, e.g., Cent. Bank, 511 U. S. at 188;
405. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 737 (1975).
406. Conroy v. Aniskoff, 507 U. S. 511, 519 (1993).
407. Basic, 485 U. S. at 245.
408. Basic, 485 U. S. at 246.
409. Bateman Eichler, Hill Richards, Inc. V. Berner, 472 U. S. 299, 310 (1985)
410. (quoting J. I. Case Co. V. Borak, 377 U. S. 426, 432 (1964));
411. see also Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1201 (2013).
412. (quoting Tellabs, Inc. V. Makor Issues & Rights, Ltd., 551 U. S. 308, 313 (2007)));
413. Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 730 (1975) (same).
414. See, e.g., Stephen J. Choi & Adam C. Pritchard, SEC Investigations and Securities Class Actions: An Empirical Comparison 38-39 (Univ. of Michigan Law & Econ. Research Paper No. 12-022, 2012), available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=2109739;
415. Jonathan M. Karpoff, D. Scott Lee & Gerald S. Martin, The Legal Penalties for Financial Misrepresentation 4 (May 1, 2007) (unpublished manuscript available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=933333);
416. James D. Cox & Randall S. Thomas, SEC Enforcement Actions for Financial Fraud and Private Litigation: An Empirical Inquiry, 53 DUKE L. J. 737, 777 (2003).
417. Id.; see also Maria Correia & Michael Klausner, Are Securities Class Actions 'Supplemental' to SEC Enforcement? An Empirical Analysis 45 (May 15, 2012);
418. The Court has relied on a "vexatiousness" rationale on at least eight occasions: see Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 739 (1975);
419. Cent. Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164, 189 (1994);
420. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 162-64 (2008);
421. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 224 n. 3 (1976);
422. Santa Fe Indus., Inc. V. Green, 430 U. S. 462, 479 (1977)
423. (quoting Blue Chip Stamps, 421 U. S. at 740));
424. Va. Bankshares, Inc. V. Sandberg, 501 U. S. 1083, 1096 (1991);
425. Dura Pharms., Inc. V. Broudo, 544 U. S. 336, 346-47 (2005)
426. (quoting Blue Chip Stamps, 421 U. S. at 741));
427. Tellabs, Inc. V. Makor Issues & Rights, Ltd., 551 U. S. 308, 323-24 (2007);
428. see also S. REP. NO. 792, at 21 (1934)
429. Wendy Gerwick Couture, The End of the Vexatiousness Rationale, 41 SEC. REG. L. J. 301, 301 (2013).
430. Blue Chip Stamps, 421 U. S. at 739
431. (quoting SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833, 867 (2d Cir. 1968) (Friendly, J., concurring));
432. see also Michael M. Boone & Patrick F. McGowen, Standing to Sue Under SEC Rule 10b-5, 49 TEX. L. REV. 617, 648-49 (1971).
433. Blue Chip Stamps, 421 U. S. at 740.
434. Marc I. Steinberg & Brent A. Kirby, The Assault on Section 11 of the Securities Act: A Study in Judicial Activism, 63 RUTGERS L. REV. 1, 55 (2010).
435. See Tellabs, Inc. V. Makor Issues & Rights, Ltd., 551 U. S. 308, 314 (2007);
436. see also CORNERSTONE RESEARCH, SECURITIES CLASS ACTION FILINGS: 2013 MID-YEAR ASSESSMENT 15 fig. 14 (2013).
437. See, e.g., M. Todd Henderson & William H. J. Hubbard, Do Judges Follow the Law? An Empirical Test of Congressional Control Over Judicial Behavior 1 (Coase-Sandor Inst. for Law & Econ., Working Paper No. 671, 2014);
438. Michael J. Kaufman & John M. Wunderlich, Resolving the Continuing Controversy Regarding Confidential Informants in Private Securities Fraud Litigation, 19 CORNELL J. L. & PUB. POL'Y 637, 683 (2010);
439. Michael A. Perino, Did the Private Securities Litigation Reform Act Work?, 2003 U. ILL. L. REV. 913, 938;
440. see also H. R. CONF. REP. NO. 104-369, at 39 (1995).
441. See, e.g., RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 460 (6th ed. 2003);
442. Coffee, Reforming the Securities Class Action, supra note 4, at 1558-59;
443. Janet Cooper Alexander, Rethinking Damages in Securities Class Actions, 48 STAN. L. REV. 1487, 1502 (1996);
444. Donald C. Langevoort, Capping Damages for Open-Market Securities Fraud, 38 ARIZ. L. REV. 639, 646-48 (1996).
445. Frank H. Easterbrook & Daniel R. Fischel, Optimal Damages in Securities Cases, 52 U. CHI. L. REV. 611, 651 (1985).
446. See Judson Caskey, The Pricing Effects of Securities Class Action Lawsuits and Litigation Insurance 2, J. L. ECON. & ORG. (forthcoming 2013), available at http://jleo. oxfordjournals.org/content/early/2013/01/16/jleo.ews048.full.pdf+html;
447. see also Amar Gande & Craig M. Lewis, Shareholder-Initiated Class Action Lawsuits: Shareholder Wealth Effects and Industry Spillovers, 44 J. FIN. & QUANTITATIVE ANALYSIS 823, 825-26 (2009).
448. See, e.g., Richard A. Booth, The Future of Securities Litigation, 4 J. BUS. & TECH. L. 129, 139 (2009).
449. For a detailed examination of the market for directors' and officers' insurance, see TOM BAKER & SEAN J. GRIFFITH, ENSURING CORPORATE MISCONDUCT: HOW LIABILITY INSURANCE UNDERMINES SHAREHOLDER LITIGATION (2010);
450. see also Langevoort, Capping Damages, supra note 349, at 648-49.
451. Michael Klausner, Jason Hegland & Matthew Goforth, How Protective Is D&O Insurance in Securities Class Actions? An Update, PLUS J., May 2013, at 1.
452. Coffee, Reforming the Securities Class Action, supra note 4, at 1558.
453. Coffee, in Reforming the Securities Class Action, supra note 4, at 1551-53
454. See also Langevoort, Capping Damages, supra note 349, at 639, 648 n. 43.
455. Coffee, Reforming the Securities Class Action, supra note 4, at 1535-36;
456. Ronald J. Gilson & Reinier Kraakman, Market Efficiency After the Financial Crisis: It's Still a Matter of Information Costs 4, U. VA. L. REV. (forthcoming 2014);
457. Burton G. Malkiel, The Efficient Market Hypothesis and Its Critics, 17 J. ECON. PERSP. 59, 59 (2003)
458. [hereinafter Malkiel, The Efficient Market Hypothesis and Its Critics];
459. Daniel R. Fischel, Efficient Capital Markets, the Crash, and the Fraud on the Market Theory, 74 CORNELL L. REV. 907, 907 (1989);
460. see also Eugene F. Fama, Efficient Capital Markets: A Review of Theory and Empirical Work, 25 J. FIN. 383, 383 (1970).
461. For an overview of the debate, see, for example, Malkiel, The Efficient Market Hypothesis and Its Critics, supra note 358;
462. Burton G. Malkiel, The Efficient-Market Hypothesis and the Financial Crisis, in RETHINKING THE FINANCIAL CRISIS 75 (Alan Blinder, Andrew Lo & Robert Solow eds., 2012)
463. [hereinafter Malkiel, The Efficient-Market Hypothesis and the Financial Crisis];
464. Ronald J. Gilson & Reinier Kraakman, Market Efficiency After the Fall: Where Do We Stand Following the Financial Crisis?, in RESEARCH HANDBOOK ON THE ECONOMICS OF CORPORATE LAW 456 (Claire A. Hill & Brett H. McDonnell eds., 2012);
465. Gilson & Kraakman, Market Efficiency After the Financial Crisis, supra note 358;
466. Bradford Cornell & James C. Rutten, Market Efficiency, Crashes, and Securities Litigation, 81 TUL. L. REV. 443 (2007);
467. see also Donald Langevoort, Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation, 97 NW. U. L. REV. 135, 140-43 (2002).
468. For a popular critique of the efficient market theory, see JUSTIN FOX, THE MYTH OF THE RATIONAL MARKET (2009).
469. See, e.g., Malkiel, The Efficient Market Hypothesis and Its Critics, supra note 358;
470. Victor L. Bernard, Christine Botosan & Gregory D. Phillips) Challenges to the Efficient Market Hypothesis: Limits to the Applicability of the Fraud on the Market Theory, 73 NEB. L. REV. 781, 786 (1994)
471. Paul A. Ferrillo, Frederick C. Dunbar & David Tabak, The "Less than" Efficient Capital Markets Hypothesis: Requiring More Proof from Plaintiffs in Fraud-on-the-Market Cases, 78 ST. JOHN'S L. REV. 81 (2004).
472. Basic Inc. V. Levinson, 485 U. S. 224, 253 (1988).
473. Justice Scalia, in his concurrence in Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013).
474. See, e.g., Brief of Law Professors as Amici Curiae in Support of Petitioners at 7-8, Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 (2013).
475. See, e.g., Eugene F. Fama & Kenneth R. French, Common Risk Factors in the Returns on Stocks and Bonds, 33 J. FIN. ECON. 3 (1993);
476. Eugene F. Fama & Kenneth R. French, The Cross-Section of Expected Stock Returns, 47 J. FIN. 427 (1992);
477. Eugene F. Fama & Kenneth R. French, Size and Book-to-Market Factors in Earnings and Returns, 50 J. FIN. 131 (1997);
478. Mark M. Carhart, On Persistence in Mutual Fund Performance, 52 J. FIN. 57 (1997).
479. See, e.g., Eugene F. Fama, Efficient Capital Markets: II, 46 J. FIN. 1575, 1575-76 (1991).
480. See, e.g., Stephen F. LeRoy & Richard D. Porter, The Present-Value Relation: Tests Based on Implied Variance Bounds, 49 ECONOMETRICA 555 (1981);
481. Robert J. Shiller, Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?, 71 AM. ECON. REV. 421 (1981).
482. See, e.g., Allan W. Kleidon, Variance Bounds Tests and Stock Price Valuation Models, 94 J. POL. ECON. 953 (1986);
483. Terry A. Marsh & Robert C. Merton, Dividend Variability and Variance Bounds Tests for the Rationality of Stock Market Prices, 76 AM. ECON. REV. 483 (1986).
484. Malkiel, The Efficient-Market Hypothesis and the Financial Crisis, supra note 359, at 86.
485. see David R. McLean & Jeffrey E. Pontiff, Does Academic Research Destroy Stock Return Predictability? (AFFI/EUROFIDAI, Paris Dec. 2012 Fin. Meetings Paper, 2013), available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=2156623.
486. See, e.g., EDWARD E. LEAMER, SPECIFICATION SEARCHES: AD HOC INFERENCE WITH NONEXPERIMENTAL DATA (1978);
487. Andrew W. Lo & A. Craig MacKinlay, Data-Snooping Biases in Tests of Financial Asset Pricing Models, 3 REV. FIN. STUD. 431 (1990);
488. James J. Heckman, Sample Selection Bias as a Specification Error, 47 ECONOMETRICA 153 (1979);
489. Fama, Efficient Capital Markets: II, supra note 366, at 1585.
490. Malkiel, The Efficient-Market Hypothesis and the Financial Crisis, supra note 359, at 83-84;
491. Fama & French, The Cross-Section of Expected Stock Returns, supra note 365, at 432-45.
492. In contrast, in Josef Lakonishok, Andrei Shleifer & Robert W. Vishny, Contrarian Investment, Extrapolation, and Risk, 49 J. FIN. 1541, 1559-64, 1574-77 (1994).
493. See generally McLean & Pontiff, Does Academic Research Destroy Stock Return Predictability?, supra note 370.
494. http://ssrn. com/abstract=1104888 (collecting studies). Other studies suggest that overreaction is as common as underreaction.
495. See, e.g., Victor L. Bernard & Jacob K. Thomas, Evidence that Stock Prices Do Not Fully Reflect the Implications of Current Earnings for Future Earnings, 13 J. ACCT. & ECON. 305 (1990).
496. Marlene A. Plumlee, The Effect of Information Complexity on Analysts' Use of that Information, 78 ACCT. REV. 275, 293 (2003);
497. Gur Huberman & Tomer Regev, Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar, 56 J. FIN. 387 (2001);
498. Peter Klibanoff, Owen Lamont & Thierry A. Wizman, Investor Reaction to Salient News in Closed-End Country Funds, 53 J. FIN. 673 (1998);
499. Thomas S. Y. Ho & Roni Michaely, Information Quality and Market Efficiency, 23 J. FIN. & QUANTITATIVE ANALYSIS 53 (1988).
500. http://ssrn. com/abstract=2302734);
501. see also Brad K. Barber, Paul A. Griffin & Baruch Lev, The Fraud on the Market Theory and the Indicators of Common Stocks' Efficiency, 19 J. CORP. L. 285, 285-86 (1994);
502. Victor L. Bernard, Christine Botosan & Gregory D. Phillips, Challenges to the Efficient Market Hypothesis: Limits to the Applicability of Fraud-on-the-Market Theory, 73 NEB. L. REV. 781, 796 (1994);
503. Geoffrey Christopher Rapp, Proving Markets Inefficient: The Variability of Federal Court Decisions on Market Efficiency in Cammer v. Bloom and Its Progeny, 10 U. MIAMI BUS. L. REV. 303 (2002).
504. Cammer v. Bloom, 711 F. Supp. 1264, 1286-87 (D. N. J. 1989).
505. Courts have added additional factors to the Cammer test. See, e.g., Krogman v. Sterritt, 202 F. R. D. 467, 474 (N. D. Tex. 2001).
506. Grigori Erenburg, Janet Kiholm Smith & Richard L. Smith, The Paradox of "Fraud-on-the-Market Theory": Who Relies on the Efficiency of Market Prices?, 8 J. EMPIRICAL LEGAL STUD. 260 (2011).
507. (citing In re PolyMedica Corp. Sec. Litig., 453 F. Supp. 2d 260, 270 (2006);
508. In re Fed. Home Loan Mortg. Corp. (Freddie Mac) Sec. Litig., 281 F. R. D. 174, 180-81 (2012);
509. ∗12 (S. D. N. Y. July 3, 2013).
510. 635 F.2d 156 (2d Cir. 1980).
511. Langevoort, Capping Damages, supra note 349, at 639;
512. Coffee, Reforming the Securities Class Action, supra note 4, at 1535-36.
513. ∗8 (S. D. N. Y. July 3, 2013);
514. In re Fed. Home Loan Mortg. Corp. (Freddie Mac) Sec. Litig., 281 F. R. D. 174, 177 (2012).
515. (citing Basic Inc. V. Levinson, 485 U. S. 224, 241-42 (1988))).
516. Amgen Inc. V. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1193 (2013);
517. Basic, 485 U. S. at 242.
518. 2012 SETTLEMENTS REVIEW AND ANALYSIS, supra note 2, at 11 fig. 11.
519. http://goo.gl/E0XJYu (discussing $54 million WorldCom settlement and $168 million Enron settlement; both cases alleged section 11 violations);
520. http://iposecuritieslitigation. com/stipofsettlement3.09.pdf
521. Joshua H. Vinik, Andrei Rado & John R. S. McFarlane, Why Institutional Investors Are Opting Out of Class-Action Litigation, PENSIONS & INVESTMENTS (July 25, 2011), http://www.pionline.com/article/20110725/PRINTSUB/307259985.
522. Id.; see also Kevin LaCroix, Securities Class Action Opt-Outs: Back with a Vengeance?, D&O DIARY (Nov. 19, 2012), http://www.dandodiary.com/articles/optouts/;
523. Julie Triedman, Heavy-Hitters Hit Pfizer with New Securities Suit, Highlighting Opt-Out Trend, AM. LAW LITIG. DAILY ONLINE (Nov. 15, 2012).
524. AMIR ROZEN, JOSHUA B. SCHAEFFER & CHRISTOPHER HARRIS, OPT-OUT CASES IN SECURITIES CLASS ACTION SETTLEMENTS 1(2013), available at http://goo.gl/5Q2XAM.
525. BLAIR A. NICHOLAS & IAN D. BERG, WHY INSTITUTIONAL INVESTORS OPT OUT OF SECURITIES FRAUD CLASS ACTIONS AND PURSUE DIRECT INDIVIDUAL ACTIONS 1(2009), available at http://www.blbglaw. com/news/media-mentions/00104/-res/id=sa-File1/PLIreprint7-22-09.
526. John C. Coffee, Accountability and Competition in Securities Class Actions: Why 'Exit' Works Better than 'Voice' 29 (Columbia Univ. Law & Econ. Working Paper No. 329, 2008)
527. [hereinafter Coffee, Accountabiltiy and Competition in Securities Class Actions], available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=1113845.
528. Coffee, Accountability and Competition in Securities Class Actions, supra note 406, at 29-30.
529. Kevin LaCroix, Are Securities Class Action Opt-Out Actions Back?, D&O DIARY (Aug. 1, 2011), http://www.dandodiary.com/2011/08/articles/optouts/are-securities-class-action-optout-actions-back/.
530. Coffee, Accountability and Competition in Securities Class Actions, supra note 406, at 48;
531. Coffee, Accountability and Competition in Securities Class Actions, supra note 406, at 34-36;
532. Coffee, Accountability and Competition in Securities Class Actions, supra note 406, at 37-38
533. Calls for a legislative response followed the Supreme Court's decisions in each of Central Bank, Stoneridge, and Morrison. In Central Bank of Denver, N. A. V. First Interstate Bank of Denver, N. A., 511 U. S. 164 (1994)
534. In Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148 (2008)
535. In Morrison v. National Australian Bank Ltd., 130 S. Ct. 2869 (2010)
536. For an example of arguments in defense of the current status quo, see, for example, Roberta Karmel, In Defense of the Presumption of Reliance: Thoughts on "Amgen" N. Y. L. J., Apr. 18, 2013, at 3.
537. Donald C. Langevoort, Judgment Day for Fraud-on-the-Market?: Reflections on Amgen and the Second Coming of Halliburton 13-14 (Georgetown Public Law Research Paper No. 13-58, 2013), available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=2281910
538. see also Shahien Nasiripour, Bipartisan Bid to Give More Clout to SEC, FIN. TIMES, July 23, 2012, at 14.
539. See, e.g., Coffee, Reforming the Securities Class Action, supra note 4, at 1538.
540. See, e.g., Langevoort, Capping Damages, supra note 349, at 641.
541. Merritt B. Fox, Civil Liability and Mandatory Disclosure, 109 COLUM. L. REV. 237, 287 (2009).
542. Adam C. Pritchard, Stoneridge Investment Partners v. Scientific-Atlanta: The Political Economy of Securities Class Action Reform, 2007-2008 CATO SUP. CT. REV. 217, 247-55.
543. See, e.g., Edward A. Fallone, Section 10 (b) and the Vagaries of Federal Common Law: The Merits of Codifying the Private Cause of Action Under a Structuralist Approach, 1997 U. ILL. L. REV. 71, 81.