Federal Circuits Grapple With Standard of Proof and the "Fraud-On-The-Market" Presumption At Class Certification Stage

In recent years, a split among the circuits has developed in federal securities class actions with regard to the procedure and standard of proof required to certify a class. At the class certification stage of the proceedings, district courts are instructed to conduct a “rigorous analysis” of the various requirements set forth in Federal Rule of Civil Procedure 23, while at the same time refrain from deciding issues that go to the substantive merits of the case. This tension, coupled with ambiguity in Circuit-level authority, has created uncertainty among many district courts. Most recently, the United States Court of Appeals for the Sixth Circuit granted interlocutory review in In re Abercrombie Fitch & Co., No. 09-0310 (6th Cir. Aug. 24, 2009), to consider this precise issue. The court, in its order granting review, noted that although the Sixth Circuit had yet to address the issue, its sister circuits, including the First, Second, Fourth and Fifth Circuits, have articulated various different standards to be applied.

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