While the past year, or even eighteen months, was short on landmark federal securities law decisions, there was significant activity on the part of private securities litigants.  In 2018, plaintiffs filed 403 new federal securities fraud class actions, just short of 2017's record high of 412.1  This continued a marked uptick in securities filings over the last two years.  After 20 years with an average of only 203 new filings per year, the pace has now nearly doubled.2  This increase was driven in part by the emergence of securities cases relating to mergers and acquisitions.  As few as 13 such cases were filed per year in the early 2010s, but 198 were filed in 2017 and 182 in 2018.3  So far in 2019, there have been 134 securities class actions filed, signaling that the trend is continuing.  This increase may have resulted at least in part from decisions by the Delaware Court of Chancery severely restricting the ability of stockholders to resolve breach of fiduciary duty claims against directors in the M&A context with non-monetary settlements whereby the company makes supplemental disclosure, pays the plaintiff's attorney a fee, and defendants receive class-wide releases.4  Given that this avenue for quick resolution of M&A litigation is now effectively foreclosed in the absence of clearly material supplemental disclosure, it appears that certain stockholders have migrated to federal court asserting federal securities law claims instead.

At the same time, the lower federal courts have been prolific in issuing opinions on a range of important issues affecting private securities litigants.  In the process, courts attempted to mediate between their perception that private lawsuits are necessary to protect investors and promote ethical business practices while also recognizing the significant potential for abuse in this area, including the filing of meritless lawyer-driven suits.

  • The Supreme Court issued two significant decisions in 2018, clarifying that the statute of limitations for a successive class action is not tolled by a prior class action (China Agritech, Inc. v. Resh) and that plaintiffs may bring class actions asserting claims under the Securities Act of 1933 (Securities Act) in state courts (Cyan, Inc. v. Beaver County Employees Retirement Fund). In addition, the Supreme Court opened 2019 by holding that an individual who is not the "maker" of a fraudulent statement may nonetheless be held primarily liable under the federal securities laws for disseminating the fraudulent misstatement (Lorenzo v. Securities and Exchange Commission)—a decision that, according to Justice Thomas in dissent, renders the Court's landmark 2011 decision in Janus Capital Group, Inc. "dead letter."
  • The federal courts of appeal decided what state law class actions may be brought in federal courts (Brink v. Raymond James & Assocs., Inc. (11th Cir.)); a defendant's burden in rebutting a presumption of market efficiency on class certification (Arkansas Teachers Ret. Sys. v. Goldman Sachs Grp., Inc. (2d Cir.)); the state of mind necessary for liability under Section 14(e) of the Securities Exchange Act of 1934 (Exchange Act) (Varjabedian v. Emulex Corp. (9th Cir.)); and whether a securities action must be dismissed when a plaintiff loses standing, or the court retains jurisdiction to substitute a new plaintiff to cure the defect (Klein v. Qlik Techs., Inc. (2d Cir.)).
  • The federal district courts have been particularly active, issuing decisions on a wide range of issues, including: what triggers the tolling of the limitations period under the Exchange Act; federal preemption of state law securities fraud class actions; the parties' burden in establishing—or defeating—a presumption of class-wide reliance on class certification; selection of lead plaintiff and class representative in securities class actions; what types of traders may be included in the definition of a plaintiff class in a securities class action; what allegations are sufficient—and not—in order to meet pleading standards under the Private Securities Litigation Reform Act (PLSRA); and whether a putative class action must be dismissed when the named plaintiff loses standing.

The federal courts also issued significant decisions impacting entities and individuals facing regulatory issues or potential government investigations.  The Supreme Court narrowed the definition of who qualifies as a whistleblower in a decision (Somers v. Digital Realty Trust) that may impact employees' willingness to report potential misconduct internally before "reporting out" to the Securities and Exchange Commission (SEC) or other regulator.  The Second Circuit also revisited a significant decision addressing the personal benefit requirement in insider trading cases (U.S. v. Martoma).  The Second Circuit also revisited a significant decision addressing the personal benefit requirement in insider trading cases (U.S. v. Martoma).  The Second Circuit amended its earlier decision in Martoma and left Newman's "meaningfully close" personal relationship test intact but concluded that the test can be met where the tipper gives the information to the tippee with the intent to benefit.  On petition to the Supreme Court, Martoma challenges the Second Circuit's holding that a mere intent to benefit without a meaningfully close personal relationship is sufficient to establish liability.

Meanwhile, the SEC continued its regulatory focus on retail investors and cyber issues.  Enforcement activity by the SEC unexpectedly increased in FY 2018, particularly in the second half of the year.  Overall, the SEC filed 821 total actions in FY 2018, a significant increase from FY 2017.5  Consistent with the agency's focus on retail investors, this included substantial increases in the number of securities offering cases, cases against investment advisers and investment companies, and cases against broker dealers.  During the second half of FY 2018, the SEC filed a record-setting 55 new actions against public companies and subsidiaries,6 compared with only 15 in the first half of 2018.7  At the same time, the number of issuer reporting and disclosure actions—often the largest and most complex cases the SEC brings—decreased significantly in FY 2018.

We discuss these developments, and look ahead to the remainder of 2019, below.

I. Timeliness of Securities Class Actions

In recent years, the Supreme Court has focused on clarifying the circumstances under which the statute of limitations applicable to federal securities law claims is tolled in light of prior-filed suits.  In the seminal case of American Pipe & Construction Co. v. Utah, 8 the Supreme Court held that the commencement of a class action extends (or tolls) the statute of limitations applicable to claims by individual class members, allowing them to intervene in the action if class certification is ultimately denied.  In Crown, Cork & Seal Co., Inc. v. Parker,the Court extended American Pipe to allow tolling for individual suits by class members, regardless of whether they intervene in the prior action or commence new individual suits following denial of class certification.  In 2017, however, the Supreme Court put limits on what seemed to be a situation where tolling could go on nearly endlessly.  In California Public Employees' Retirement System v. ANZ Securities, Inc.,9 the Court held that American Pipe tolling only applies to the one-year statute of limitations under the Securities Act; it does not apply to the three-year statute of repose, which was intended to be an absolute bar to suits brought more than three years after the challenged fraud.

In 2018, the Supreme Court again revisited the concept of American Pipe tolling, and again came down in favor of imposing absolute time limits.  In China Agritech, Inc. v. Resh,10 the Supreme Court considered whether American Pipe tolling not only extends the statute of limitations for individual suits but also for new putative class actions.  In China Agritech, an investor sought to bring a class action outside the two-year statute of limitations under the Exchange Act.  The investor argued that the statute of limitations was tolled under American Pipe by a prior class action of which he was a class member.  The Ninth Circuit accepted the investor's argument, holding that the same equitable considerations that warrant tolling of successive individual suits under American Pipe also apply to successive class action suits.  But the Supreme Court reversed, holding that the American Pipe doctrine does not apply to successive class actions.  Writing for eight justices, Justice Ginsburg explained that the American Pipe doctrine tolls individual claims because "economy of litigation favors delaying those claims until after a class-certification denial."11  It would be wasteful to encourage the filing of individual suits when class certification may obviate the need for such suits.12  In contrast, economy of litigation does not favor encouraging successive class suits.  Rather, it would be more efficient for all would-be class representatives to come forward at the outset of a case for a binding, global decision on class representative status.13  Moreover, unlike individual claims (for which the clock would start running again after class certification denial), there could be no end date for class claims because the statute of limitations would be tolled during the pendency of each successive class action.14  Justice Ginsburg also explained that the Court's holding was consistent with the policy goals of Rule 23 of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act, which each express a preference for early resolution of class certification issues, including the early selection of lead plaintiff and class representative.15

Although the case under review in China Agritech only involved claims under the Exchange Act, Justice Ginsburg's opinion could be construed to apply not only to Securities Act claims, but to all class actions under Rule 23 of the Federal Rules of Civil Procedure.  The possibility that China Agritech might apply outside the securities law context prompted Justice Sotomayor to write a concurring opinion.  Justice Sotomayor explained that China Agritech should only apply to cases under the PSLRA (i.e., federal securities class actions asserting Exchange Act claims), which mandates notice to class members and an express process for selecting representatives.16  By contrast, in any class action where the PSLRA does not apply, members of a potential class are not given notice of the action until a class has been certified.17  Thus, superior class representatives may not know they should come forward and replace an unqualified representative until after the statute of limitations already has run out.18  To avoid what Justice Sotomayor characterized as an outcome that was not "in the interest of justice," she encouraged courts to "liberally permit amendment of the pleadings or intervention of new plaintiffs and counsel."19

Meanwhile, in In re BP p.l.c. Securities Litigation,20 a district court in the Southern District of Texas interpreted ANZ Securities—which refused to toll the three-year statute of repose under the Securities Act—to apply to claims under the Exchange Act.  In In re BP, a group of investors sought to bring individual suits more than five years after the challenged misstatements notwithstanding the five-year statute of repose provided in the Exchange Act, 28 U.S.C. §1658(b)(2).  The investors argued that the time limit was a statute of limitations, not a statute of repose, and therefore was tolled by the pendency of a prior class action.  The court disagreed, holding that the five-year period under the Exchange Act is a statute of repose that was intended as the outside limit for commencing an action and thus cannot be tolled.  The court based its decision on the language and structure of 28 U.S.C. § 1658(b), which sets forth limitations periods applicable to Exchange Act claims.  Like its analogue under the Securities Act, 15 U.S.C. §77m, the provision contains two time limits:  a two-year period following discovery of the alleged fraud, and a five-year period following the actual violation.21  The court concluded that, as with the Securities Act, Congress intended the shorter period to be a statute of limitations, which can be equitably tolled, but intended the longer period to be a statute of repose, which is absolute, final, and not subject to equitable tolling.22

These decisions make clear that courts are serious about setting time limits on securities actions.  In particular, the three-year and five-year statutes of repose under the Securities Act23 and Exchange Act,24 respectively, are strict bars to securities claims.  And the widely invoked concept of American Pipe tolling is actually limited in scope, applying only to individual claims brought within the applicable statute of repose.

II. Federal Preemption

In 1995, Congress enacted the PSLRA, which created a number of stringent substantive and procedural requirements applicable to Exchange Act claims.  For example, the PSLRA created heightened pleadings requirements, established damages caps, and imposed mandatory sanctions for frivolous litigation.  This prompted certain private litigants to seek to bring securities class actions in state courts.  To stem such an end-run, Congress enacted the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which amended portions of the Securities Act and Exchange Act to preempt "covered" class actions in state court and permit defendants to remove such actions to federal court.  SLUSA preemption applies only to a "covered class action" in which the plaintiff alleges a "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security" or "that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security."25  A "covered class action" is defined as a lawsuit in which damages are sought on behalf of fifty or more people; a "covered security" is defined as a security listed on a national stock exchange.26

In Cyan, Inc. v. Beaver County Employees Retirement Fund,27 a unanimous Supreme Court held that SLUSA does not strip state courts of their jurisdiction over class actions alleging violations only of the Securities Act.  The Court grounded its decision in the text of the SLUSA.  Under 15 U.S.C. § 77(a), district courts have "concurrent" jurisdiction over Securities Act claims, "except as provided in section 77p of this title with respect to covered class actions."28  In turn, § 77p bars certain securities class actions based upon "the statutory or common law of any State."29  Importantly, however, the statute does not expressly purport to deprive courts of jurisdiction under federal law, including the Securities Act.30  This means that litigants may continue to commence actions asserting Securities Act claims in state court without facing the SLUSA's removal and preemption provisions.  As the Court noted, however, such an option is not available for class actions asserting claims under the Exchange Act, which, under 15 U.S.C. § 78bb(f)(1), only may be filed in federal court.31

The lower federal courts, in contrast, have been focused not on which federal claims may be brought in state court, but on which state law claims may be brought in federal court.  Under SLUSA, "covered class actions" involving "covered securities" that are filed in federal court, invoke state law, and allege that securities fraud are subject to dismissal.32  In Brink v. Raymond James & Associates, Inc.,33 the Eleventh Circuit held that SLUSA did not require the dismissal of a class action in federal court asserting claims for breach of contract and negligence under state law.  The plaintiffs there alleged that the defendants misrepresented the true nature of transaction fees charged to customers for use of Raymond James and Associates brokerage services.  The defendants sought dismissal of these claims under SLUSA, 15 U.S.C. § 78bb(f)(1)(A), arguing that the claims were actually Exchange Act claims "disguised" as state breach of contract and negligence claims.  The Eleventh Circuit disagreed, explaining that the alleged misrepresentations about transaction fees only would have influenced a customer's choice of broker, not the underlying investment decision.34  This did not constitute a "material" misrepresentation of fact sufficient to state a federal securities fraud claim, and thus was not subject to SLUSA's bar on state law claims equivalent to federal claims.35

In contrast, in North Sound Capital LLC v. Merck & Co.,36 a district court in the District of New Jersey held that a state common law fraud claim was preempted by SLUSA.  The plaintiffs in that case had opted out of an earlier class action asserting Exchange Act claims against Merck regarding the effectiveness of clinical trials for the cholesterol-lowering drug Vitorin.  The defendants sought dismissal of plaintiffs' common law fraud claim under SLUSA.  The court held that the action met the test for a "covered class action" in that it was appropriate to group the sixteen individual plaintiffs with members of the earlier class action to meet the 50-person threshold.37  The court explained that not only were the actions filed in the same court, but there was informal coordination between individual opt-out actions and the lead action sufficient to meet the requirement of being "joined, consolidated, or otherwise proceed[ing] as a single action."38  The decision is currently on appeal to the Third Circuit.  A district court in the Southern District of California came to the same conclusion in Highfields Capital I, LP v. SeaWorld Entertainment, Inc., holding that an individual opt-out action constituted a "covered class action" because it was "sufficiently coordinated" with a class action to "proceed as a single action."39

Finally, the Delaware Court of Chancery recently considered whether a corporate charter could require claims brought by a corporation's stockholders under the Securities Act to proceed in federal court, and held that it could not.  In Sciabacucchi v. Salzberg,40 a stockholder brought suit in the Court of Chancery alleging that a registration statement filed in connection with an IPO contained material misrepresentations in violation of Section 11 of the Securities Act.  The defendants contended that the action had to be brought in federal court by virtue of a forum selection clause in the corporation's charter, which provided that federal court would be the exclusive jurisdiction for resolving Securities Act claims.  Vice Chancellor J. Travis Laster disagreed, reasoning that "charter and bylaws can only address internal-affairs claims," and the forum-selection clause was therefore invalid because federal securities actions are "external claim[s] that fall[] outside the scope of the corporate contract."41  The defendants sought to appeal the court's decision, but that appeal was denied for failure to comply with the rules governing interlocutory appeals.42

The net result of these decisions is that all "covered class actions" that allege fraud in connection with the purchase of a sale of a "covered security" (i.e., a security traded on a national exchange) must be brought under the federal securities laws, not state law.  Although under Cyan such actions asserting only claims under the Securities Act may be filed in state court, all other "covered" class actions must be filed in federal court, subject to the requirements of the PSLRA.

III. Theories of Securities Fraud

The PSLRA sets a lofty standard for pleading securities fraud under Section 10(b) of the Exchange Act.  First, when a plaintiff alleges a misrepresentation or omission of a material fact, the complaint must "specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading."43  Second, to plead the element of scienter, the complaint must "with respect to each act or omission . . . state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind."44  A "strong inference" is "more than merely plausible or reasonable—it must be cogent and at least as compelling as any opposing inference of non-fraudulent intent."45  What is sufficient to meet these standards is invariably fact-dependent and impossible to reduce to a formula.  Nonetheless, there have been notable decisions providing guidance on pleading a viable Section 10(b) claim and, for defendants, offering roadmaps to successfully challenge such claims at the motion to dismiss stage.

Most significantly, the Supreme Court opened 2019 by holding that an individual who is not the "maker" of a fraudulent statement—and thus may not be held liable under Section 10(b)—may nonetheless be held primarily liable for disseminating the fraudulent statement.  In Lorenzo v. Securities and Exchange Commission,46 the SEC commenced administrative proceedings against the vice president of an investment bank for emailing fraudulent statements to potential investors regarding the value of a company involved in a debenture offering.  The SEC determined that the employee's actions violated Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and imposed sanctions, including a civil penalty and a lifetime industry bar.  On appeal, the D.C. Circuit reversed in part.  Relying on the Supreme Court's decision in Janus Capital Group, Inc. v. First Derivative Traders,47 a panel of the D.C. Circuit held that the employee could not be liable under Rule 10b-5(b)  because he did not "make" the statement in question since he did not have "ultimate authority" over the statements in his investor emails.  Rather, the individual with "ultimate authority" was the employee's supervisor, who not only supplied the content of the email messages, but approved each message before it was sent.48  Nevertheless, the court concluded that the employee could still be held liable on the basis of the employee's participation in a fraudulent scheme to send the emails.49  Then-D.C. Circuit Judge Brett Kavanaugh dissented, explaining that permitting liability under these provisions for someone who is not a "maker" of a statement would amount to an "end-run" around the Supreme Court's decision in Janus.50

On March 27, 2019, a 6-2 majority of the Supreme Court (with Justice Kavanaugh taking no part in the decision), affirmed the D.C. Circuit's decision, holding that, even if an individual is not the "maker" of a misstatement, the individual's participation in disseminating the misstatement falls within the scope of other provisions Rule 10b-5.51  Writing for the majority, Justice Breyer rooted the Court's decision in the text of subsections (a) and (c) of Rule 10b-5, which make it unlawful to "employ any device, scheme, or artifice to defraud" and "engage in any act, practice, or course of business" that "operates . . . as a fraud or deceit."52  According to Justice Breyer, "the words in these provisions are, as ordinarily used, sufficiently broad to include within their scope the dissemination of false or misleading information with the intent to defraud."53  Lorenzo argued that the majority's rationale would render Rule 10b-5(b)—which makes it unlawful "[t]o make any untrue statement of material fact or to omit to state a material fact"—"superfluous" because each subsection of 10(b)-5 governs a "separate type of conduct."54  But the Court rejected this argument, explaining that the Court and SEC "have long recognized considerable overlap among the subsections of [Rule 10b-5] and related provisions of the securities laws."55  Rather, "Congress intended to root out all manner of fraud in the securities industry," and "gave to the Commission the tools to accomplish that job."56

In a dissenting opinion joined by Justice Gorsuch, Justice Thomas cautioned that the majority's "sweeping holding" "eviscerates" Janus and renders that decision a "dead letter."57  According to Justice Thomas, the majority's decision may subject individuals only "tangentially" involved in the misconduct (like a secretary instructed to send a fraudulent email) to private securities fraud liability, in abrogation of the distinction between primary and secondary liability (for which no private right of action exists under the federal securities laws).58  While the implications of Lorenzo with respect to such conduct remain to be seen, it is clear that Lorenzo substantially reduces the force of technical arguments against liability based on one's "ultimate authority" over a subject communication.  Under Lorenzo, the focus of the inquiry becomes an individual's "intent to defraud" and active participation in a "scheme" or "course of business" designed to defraud, regardless of whether or not a fraudulent misstatement was involved.  We expect the limits of Lorenzo to be a prevalent subject of litigation over the coming year.

In another significant development, the Ninth Circuit assessed the standards for pleading fraud under Section 14(e) of the Exchange Act in Varjabedian v. Emulex Corp. 59 —a decision on which the Supreme Court first granted, and later denied, certiorari.  Section 14(e) prohibits fraudulent, deceptive, or manipulative acts or practices in connection with a tender offer.  While the federal courts agree that Section 14(e) confers a private right of action, five circuits, including the Second, Third, Fifth, Sixth, and Eleventh, have held that, to state a claim, a claimant must plead that the defendant acted with scienter—i.e., a mental state embracing an intent to deceive, manipulate, or defraud.60  In Varjabedian, however, the Ninth Circuit broke rank, holding that a private litigant claiming a Section 14(e) violation need only plead that the defendant acted negligently when it misrepresented or omitted a material fact in connection with a tender offer.  That case involved the merger between two technonlogy companies (Emulex and Avago) that was approved by their stockholders.  Thereafter, a dissatisfied shareholder brought suit under Section 14(e), claiming information omitted from Emulex's tender offer materials rendered them materially misleading.  The district court dismissed the complaint, explaining that the "similarities between Rule 10b-5 and § 14(e) require a plaintiff bringing a cause of action under § 14(e) to allege scienter," and the plaintiff failed to allege facts demonstrating that Emulex knowingly omitted the information.61  A Ninth Circuit panel reversed, holding that an allegation that the information was negligently omitted is sufficient to state a claim.  The panel reasoned that the "rationale regarding Rule 10(b)-5 does not apply to Section 14(e)" because 10(b)-5 is a "regulation promulgated under Section 10(b) of the Exchange Act, which allows the SEC to regulate only 'manipulative or deceptive devices'" while Section 14(e) "is a statute, not an SEC Rule."62  The court found that a more apt comparison was Section 17(a) of the Securities Act, which "is largely identical to the first clause of Section 14(e) [and] requires a showing of negligence, not scienter."63  Although the Supreme Court initially granted certiorari on January 4, 2019, it dismissed the petition on April 23, 2019, as "improvidently granted."64  We anticipate that the Supreme Court may accept a case presenting this issue in the future to the extent the circuit split widens or lower federal courts divide on the question.

District court decisions continued to elucidate the types of allegations that will be deemed sufficient under the PSLRA to plead a Section 10(b) claim.  In Metzler Asset Management GmbH v. Kinglsey,65 the plaintiffs alleged that Biogen Inc. and its executives made misleading statements about the business prospects of the company and the safety of Tecfidera, the company's leading multiple sclerosis drug.  A district court in the District of Massachusetts granted defendants' motion to dismiss.  As an initial matter, the court held that the generalized positive statements about the company and the drug challenged by plaintiffs were not actionable as a matter of law.  These statements—for example, that the company is on a "solid trajectory" and the drug has "an attractive safety profile"—amount to generic expressions of corporate optimism, or "puffery," that are immaterial as a matter of law.66  Although more specific statements about earnings and safety were potentially actionable, the court concluded that plaintiffs had not sufficiently pled a strong inference of scienter as required under the PSLRA.  In particular, the court found insufficient general statements of defendants' knowledge attributed to 17 confidential witnesses.67  The court found that allegations based on confidential witnesses still had to plead specific facts, which was not the case here.68  Moreover, while allegations of motive and opportunity are sufficient to plead scienter in the First Circuit, the plaintiffs merely alleged that the defendant executives had the opportunity to misrepresent Tecfidera's growth projections and, since Tecfidera was the company's main revenue source, the executives knew the statements were false.69  Such allegations regarding "the usual concern by executives to improve financial results" did not suffice.70  The court's decision is currently on appeal to the First Circuit.

In contrast, in In re Volkswagen "Clean Diesel" Marketing, Sales Practices, and Product Liability Litigation,71 a district court in the Northern District of California found that the plaintiff adequately pled Section 10(b) claims.  The claims arose from the widely-reported "massive" fraud to use "defeat devices" in Volkswagen's diesel vehicles to deceptively pass emissions tests and sell vehicles that released pollutants up to 40 times above the legal limit.72  The plaintiffs claimed that Michael Horn, the CEO of Volkswagen Group of America, knowingly omitted from the company's offering documents Volkswagen's scheme to use the defeat devices.73  The court dismissed the first amended complaint on the grounds that it merely alleged that Horn learned Volkswagen was using the defeat devices on the same day it issued its Offering Memorandum.74  Such an allegation, according to the court, was insufficient to plead scienter.  The court ruled that the plaintiffs' second amended complaint, however, cured that deficiency because it alleged additional facts pleading that Horn learned of Volkswagen's fraud seven weeks earlier.75  In light of the new allegations, the court found that "Horn's delay" in investigating the "potentially negative information before public disclosure" was unreasonable and thus, "a strong inference arises that [Horn] acted with intent to deceive or with deliberate recklessness when he failed to disclose this information to bond investors who participated in the May 2014 offering."76

In Trahan v. Interactive Intelligence Group, Inc.,77 a district court in the Southern District of Indiana dismissed claims under Section 14(a) of the Exchange Act based on an allegedly false and misleading proxy statement seeking shareholder approval of a proposed merger.  In so holding, the court provided useful guidance regarding materiality and when statements of opinion are actionable.  First, the plaintiffs alleged that the proxy was misleading because it did not include a broader range of financial projections.  But the court held that there was no basis to conclude that additional projections would alter the total mix of information available as viewed by a reasonable investor.78  Second, the plaintiffs alleged that the choice of inputs made the company's financial projection model misleading.  But the court held that the inputs used in the financial projections were immaterial because the model and assumptions used were clearly stated.79  Finally, the plaintiffs claimed that statements concerning the directors' reasons for supporting the merger were misleading.  The court, however, held that plaintiffs did not plead any facts permitting a plausible inference that the statements were not made in good faith and with a reasonable basis.80

IV. Class Certification

Class certification is often make-or-break for plaintiffs and defendants.  If a class is certified, the potential damages a defendant faces rise astronomically, often leading to an eventual settlement.  By contrast, if certification is denied, the leverage tips decidedly to the defendants against individuals who typically lack the resources or incentive to effectively litigate a complex securities case.  In fact, denial of class certification usually is the death knell for the action.  Federal courts recently have issued important decisions on three class certification issues arising in cases asserting federal securities law claims:  establishing reliance on a class-wide basis, choosing lead plaintiff and class representative, and defining the class.

A. Establishing Reliance on a Class-Wide Basis

Under Rule 23(b) of the Federal Rules of Civil Procedure, it is the plaintiff's burden on class certification to establish "that the questions of law or fact common to class members predominate over any questions affecting only individual members[.]"81  "An individual question is one where 'members of a proposed class will need to present evidence that varies from member to member,' while a common question is one where 'the same evidence will suffice for each member to make a prima facie showing [or] the issue is susceptible to generalized, class-wide proof.'"82  Class action plaintiffs often face difficulty in meeting this requirement with respect to the "reliance" element of a Section 10(b) claim.  So the theory goes, it is difficult if not impossible to determine whether individuals in a wide, amorphous class of investors directly relied on misstatements in deciding whether to purchase or sell stock.

To avoid a situation in which no Section 10(b) securities class action can ever be certified, the Supreme Court has articulated two "presumptions" of reliance if certain conditions are satisfied.  First, under the Basic (or fraud-on-the-market) presumption, plaintiffs can invoke a presumption of reliance if they traded in securities of a company that made material misrepresentations to the public and whose securities are traded on an efficient market.83  It is recognized, however, that a defendant may rebut the presumption and defeat class certification by showing that the misrepresentations did not actually affect the price of the stock.84  Second, plaintiffs also can invoke the Affiliated Ute presumption of reliance.  This is available "if there is an omission of material fact by one with a duty to disclose."85

In Arkansas Teachers Retirement System v. Goldman Sachs Group, Inc.,86 the Second Circuit clarified a defendant's burden in seeking to rebut the Basic presumption.  There, the plaintiffs alleged that Goldman Sachs and several of its directors made material misstatements about Goldman's efforts to avoid conflicts of interest, causing its stock price to drop once the "truth" allegedly became known.  In opposing class certification, the defendants sought to rebut the Basic presumption with evidence that the bank's stock did not decline in response to various press reports disclosing information about conflicts of interest.  Judge Paul A. Crotty of the Southern District of New York nonetheless certified the class, holding that defendants did not provide "conclusive evidence that no link exists between the price decline [of Goldman stock] and the misrepresentation[s]."87  The Second Circuit vacated the order, however, holding that the district court applied the wrong standard.  A defendant need not present "conclusive evidence" of no price impact.  Rather, a defendant seeking to rebut the Basic presumption must do so "by a preponderance of the evidence."88  In other words, it is defendant's burden to show that it is more likely than not that misrepresentations did not affect the price of the company's stock.89  (As noted in Section IX, infra, this matter is returning to the Second Circuit in 2019.)

In Colman v. Theranos, Inc.,90 the plaintiffs asserted claims for fraud, misrepresentation, and market manipulation against Theranos, Inc., alleging that Theranos promoted a highly-publicized blood testing technology that in fact did not exist.  Plaintiffs sought to certify of a class of "indirect investors" that purchased interests in entities that had bought Theranos stock during the class period.  A district court in the Northern District of California declined to certify the putative class, holding that individualized questions of reliance predominated.  In particular, the court refused to apply the Basic presumption, finding that Theranos stock did not trade in an efficient market.  Rather, the plaintiffs were private investors who used private channels to purchase the stock in discrete offerings.91  Unlike in an efficient market, the stock did not trade with high weekly volumes in a fluid market monitored by market makers and arbitrageurs.92

Although Arkansas Teachers and Theranos were wins for defendants, other recent decisions addressing this issue came out in favor of plaintiffs.  So long as plaintiffs presented evidence of market efficiency, federal courts were reluctant to find the presumption rebutted absent strong, affirmative proof to the contrary, typically involving conclusive evidence that the stock price did not move in response to corrective disclosure.  For example, in Pirnik v. Fiat Chrysler Automobiles, N.V.,93 a district court in the Southern District of New York rejected the defendants' attempt to rebut the Basic presumption by simply criticizing the analysis and event study conducted by the plaintiffs' expert.  The court explained that the defendants' failure to prepare their own event study, alone, was sufficient basis for rejecting defendants' argument at that stage.94  Two district courts in the Central District of California came to the same conclusion in Angley v. UTi Worldwide Inc.95 and In re Banc of California Securities Litigation.96  In both cases, the defendants' sole argument for rebutting the presumption was to discredit the plaintiffs' expert, including whether the stock traded in an efficient market based on the rate at which the stock responded to news reports concerning the securities at issue.  These courts explained that criticism, without affirmative evidence of a lack of price impact, is not enough.97  Likewise, in Bing Li v. Aeterna Zentaris, Inc.,98 the defendants attempted to rebut the Basic presumption by criticizing the statistical confidence level of plaintiffs' expert's event study showing price impact—it was 84%, while standard industry practice is 95%.  A district court in the District of New Jersey rejected the defendants' argument, holding the defendant must affirmatively demonstrate no price impact to meet its burden.99

A district court in the Western District of Texas was similarly not receptive to defendants' efforts to rebut the Basic presumption.  In Rooney v. EZCORP, Inc.,100 the court concluded that the plaintiffs were entitled to the Basic presumption because, among other reasons, the defendant corporation's stock traded on the NASDAQ.  Defendants then attempted to rebut the presumption with an expert study purporting to show a lack of price impact following issuance of corrective disclosures.  The court held that this was insufficient.  According to the court, the Supreme Court in its second decision in Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II),101 allowed "defendants to rebut the Basic presumption by showing a lack of price impact following a misrepresentation, and not following a corrective disclosure."102  Because the defendants failed to provide "any evidence that the alleged misrepresentations did not affect the stock price," the court held that the plaintiffs were "entitled to rely on the presumption at the class certification stage."103   The district court's analysis, however, appears inconsistent with Halliburton II' which noted that the presumption may be rebutted with "evidence that the asserted misrepresentation (or its correction) did not affect the market price of the defendant's stock."104  The district court's decision is on appeal to the Fifth Circuit.

In addition to these decisions regarding the Basic presumption, federal courts considered the scope of the Affiliated Ute presumption applicable to cases that primarily involve omissions.  For example, in Schwab v. E*TRADE Financial Corp.,105 plaintiffs asserted that E*TRADE violated Section 10(b) of the Exchange Act in connection with its disclosure regarding a duty of "best execution"—i.e., the duty to buy or sell a security in the market that will achieve the most favorable price for the customer.106  The plaintiffs did not seek to invoke the Basic presumption.  Rather, they relied exclusively on the Affiliated Ute presumption on the ground that the case primarily involved E*TRADE's failure to disclose its non-compliance with best execution regulations.  The district court disagreed, finding that "the plaintiff's allegations were primarily misrepresentation claims rather than omission claims."107  The Second Circuit affirmed, rejecting the plaintiffs' theory as simply verbal gymnastics.  The court stated that the plaintiffs alleged that E*TRADE made many statements during the class period affirming its commitment to executing orders in compliance with the duty of best execution.  In light of these challenged misstatements, the court characterized plaintiffs' attempt to frame the action as involving primarily omissions as relying on "simply the inverse" of a misrepresentation claim:  the "only omission is the truth that the statement misrepresents."108  Notably, the court also emphasized that the rationale for the Affiliated Ute presumption is to give plaintiffs a mechanism for establishing reliance when it is impossible as a practical matter to prove that they relied on the alleged omissions.109  In view of the many affirmative misstatements at issue, this was not the case here.110

On the other hand, a district court in the District of Minnesota upheld the applicability of the Affiliated Ute presumption in West Virginia Pipe Trades Health and Welfare Fund v. Medtronic, Inc.111  In that case, the plaintiffs alleged that Medtronic, Inc., a medical device company, engaged in a scheme to conceal the adverse results of clinical studies of INFUSE—a device designed to induce development of new bone tissue in patients.  The plaintiffs alleged that Medtronic forged financial relationships with physician authors, who, in exchange for Medtronic's financial backing, omitted the dangers of INFUSE from articles published in medical journals.  Claiming that the case primarily involved omissions, the plaintiffs sought to invoke Affiliated Ute presumption (not the basic presumption).  The defendants opposed the plaintiffs' efforts to employ the presumption, arguing that the claims were actually "based on the journal articles' statements downplaying risks associated."112   The court disagreed, finding that the "statements in the journal articles" were not the focus of the pleadings.  Rather, "the crux of Plaintiffs' scheme liability claims is that Medtronic paid physicians to conceal adverse events and side effects associated with the use of INFUSE."113  Therefore, the relevant inquiry was whether "Medtronic's failure to disclose that the authors were allegedly paid to induce their complicity in concealing adverse events related to INFUSE was an affirmative representation or an omission."114

Likewise, a district court in the District of Nebraska held that a retail equity trader's complaint contained facts sufficient to plead a Section 10(b) fraud claim for purposes of class certification related to omissions involving a "best execution theory" of liability.  In Klein v. TD Ameritrade Holding Corp.,115 the plaintiffs claimed that TD Ameritrade algorithmically routed customer orders to venues that paid the company the most money regardless of whether the venue provided the most efficient execution of those orders.  The plaintiffs claimed that this practice violated "best execution" principles, which require brokers to "use reasonable efforts to maximize the economic benefit to the client in each transaction."116  The court held that the Affiliated Ute presumption of reliance applied:  "Like a securities dealer's failure to disclose its policy of overcharging investors, defendants' execution of investors' trades at the NBBO price, when better prices may have been available from alternative services, constitutes a potentially fraudulent common course of conduct from which reliance can be presumed."117  The court thus granted class certification, noting that the plaintiffs demonstrated that they could show on a class-wide basis that class members suffered economic loss by relying on omissions about TD Ameritrade's failure to provide best execution.118

Finally, a district court in the Southern District of New York considered a related defense to class-wide reliance applicable to Section 11 claims (relating to misleading statements in registration statements) in Yi Xiang v. Inovalon Holdings, Inc.119  It is an absolute defense to a Section 11 claim if the purchaser of a security "[knows] about the false statement at the time of acquisition."120  In a class certification context, predominance can be defeated if defendants demonstrate that class members had "differing levels of knowledge regarding the misleading nature of the statements or omissions when they invested sufficient to outweigh common issues."121  InYi Xiang, the plaintiffs alleged that the defendants failed to disclose in Inovalon Holdings, Inc.'s registration statement and prospectus that the company derived significant revenue from New York-based customers and thus would be subject to increased taxes in New York.  The defendants contended that individualized inquiries into investor knowledge would be necessary because (i) the company's public filings disclosed relevant information concerning its tax burden and (ii) certain investors conducted independent research into the company before purchasing its securities.  The court, however, rejected this argument, explaining that, where the defense has been held to be viable, defendants have shown that certain class members either participated in or had knowledge of the alleged conduct.122  The defendants in this case did not make such a showing, or even establish that the class consisted of an identifiable group of sophisticated investors such that it could be inferred.123  Notably, the court rejected the notion that publicly available information could support such a defense, as such information merely raises issues of knowledge "subject to generalized proof."124

While these decisions defy generalized observations about a pro-plaintiff or defendant trend, what is clear is that courts will carefully scrutinize a class plaintiff's opening evidence of market efficiency.  This trend follows from the Supreme Court's holding in Wal-Mart Stores, Inc. v. Dukes that putative class action plaintiffs must provide "significant proof" at the class certification stage that all the prerequisites to class certification under Rule 23 are satisfied.125  The decisions discussed above demonstrate that, in order for defendants to maximize their chances of defeating class certification, they need to present affirmative evidence either of a lack of price impact from corrective disclosure in order to rebut the Basic presumption or establish that Affiliated Ute is inapplicable in a case truly about misstatements.

B. Choosing the Lead Plaintiff and Class Representative

Under the PSLRA, after a plaintiff files a class action, it must issue public notice and, within 60 days, any class member may move the court to serve as lead plaintiff.126  The PSLRA directs the court to appoint as lead plaintiff the member of the class the court determines to be the "most adequate plaintiff," i.e., the member the court determines to be "most capable of adequately representing the interests of class members."127  While lead plaintiff often becomes the class representative, that result is not mandated by the PSLRA and is not always the outcome.128  Given the stakes, the battle among class members (and, in particular, their counsel) for these roles is often fierce.

Recent decisions confirm that the overriding factor in selecting the lead plaintiff is the financial interest of the prospective lead plaintiff, typically quantified as financial losses during the alleged class period.  Once superior losses are established, it is difficult for challengers to overcome, even if the difference is slight.  For example, in Hessefort v. Super Micro Computer, Inc.,129 a district court in the Northern District of California conferred lead plaintiff status on a pension fund that had $180,622 in losses during the class period over a challenger whose losses were $172,826.  The court explained that, although the difference was small, "any financial difference is meaningful in determining a lead plaintiff."130  Likewise, in Shenk v. Mallinckrodt PLC,131 a district court in the District of Columbia conferred lead plaintiff status on the pension fund with the greatest losses.  In so ruling, the court rejected the challenger's argument that the fund was subject to a unique defense because its counsel made political contributions to the Ohio Attorney General, who in turn selected counsel.  The court explained that there was no basis for finding that political contributions by law firms were illegal, or any nexus between the contributions and selection of counsel.132  In In re Sequans Communications S.A. Securities Litigation,133 a district court in the Eastern District of New York chose as lead plaintiff individuals who demonstrated greater losses than a competing institutional investor.  While recognizing that some courts have found a preference for institutional investors as lead plaintiff, the court held that "the preference is not embodied in the statutory text [of the PSLRA] in any respect."134

Notably, courts recognized that, for the purpose of establishing financial interest, it is permissible for a group of individuals to apply collectively.  A district court in the Eastern District of New York considered this question in Brady v. Top Ships Inc.135  There, the court granted lead plaintiff status to the "Top Ships Investor Group," which consisted of three individuals who collectively had the largest financial losses in the class period.  The court explained that, in deciding whether to aggregate individuals for consideration as lead plaintiff, courts consider (1) the existence of a pre-litigation relationship, (2) involvement in the litigation to date, (3) plans for cooperation, (4) sophistication, and (5) whether members chose outside counsel and not vice versa.136  The court found that these considerations weighed in favor of selecting the Top Ships Investor Group, citing the group's small size (three in number) and a declaration submitted by the group providing evidence of its ability to cohesively manage the litigation.137  Likewise, in In re Sequans, supra, the court saw no issue with grouping the losses of two individuals seeking to act as a collective lead plaintiff.138

After a lead plaintiff's motion for class certification is granted, there remains a question of who will serve as class representative under Rule 23.  Typically, it will be lead plaintiff.  But in City of Cape Coral Municipal Firefighters' Retirement Plan v. Emergent Biosolutions, Inc.,139 a district court in the District of Maryland explained that it need not always be the case and, in any event, a lead plaintiff may continue on in a case even if it is not appointed class representative.  In City of Cape Coral, the lead plaintiff filed a motion for class certification seeking to appoint itself and another class member (Geoffrey Flagstad) as class representatives.  The court granted the motion for class certification, but shortened the class period so that it excluded lead plaintiff but not Flagstad from the class.  The question for the court was whether someone who is not lead plaintiff may nonetheless be an adequate class representative.  The court's answer was yes.  Nothing in the PSLRA prohibits appointment of a class representative who has not been previously appointed as lead plaintiff.140  In addition, the court found that Flagstad would serve the class fairly and adequately in light of evidence that he had reviewed the complaint when it was filed, received regular reports and communications from counsel about the case, and was committed to participating in the case.141  Finally, the court held that lead plaintiffs would "remain in the case and retain their obligations under the PSLRA and Rule 23 even when they are not appointed class representatives"—although the court did not specify what "obligations" would remain post-class certification.142

These cases demonstrate that courts are reluctant to allow a class action to become bogged down over questions concerning the lead plaintiff and class representative.  Instead, courts will endeavor to move the process along using the simplest method possible to choose lead plaintiff (financial losses), and not crediting attacks on the presumptive choice absent serious evidence of inadequacy.

C. Defining the Class

In 2005, in Dura Pharmaceuticals, Inc. v. Broudo, the Supreme Court held that, to adequately allege the loss causation element of a Section 10(b) claim, a plaintiff must allege both that the stock price was inflated at the time of purchase and that the price "fell significantly after the truth became known in order to allege a cognizable loss."143  Dura thus blocks "in-and-out traders," who purchase stock during a class period but sell before the truth is revealed to the market, from asserting a Section 10(b) claim.

The question in In re Twitter Inc. Securities Litigation144 was whether in-and-out traders must be expressly excluded from the definition of the class.  A district court in the Northern District of California answered that question in the negative.  The court explained that Dura only relates to how loss causation has to be pled in the complaint; it does not affect the class definition at the certification stage.145  Moreover, the court could revisit the issue after discovery is complete pursuant to Federal Rule of Civil Procedure 23(c)(1)(C).146  In any event, whether or not the class is defined to exclude in-and-out traders is largely an academic question, as Dura suggests that they cannot recover damages if an action reaches such a stage.

A district court in the Southern District of New York recently reaffirmed a court's flexibility to modify class definitions and create sub-classes when it deems appropriate.  In In re SunEdison, Inc. Securities Litigation,147 the plaintiffs sought certification of a class of "[a]ll persons or entities who (i) purchased . . . SunEdison [] common stock between September 2, 2015 and April 4, 2016" in reliance on allegedly false statements published in Bloomberg about SunEdison's liquidity "or (ii) purchased shares of SunEdison [] preferred stock pursuant or traceable to the registered public offering on or about August 18, 2015[.]"148  Rather than certify the class as proposed, the court exercised its discretion under Rule 23 to split the class into two subclasses—one alleging violations of the Securities Act and one alleging violations of the Exchange Act.  The court explained that these modifications were justified because there was "little to no factual overlap" between the claims and the proposed class period for the Securities Act claims "extends beyond the date of statements that plaintiffs themselves have described as disclosures of the omitted material information."149


1   Cornerstone Research & Stanford L. Sch. Sec. Class Action Clearinghouse, Securities Class Action Filings: 2018 Year in Review (2019), https://www.cornerstone.com/Publications/Reports/Securities-Class-Action-Filings-2018-Year-in-Review.

2   Id.

3   Id.

4   See In re Trulia S'holder Litig., 129 A.3d 884, 891-99 (Del. Ch. 2016); see also, e.g., In re Walgreen Co. S'holder Litig., 832 F.3d 718, 725-26 (7th Cir. 2016); In re Xoom Corp. S'holder Litig., 2016 WL 4146425, at *3-5 (Del. Ch. Aug. 4, 2016); KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 759 n.97 (Del. 2019).

5   U.S. Sec. & Exch. Comm'n, Division of Enforcement, Annual Report FY 2018 (Nov. 2, 2018), https://www.sec.gov/files/enforcement-annual-report-2018.pdf.

6   Cornerstone Research & NYU Pollack Center for Law & Business, SEC Enforcement Activity:  Public Companies and Subsidiaries – Fiscal Year 2018 Update (Dec. 11, 2018), https://www.cornerstone.com/Publications/Reports/SEC-Enforcement-Activity-Public-Companies-and-Subsidiaries—Fiscal-Year-2018-Update.

7   Cornerstone Research & NYU Pollack Center for Law & Business, SEC Enforcement Activity:  Public Companies and Subsidiaries – Midyear FY 2018 Update (May 15, 2018), https://www.cornerstone.com/Publications/Reports/SEC-Enforcement-Activity-Public-Companies-and-Subsidiaries-Midyear-FY-2018-Update.

8   414 U.S. 538 (1974).

9   137 S. Ct. 2042 (2017).

10 138 S. Ct. 1800 (2018).

11 Id. at 1806.

12 Id. at 1807.

13 Id. at 1811.

14 Id. at 1808.

15 Id. at 1807.

16 Id. at 1812.

17 Fed. R. Civ. Proc. 23(c)(2).

18 China Agritech, 138 S.Ct. at 1815.

19 Id.

20 341 F. Supp. 3d 698 (S.D. Tex. 2018).

21 28 U.S.C. §1658(b).

22 In re BP, 341 F. Supp. 3d at 705-06.

23 15 U.S.C. §77m.

24 28 U.S.C. §1658(b).

25 15 U.S.C. § 78bb(f)(1).

26 15 U.S.C. § 78bb(f)(5)(B), (E).

27 138 S. Ct. 1061, 1066-80 (2018).

28 Id. at 1068.

29 Id. at 1067.

30 Id. at 1069.

31 Id. at 1073.

32 15 U.S.C. § 78bb(f)(1).

33 892 F.3d 1142 (11th Cir. 2018).

34 Id. at 1148.

35 Id. at 1149.

36 314 F. Supp. 3d 589 (D.N.J. 2018).

37 Id. at 603.

38 Id. at 610-11.

39 365 F. Supp. 3d 1050, 2019 WL 480495, at *6-8 (S.D. Cal. Feb. 7, 2019).

40 2018 WL 6719718 (Del. Ch. Dec. 19, 2018).

41 Sciabacucchi, 2018 WL 6719718, at *14, 18.       

42 Salzberg v. Sciabacucchi, 2019 WL 549039 (Del. Feb. 12, 2019).

43 15 U.S.C. § 78u-4(b).

44 15 U.S.C. § 78u-4(b)(2).

45 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314 (2007).

46 No. 17-1077.

47 564 U.S. 135 (2011).

48 Lorenzo v. Sec. & Exch. Comm'n, 872 F.3d 578, 587-88 (D.C. Cir. 2017).

49 Id. at 591.

50 Id. at 601.

51 Lorenzo v. SEC, 139 S. Ct. 1094 (Mar. 27, 2019).

52 Id. at 1100 (quoting 17 C.F.R. § 240.10b-5, 15 U.S.C. § 78j(b), and 15 U.S.C. § 77q(a)).

53 Id.

54 Id. at 1102.

55 Id.

56 Id. at 1104.

57 Id. at 1110.

58 Id. at 1110-1111 (Thomas, J., dissenting).

59 888 F.3d 399 (9th Cir. 2018).

60 See Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 207 (5th Cir. 2009); In re Digital Island Sec. Litig., 357 F.3d 322, 328 (3d Cir. 2004); SEC v. Ginsburg, 362 F.3d 1292, 1297 (11th Cir. 2004); Conn. Nat'l Bank v. Fluor Corp., 808 F.2d 957, 961 (2d Cir. 1987); Adams v. Standard Knitting Mills, Inc., 623 F.2d 422, 431 (6th Cir. 1980).

61 Varjabedian v. Emulex Corp., 52 F. Supp. 3d 1226, 1233 (C.D. Cal. 2016).

62 Varjabedian, 888 F.3d at 406 (quoting 15 U.S.C. § 78j(b)).

63 Id.

64 Emulex Corp. v. Varjabedian, --S.Ct.--, 2019 WL 1768137, at *1 (Apr. 23, 2019).

65 305 F. Supp. 3d 181 (D. Mass. 2018).

66 Id. at 209-10.

67 Id. at 214.

68 Id. at 215.

69 Id. at 218-220.

70 Id. at 218.

71 328 F. Supp. 3d 963 (N.D. Cal. 2018).

72 Id. at 979-81.

73 Id. at 982.

74 Id. at 967.

75 Id. at 968.

76 Id. at 989.

77 308 F. Supp. 3d 977 (S.D. Ind. 2018).

78 Id. at 989-90.

79 Id. at 995.

80 Id. at 998-99.

81 Fed. R. Civ. P. 23(b)(3).

82 Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (quoting 2 W. Rubenstein, Newberg on Class Actions § 4:50, pp. 196-197 (5th ed. 2012)).

83 Basic Inc. v. Levinson, 485 U.S. 224, 250 (1988).

84 Id. at 229-30.

85 Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 159 (2008) (citing Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54 (1972)).

86 879 F.3d 474 (2d Cir. 2018).

87 In re Goldman Sachs Grp., Inc. Sec. Litig., 2015 WL 5613150, at *7 (S.D.N.Y. Sept. 24, 2015).

88 Arkansas Teachers, 879 F.3d at 485.

89 Id. at 485.

90 325 F.R.D. 629, 641-46 (N.D. Cal. 2018).

91 Id. at 647.

92 Id.

93 327 F.R.D. 38 (S.D.N.Y. 2018).

94 Id. at 45.

95 311 F. Supp. 3d 1117 (C.D. Cal. 2018).

96 326 F.R.D. 640 (C.D. Cal. 2018).

97 Angley, 311 F. Supp. 3d at 1126; Banc, 326 F.R.D. 640 at 650.

98 324 F.R.D. 331, 345 (D.N.J. 2018).

99 Id. at 345.

100 2019 WL 691205, at *7 (W.D. Tex. Feb. 19, 2019).

101 573 U.S. 258 (2014).

102 Id. at *7.

103 Id. at *8 (emphasis added).

104 573 U.S. at 280-81 (emphasis added).

105 752 Fed. App'x. 56 (2d Cir. Oct. 26, 2018).

106 FINRA Manual Rule 5310(a)(1).

107 Schwab v. E*Trade Fin. Corp., 285 F. Supp. 3d 745, 753 (S.D.N.Y. 2018).

108  Schwab, 752 Fed. Appx. at 59.

109 Id.

110 Id.

111 325 F.R.D. 280 (D. Minn. 2018).

112 Id. at 289.

113 Id. at 288 (emphasis in original).

114 Id. at 289.

115  327 F.R.D. 283 (D. Neb. 2018).

116 Id. at 295.

117 Id.

118 Id. at 297.

119 327 F.R.D. 510 (S.D.N.Y. 2018).

120 DeMaria v. Andersen, 318 F.3d 170, 175 (2d Cir. 2003); see 15 U.S.C. § 77k(a).

121 Yi Xiang, 327 F.R.D. at 528.

122 Id.

123 Id.

124 Id. at 529.

125 564 U.S. 338 (2011); see also EQT Prod. Co. v. Adair, 764 F.3d 347 (4th Cir. 2014); Rodriguez v. Nat'l City Bank, 726 F.3d 372, 376 (3d Cir. 2013); M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 839, 841-44 (5th Cir. 2012); Ellis v. Costco Wholesale Corp., 657 F.3d 970, 974 (9th Cir. 2011).

126 15 U.S.C. § 78u-4(a)(3)(A).

127 15 U.S.C. § 78u-4(a)(3)(B)(i).

128 Fed. R. Civ. P. 23(a)(4).

129 317 F. Supp. 3d 1056 (N.D. Cal. 2018).

130 Id. at 1060.

131 300 F. Supp. 3d 279 (D.D.C. 2018).

132 Id. at 285.

133 289 F. Supp. 3d 416 (E.D.N.Y. 2018).

134 Id. at 422.

135 324 F. Supp. 3d 335.

136 Id. 345.

137 Id. at 347.

138 289 F. Supp. 3d at 422.

139 322 F. Supp. 3d 676 (D. Md. 2018).

140 Id. at 685.

141 Id. at 684.

142 Id. at 682.

143 544 U.S. 336, 347 (2005).

144 326 F.R.D. 619 (N.D. Cal. 2018).

145 Id. at 625.

146 Id.

147 329 F.R.D. 124 (S.D.N.Y. 2019).

148 Id. at 133.

149 Id. at 130.

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