Supreme Court Hears Argument on Determining Materiality at the Class Certification Stage on 10b-5 Securities Fraud Cases

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The U.S. Supreme Court heard oral argument on November 5, 2012, to determine the issue of whether a court should decide the issue of materiality in an SEC Rule 10b-5 misrepresentation case, before certifying a plaintiff class based on the fraud-on-the-market theory — and if so, whether the court should then allow the defendant to present evidence rebutting the presumption of the theory before certifying the class. At oral argument, the petitioner stressed the importance of gate-keeping the materiality issue at the class-certification stage and was pressed by the court to distinguish it from the merits-based analysis conducted at the trial and summary judgment stage. Although the petitioner maintained that a finding at the class-certification stage was not determinative upon the later stages of the trial, many of the justices seemed unconvinced.