The little-noticed impact of two distinct lines of decisions by the Supreme Court in recent years has given companies greater ability to limit the use of class action lawsuits and more effectively contest class certification. The current term may continue this trend, with four cases having the potential to significantly impact the ability of plaintiffs to bring or maintain class actions. Taken together, the Court's willingness to decide these issues and its decisions to date suggest that the Court is cutting back on plaintiffs' ability to successfully prosecute class actions while promoting defendant-companies' ability to avoid or defeat class actions.
The modern federal class action lawsuit gained prominence following Congress's revision of Federal Rule of Civil Procedure 23 ("Rule 23'') in the 1960s. Since that time, class actions have grown, both in terms of the number of filings and the amount of damages awarded, and have had a significant impact on how business is transacted. Proponents of class action litigation point to the fact that, where a defendant is alleged to have caused injury to a significant number of parties, class litigation increases efficiencies and promotes judicial economy by eliminating the need for repeatedly litigating the same or substantially similar claims. Additionally, class litigation helps to overcome the problem that de minimis recoveries often ' ''do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.' '' (Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (citation omitted)). Class actions, however, come at a high cost to American businesses and foreign companies that either operate here or have securities traded on a U.S. exchange. Because a class action aggregates the claims of dozens, hundreds, or even millions of individual plaintiffs, the potential for a massive judgment and (at the very least) a prolonged and expensive litigation process, places significant pressure on the defendant(s) to settle, even where the plaintiffs' claims are meritless. Additionally, class actions are notoriously lawyer-driven, with members of the plaintiffs' bar reaping substantial fees for the opportunity to "serve'' plaintiffs who often have little interest, and therefore, little involvement in the litigation.
Because of the controversial nature and potential impact of the class action lawsuit, there is significant interest when class action issues are adjudicated by the Supreme Court or one of the federal Courts of Appeal. Recent Supreme Court decisions on contractual arbitration provisions and class certification standards suggest the Court may further limit the ability of plaintiffs to file and maintain class action lawsuits in the future.
Contractual Arbitration Agreements
Arbitration is a method of dispute resolution generally involving one or more neutral third-parties-known as arbitrators-whose decision is binding on the parties. Arbitration, at least in theory, offers the potential for a faster and less-costly dispute resolution process than litigation. The discovery process, which can be enormously time-consuming and expensive to parties involved in litigation and especially in class actions, may be narrowly tailored in an individual arbitration (with limited document exchanges, interrogatories and depositions). Additionally, motion practice can be significantly curtailed in an arbitration proceeding.
The benefits of arbitration, including those referenced above, have induced companies to include mandatory arbitration provisions in consumer and commercial contracts. These arbitration clauses, in many cases, mandate that a potential plaintiff must pursue any and all claims against the company individually, rather than as a member or representative of a class. Not surprisingly, these provisions have faced substantial opposition from consumer rights advocates and plaintiffs' lawyers who pursue claims in the class action context. The Supreme Court has recently had the opportunity to review several decisions involving class arbitration issues, and its holdings may afford companies the ability to substantially decrease the number of class action lawsuits.
A. Stolt-Nielsen v. AnimalFeeds Int'l Corp.
In 2010, the Supreme Court was presented with the following question: can parties to a commercial contract that provides for mandatory arbitration of all disputes-but is silent on the issue of class procedures-be compelled to engage in class arbitration? (See Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010).) In Stolt-Nielsen, the Court found that a pre-dispute arbitration agreement that was silent on the issue of class procedures could not be interpreted to allow classwide arbitration. (See id. at 1762 ("a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so'') (emphasis in original)).
In the wake of Stolt-Nielsen, a circuit split has developed with respect to the appropriate interpretation of that decision. Consistent with what appears to be the holding in Stolt-Nielsen, the Fifth Circuit has determined that "arbitrators should not find implied agreements to submit to class arbitration'' where the arbitration clause is silent on this topic. (See Reed v. Florida Metro. Univ., Inc., 681 F.3d 630, 646 (5th Cir. 2012)). The Second and Third Circuits, on the other hand, have interpreted Stolt-Nielsen far more narrowly. These courts have held that where the parties' agreement is silent on the class arbitration issue, an arbitrator can permit classwide arbitration upon determining that the parties implicitly agreed to that procedure. (See Jock v. Sterling Jewelers Inc., 646 F.3d 113, 123 (2d Cir. 2011) ("no explicit agreement to permit class arbitration . . . is not the same thing as stipulating that the parties had reached no agreement on the issue''), cert. denied, 132 S. Ct. 1742 (2012); Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 222-23 (3d Cir.) ("No stipulation between [the parties] is conclusive of the parties' intent and, indeed, the parties dispute whether or not they intended to authorize class arbitration. Therefore, the arbitrator in this case was not constrained to conclude that the parties did not intend to authorize class arbitration''), cert. granted, No. 12-135, 2012 BL 321896 (U.S. Dec. 7, 2012)).
In order to distinguish Stolt-Nielsen, the Jock and Sutter courts relied on the fact that the parties in Stolt- Nielsen entered into a stipulation providing that there was no agreement on class procedures. This appears to be a distinction without a difference, however, as the same "silence'' was at issue in all three decisions. (See Jock, 646 F.3d at 128 (Winter, J., dissenting) (asserting that the facts in Jock were "on all fours'' with the Supreme Court's decision in Stolt-Nielsen)). Indeed, the arbitration provision in each case neither expressly authorized nor precluded classwide arbitration. The Supreme Court granted certiorari in Sutter on Dec. 7, 2012, presumably to resolve the circuit split regarding the interpretation of Stolt-Nielsen.
B. AT&T Mobility LLC v. Concepcion
One year after issuing its decision in Stolt-Nielsen, the Supreme Court considered a similar case, only this time in the context of a contract that expressly prohibited classwide arbitration. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), mobile phone customers brought a putative class action against AT&T alleging that the company had engaged in false advertising and fraud under California law. AT&T moved to compel arbitration under the terms of its pre-dispute contracts with the plaintiffs, all of which were standard form contracts (or contracts of adhesion). The plaintiffs opposed the motion, arguing that these contracts, which mandated that each plaintiff arbitrate its claims individually and expressly disallowed classwide arbitration, were unconscionable and unlawfully exculpatory under California law. The Supreme Court rejected this argument and upheld the validity of the class action waiver provision in the parties' agreements, ruling that the Federal Arbitration Act ("FAA''), a statute reflecting a ' ''liberal federal policy favoring arbitration,' '' preempted the conflicting California law: "The overarching purpose of the FAA . . . is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.'' (Id. at 1745, 1748 (citation omitted)).
As with Stolt-Nielsen, the federal appellate courts have taken seemingly inconsistent positions on how to interpret Concepcion. For example, in Italian Colors Restaurant v. American Express Travel Related Services Co. (In re American Express Merchants' Litigation), 667 F.3d 204, reh'g in banc denied, 681 F.3d 139 (2d Cir.), cert. granted, 133 S. Ct. 594 (2012), the Second Circuit held that an arbitration clause containing a class action waiver provision was unenforceable-even in light of Concepcion-because the "practical effect'' of that waiver was to prevent plaintiffs from bringing federal antitrust claims. (Id. at 215 n.6.) The Ninth and Eleventh Circuits, on the other hand, have interpreted Concepcion more broadly to uphold class action waiver provisions. The Eleventh Circuit has held that "in light of Concepcion, state rules mandating the availability of class arbitration based on generalizable characteristics of consumer protection claims . . . are preempted by the FAA, even if they may be â€Üdesirable.' '' (Cruz v. Cingular Wireless, LLC, 648 F.3d 1205, 1212 (11th Cir. 2011) (citation omitted).) The Ninth Circuit has criticized the Second Circuit's decision in AmEx, finding that the Second Circuit's conclusion was explicitly "foreclose[d]'' by Concepcion. (See Coneff v. AT &T Corp., 673 F.3d 1155, 1159-60 & n.3 (9th Cir. 2012) ("To the extent that the Second Circuit's opinion is not distinguishable, we disagree with it and agree instead with the Eleventh Circuit'')).
On May 29, 2012, the Second Circuit denied the defendant's motion for rehearing en banc in AmEx. In that decision, several Second Circuit judges, including Chief Judge Jacobs and Judges Cabranes and Raggi, dissented on the ground that the panel had improperly narrowed the holding of Concepcion and, in so doing, created an "unwarranted'' circuit split. (See 681 F.3d at 146-49.) On November 9, 2012, the Supreme Court granted the defendant's petition for certiorari (presumably to resolve this circuit split).1
Class Certification Standards
Under Rule 23, which governs the procedures applicable to class action litigation in federal court, "at an early practicable time'' after a lawsuit has commenced, "the court must determine by order whether to certify the action as a class action.'' (Fed. R. Civ. P. 23(c)(1)(A)). To prevail on certification, the plaintiffs must first show that: "(1) the class is so numerous that joinder of all [class] members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the [class] representative[s] are typical of [those of] the class; and (4) the [class] representative[s] will fairly and adequately protect the interests of the class.'' (Fed. R. Civ. P. 23(a)).
Once these four threshold requirements have been met, a plaintiff must also convince the court that one of the requirements in subdivision (b) of Rule 23 has been satisfied, that: (1) prosecution of separate actions risks inconsistent adjudications and incompatible standards of conduct; (2) defendants have acted or refused to act on grounds generally applicable to the class; or (3) there are common questions of law or fact that predominate over any individual class member's questions, and that a class action is superior to other methods of adjudication.
The impact of the court's decision to certify a class is difficult to understate. The denial of a class certification motion often sounds the "death knell'' of the litigation (once the appeal of that decision has been exhausted) because putative class members generally lack the resources (or are not sufficiently financially interested) to continue prosecuting the action as individual plaintiffs. On the other hand, a grant of class certification usually will place tremendous pressure on the defendant(s) to settle, even where viable defenses exist, because of the costs of discovery and the potential for an extravagant damages award should the plaintiffs prevail at trial.
Class action defendants have long argued that where the merits of the plaintiffs' claims overlap with the elements of Rule 23, a district court must rigorously analyze those merits issues to ensure that Rule 23 is satisfied and certification is appropriate. Class action plaintiffs, on the other hand, frequently argue that it is inappropriate to reach merits issues at the class certification stage, pointing to, among other things, the liberal certification standard articulated in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974), where the Court found that there is "nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action.''
In 2011, the Supreme Court considered certain issues regarding merits consideration at the class certification stage in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). This term, the Supreme Court will review two additional decisions involving the extent to which a court should address class certification issues that also involve the merits of the plaintiffs' claims.
A. Wal-Mart Stores, Inc. v. Dukes
In 2001, six female Wal-Mart employees sued their employer in the Northern District of California alleging that the company had violated Title VII of the Civil Rights Act of 1964 by paying female employees less and promoting women less often than their male counterparts. The proposed class had approximately 1.5 million members. Wal-Mart opposed class certification on the grounds that the plaintiffs could not satisfy the "commonality'' requirement of Rule 23(a) because there was not a single, countrywide Wal-Mart policy to which the plaintiffs objected. The existence of such a policy also was an element of the plaintiffs' Title VII claim. At the class certification hearing, the plaintiffs introduced opinions from sociological and statistical experts to buttress their argument that the alleged discrimination at Wal-Mart stores in different regions of the country were sufficiently similar to satisfy the commonality requirement in Rule 23(a).
The district court granted class certification, finding that Wal-Mart's argument regarding "commonality'' required the court to delve too deeply into the merits of the plaintiffs' claims. (See Dukes v. Wal-Mart, Stores, Inc., 222 F.R.D. 137, 144 (N.D. Cal. 2004) (' ''although some inquiry into the substance of a case may be necessary to ascertain satisfaction of the commonality and typicality requirements of Rule 23(a), it is improper to advance a decision on the merits to the class certification stage' '') (citation omitted), aff'd, 603 F.3d 571 (9th Cir. 2010), rev'd, 131 S. Ct. 1541 (2011)).
The Ninth Circuit affirmed, but in a 5-4 decision, the Supreme Court reversed. Justice Scalia, writing for the majority, held that a "rigorous analysis'' of whether the prerequisites of Rule 23(a) have been satisfied "will entail some overlap with the merits of the plaintiff's underlying claim. That cannot be helped.'' (131 S. Ct. at 2551). The Court went on to conduct an in-depth analysis of the plaintiffs' evidence of a common pattern or practice of discrimination (including the testimony provided by the plaintiffs' expert witnesses), even though that analysis was relevant to the merits of plaintiffs' Title VII discrimination claims, because such an inquiry was necessary to assess "commonality'' under Rule 23(a). (Id. at 2552 ("In this case, proof of commonality necessarily overlaps with [plaintiffs'] merits contention that Wal-Mart engages in a pattern or practice of discrimination. That is so because, in resolving an individual's Title VII claim, the crux of the inquiry is â€Üthe reason for a particular employment decision' '') (citation omitted)).2 After engaging in that analysis, the Court determined that the plaintiffs had failed to provide "convincing proof of a companywide discriminatory pay and promotion policy,'' and therefore had failed to establish the existence of a common question of law or fact as required by Rule 23(a). (Id. at 2556-57).
B. Comcast Corp. v. Behrend
In 2003, cable television subscribers sued Comcast Corporation in the United States District Court for the Eastern District of Pennsylvania based on allegations that Comcast colluded with Time Warner Cable, Adelphia Communications, and other cable providers to apportion cable subscribers among the respective cable providers based on geographic location in violation of the Sherman Act. Comcast argued against class certification on the grounds that the plaintiffs could not establish "that the questions of law or fact common to class members predominate over any questions affecting only individual members.'' Fed. R. Civ. P. 23(b)(3). Specifically, Comcast contended that the putative class of 2 million customers covered more than 600 franchise areas that faced different competitive conditions, and consequently, there could be no common methodology for awarding damages to the entire class.
The district court held an evidentiary hearing on the plaintiffs' motion for class certification, at which the plaintiffs offered an expert witness to establish classwide damages. Following that hearing, the district court certified the proposed class, holding that the plaintiffs' theory of class-wide damages was "plausible'' and ' ''susceptible to proof at trial through available evidence common to the class.' '' (Behrend v. Comcast Corp., 264 F.R.D. 150, 155 (E.D. Pa. 2010) (citation omitted), aff'd, 655 F.3d 182 (3d Cir. 2011), cert. granted in part, 133 S. Ct. 24 (2012)). The district court further stated that "[a] plaintiff need not establish by a preponderance of the evidence the merits of its claims at the class certification stage.'' (Id.)
On appeal, the Third Circuit acknowledged that the antitrust impact element of the plaintiffs' Sherman Act claim (i.e., a plaintiff's "individual injury'') overlapped with the predominance prong of Rule 23(b), and therefore had to be evaluated in connection with the plaintiffs' class certification motion. The Third Circuit nonetheless declined to resolve the issue of whether the plaintiff had offered adequate proof of antitrust impact, reasoning that although a "district court must conduct a â€Ürigorous analysis' of the evidence and arguments in making the class certification decision,'' such an analysis need only ' ''include a preliminary inquiry into the merits.' '' (655 F.3d at 190 (citation omitted; emphasis added)). Like the district court before it, the Third Circuit held that it was only required to determine whether the plaintiffs' theory was "capable of proof through evidence common to the class.'' (Id. at 192 (emphasis added)).
The Supreme Court granted Comcast's petition for certiorari and heard argument on Nov. 5, 2012.3
C. Amgen, Inc. v. Connecticut Retirement Plans & Trust Funds
The Supreme Court is also currently reviewing another federal appellate decision with significant implications for class certification issues. In Amgen, Inc. v. Connecticut Retirement Plans & Trust Funds, 132 S. Ct. 2742 (2012), investor plaintiffs brought suit against Amgen, Inc. in the United States District Court for the Central District of California, alleging that the company made false and misleading statements about two of its anti-anemia drugs in violation of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The plaintiffs moved to certify an investor class, invoking-in order to establish the predominance requirement of Rule 23(b)-the fraud-on- the-market presumption of reliance articulated by the Supreme Court in Basic Inc. v. Levinson, 485 U.S. 224 (1988).4 Importantly, while the plaintiffs presented evidence on the efficiency of the market for Amgen stock, they did not provide any evidence regarding the materiality of Amgen's alleged misrepresentations. Amgen opposed class certification, arguing that the plaintiffs could not demonstrate that the company's alleged misstatements were material. Amgen asserted that the plaintiffs were therefore not entitled to the fraud-onthe- market presumption of reliance, and could not establish that common questions predominated as required by Rule 23(b). The district court rejected Amgen's argument, holding that "the inquiries Defendants urge the Court to make . . . concern the merits of the case [and] [a]ccordingly, delving into those issues is inappropriate at this time.'' (Connecticut Ret. Plans & Trust Funds v. Amgen, Inc., No. CV 07-2536 PSG, 2009 BL 294840, at *11 (C.D. Cal. Aug. 12, 2009), aff'd, 660 F.3d 1170 (9th Cir. 2011), cert. granted, 132 S. Ct. 2472 (2012)).
On Amgen's appeal, the Ninth Circuit acknowledged that: (i) the plaintiffs had to show the existence of common questions of law or fact regarding reliance in order to obtain class certification; and (ii) it had previously held that the fraud-on-the-market presumption of reliance is only available where the alleged misrepresentations are material. (See 660 F.3d at 1176-77.) The Ninth Circuit nonetheless held that the plaintiffs were not required to present any evidence regarding the materiality of the alleged misrepresentations to satisfy Rule 23, at least in part because materiality involved the merits of the plaintiffs' claims. (Id. at 1177 ("a plaintiff need not prove materiality at the class certification stage to invoke the [fraud-on-the-market] presumption; materiality is a merits issue to be reached at trial or by summary judgment motion if the facts are uncontested'')).5
Thus, like the Third Circuit in Comcast, the Ninth Circuit in Amgen effectively declined to resolve issues of fact that were relevant to the issue of whether all of the prerequisites of Rule 23 had been satisfied because those issues also implicated the merits of the plaintiffs' claims.
As in Comcast, the Supreme Court granted Amgen's petition for certiorari, and heard argument on Nov. 5, 2012.
Conclusion
The Supreme Court's decisions in Stolt-Nielsen and Concepcion demonstrate that the current configuration of the Court is unapologetically in favor of promoting arbitration as an alternative to class action litigation. While these decisions dealt with arbitration clauses in consumer and/or commercial contracts, the Court's logic potentially could be applied in other contexts as well, including to brokerage customers or corporate stockholders. If the Court continues on its current path and reverses the Second Circuit's decision in AmEx and the Third Circuit's decision in Sutter, those rulings would further limit the ability of individual plaintiffs to pursue class remedies, both in the context of litigation and in arbitration.
The Court's decision in Dukes also serves as a significant hurdle that plaintiffs must overcome to obtain classwide relief. To the extent that the Court follows the reasoning set forth in Dukes in Comcast and Amgen, plaintiffs could be required in many instances to litigate issues regarding the merits of their claims in what could amount to mini-trials at the class-certification stage. Such a heightened standard would arm defendants with powerful new arguments for opposing class certification, and force plaintiffs' class counsel to give greater consideration to the merits of their claims at the outset of the case, rather than merely hoping to pass through the class certification phase and force a settlement.
Footnotes
1. Following its decisions in Stolt-Nielsen and Concepcion, the Supreme Court decided CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), a consumer class action against a credit card marketer alleging violations of the Credit Repair Organizations Act ("CROA''). Like the plaintiffs in Concepcion, the plaintiffs in CompuCredit had signed pre-dispute contracts agreeing that any claims arising out of or relating to the contractual relationship would be resolved through binding arbitration. The contracts were silent on the issue of class procedures. At issue in CompuCredit was whether this arbitration requirement violated the non-waiver and disclosure provisions of CROA, which provide in relevant part that: "You have a right to sue a credit repair organization that violates [CROA].'' (Id. at 669 (emphasis added)). The Supreme Court held that the mandatory arbitration clauses in the plaintiffs' contracts did not violate CROA's non-waiver provision because the statutory prescription of civil liability (i.e., the "right to sue'') was satisfied by arbitration. (Id. at 671.) The Court concluded that "[i]t takes a considerable stretch to regard the nonwaiver provision as a â€Ücongressional command' that the FAA not apply.'' (Id.) The CompuCredit holding could make way for the inclusion of arbitration and, by extension, class waiver clauses in corporate organizational documents or registration statements, thereby precluding class actions by investors, without running afoul of the non-waiver provision in Section 29(a) of the Securities Exchange Act, which is quite similar to the nonwaiver provision in CROA. See Jason M. Halper et al., Mandatory Arbitration as a Substitute for Private Securities Class Actions, N.Y.L.J., June 14, 2012, at 5, col. 2.
2. The Dukes opinion could have significant ramifications on how expert testimony is evaluated at the class certification stage. Consistent with many pre-Dukes decisions, the district court had admitted expert testimony at the class certification hearing without evaluating whether such testimony satisfied the admissibility standards articulated in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Federal Rule of Evidence 702. While not ruling directly on the issue, Justice Scalia wrote that "[t]he District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. . . . We doubt that is so.'' (131 S. Ct. at 2553-54 (citation omitted; emphasis added)). Following Dukes, courts have applied Daubert and Rule 702 in determining the admissibility of expert testimony at the class certification stage. (See, e.g., Cholakyan v. Mercedes-Benz, USA, LLC, 281 F.R.D. 534, 541-42 (C.D. Cal. 2012)).
3. There is an interesting aspect of the Comcast appeal that the Supreme Court could seize upon to decide the case without resolving the apparent conflict with Dukes. After Comcast filed its petition for certiorari, the parties engaged in settlement talks, which allegedly resulted in a signed settlement term sheet. Two weeks later, the parties received notice that certiorari had been granted, and Comcast allegedly refused to finalize the settlement agreement. The plaintiffs now contend that the settlement agreement mooted Comcast's appeal and that certiorari was improvidently granted.
4. In order to invoke the fraud-on-the-market presumption, a plaintiff must establish that the defendant made a "public, material misrepresentation[]'' and that the shares at issue were "traded on an efficient market.'' (Id. at 248 & n.27; id. at 241-42 (' ''The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company's stock is determined by the available material information regarding the company and its business . . . . The causal connection between the defendants' fraud and the plaintiffs' purchase of stock in such a case is no less significant than in a case of direct reliance on misrepresentations' '') (quoting Peil v. Speiser, 806 F.2d 1154, 1160-61 (3d Cir. 1986)).
5. The Supreme Court recently considered another fraud-onthe- market question in Erica P. John Fund, Inc. v. Halliburton, 131 S. Ct. 2179 (2011), where the Court reviewed a determination by the Second Circuit that a plaintiff alleging securities fraud must prove loss causation-that the plaintiff's injury was a direct result of the defendant's alleged misrepresentation(s)-at the class certification stage. There, the Supreme Court unanimously rejected the Second Circuit's determination that the plaintiff must prove loss causation in order to trigger the fraud-on-the-market presumption of reliance. (Id. at 2185-86). Although superficially similar, Erica P. John Fund is unlikely to affect the Court's ruling in Amgen. The Erica P. John Fund decision noted that the Supreme Court had "never before mentioned loss causation as a precondition for invoking Basic's rebuttable presumption of reliance,'' and that "[l]oss causation addresses a matter different from whether an investor relied on a misrepresentation, presumptively or otherwise, when buying or selling a stock.'' (Id. at 2186.) Materiality, on the other hand, is a precondition to the invocation of the fraud-on-the-market presumption under Basic. (See Basic, 485 U.S. at 247 ("Because most publicly available information is reflected in market price, an investor's reliance on any public material misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5 action'') (emphasis added); id. at 248 n. 27 (reciting the elements that a plaintiff must allege and prove in order to invoke the fraud-onthe- market presumption, including the materiality of the alleged misrepresentations)).
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