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Cutting-Edge Issues in Class Action Law and Policy

Despite Wal-Mart Stores v. Dukes, Ninth Circuit approves statistical sampling to prove that an “unofficial” common policy exists

Posted in Class Certification, Commonality, Employment

There seem to be two prevailing conceptions of class actions.  In one view, a class action is a way of determining many similar claims at once by evaluating common evidence that reliably establishes liability (and lays a ground work for efficiently calculating damages) for each class member.  That is, the class device produces the same results as individual actions would, but more efficiently.  In the other view—one we consider misguided—a “class” of plaintiffs complaining about similar conduct can have their claims determined through statistical sampling even if no common evidence will provide a common answer to common factual or legal questions. Instead, this theory holds, the results of mini-trials can simply be extrapolated to the entire class, even if individual results would vary widely.

Last week, the Ninth Circuit took a step deeper into the second camp in Jimenez v. Allstate Insurance Co. (pdf), delivering a ringing endorsement of statistical sampling as a way to establish liability as well as damages.

Fourth Circuit puts teeth into ascertainability, commonality, and predominance requirements for class certification

Posted in Ascertainability, Class Certification, Commonality, Predominance

Sometimes it’s hard to know who’s in a class without substantial individualized inquiries.  Can a court certify a class of persons with allegedly similar injuries by pigeonholing the question of class membership as a question of damages to be determined later?  Not so fast, the Fourth Circuit held in EQT Production Co. v. Adair (pdf).  A class that is not ascertainable ex ante is not a class at all.

And the Fourth Circuit also decided another question that has led to different answers from different courts.  When the rule of law proposed by plaintiffs would permit a controlling question to be answered in common for the class, but the competing rule proposed by defendants would require individualized inquiries, can the trial court treat the dispute of law as itself a common question supporting class certification?  On this point, the Fourth Circuit held that the court must first determine the correct rule and then decide whether it is susceptible to a common answer.  In a recent post, we described a California Court of Appeal decision taking the contrary view; the California Supreme Court has since denied review. (We submitted an amicus letter (pdf) on behalf of the U.S. Chamber of Commerce supporting the petition.)

Finally, the Fourth Circuit outlined a qualitative rather than a quantitative, issue-counting approach to predominance.  Under this approach, it is not how many circumstances are common among class members, but whether the common circumstances or other, individualized ones will be more significant in determining class members’ entitlement to relief.

EQT arises from a series of disputes about who was entitled to royalties for coal-based methane, a coal byproduct that is an energy source in its own right; wells are drilled to extract methane gas. The owners of surface rights to real property often sever coal mining rights (the “coal estate”) from subsurface gas rights (the “gas estate”). The disputes in EQT focus on who owns the rights to coal-based methane when the owner of the gas estate and the owner of the coal estate for a particular tract differ.  The plaintiffs are gas estate owners who assert that they are entitled to royalties for coal-based methane.

The district court certified five classes.  Four consist of current and former gas estate owners who were never paid coal-based methane royalties; the members of the fifth class assert that they were underpaid.  The Fourth Circuit reversed all five certifications.

First, the court of appeals held that you can’t certify a class if you can’t tell who is in it.  The Fourth Circuit held that the district court had not properly considered whether identifying class members “would render class proceedings too onerous” in light of a variety of “heirship, intestacy, and title-defect issues” affecting many potential class members’ claims. The Fourth Circuit understood ascertainability to require a way to “readily identify the class members in reference to objective criteria”—which means something less individualized than tract-by-tract ownership analyses.

Plaintiffs often like to recharacterize the deficiencies in a class definition as pertaining only to damages calculations—and that’s what the EQT plaintiffs did to get around their inability to determine who was in the class and who was out.  Plaintiffs contended that it would not be necessary to resolve the individualized ownership issues until the damages phase, but the court of appeals disagreed:  “The fact that verifying ownership will be necessary for the class members to receive royalties does not mean it is not also a prerequisite to identifying the class.”

Second, the court held that a dispute over the dispositive rule of law is not automatically a common issue if one competing rule could be resolved only upon individualized inquiries.  In certifying the four classes who had never been paid royalties, the district court found that the overriding common issue was a dispute over whether Virginia law entitled the owners of the gas estate to coal-bed methane royalties.  One legal rule would entitle all gas-estate owners to those royalties; the other would make the answer hinge on particular deed language.  The Fourth Circuit held that the district court should have resolved the question, and went ahead to hold that deed language was paramount.  The court of appeals left open the possibility of subclasses organized around deeds for which the relevant language was materially similar.

Finally, the Fourth Circuit rejected the finding of predominance for the class of owners claiming underpayment. On that issue, the district court had pointed to a large number of uniform practices by the defendants that were relevant to the royalty calculation.  The Fourth Circuit rejected this quantitative approach because the dispositive questions again hinged on the specific contract language, again recognizing that subclasses perhaps could be constructed around materially similar terms.

EQT provides some welcome structure and discipline to class certification analysis. Let’s hope that other courts of appeals will provide similar guidance.

Getting to “yes”: Ninth Circuit provides guidance on formation of “browsewrap” arbitration agreements

Posted in Arbitration

In the three years since AT&T Mobility LLC v. Concepcion, courts have largely been rejecting substantive attacks on arbitration agreements that waive class actions.  By contrast, in some cases plaintiffs have succeeded in avoiding arbitration by arguing that they never agreed to it in the first place.

The latest case to address such questions of contract formation comes from the Ninth Circuit, which held last week in Nguyen v. Barnes & Noble, Inc. that  plaintiff Kevin Nguyen had not agreed to arbitration because he and similarly situated consumers lacked sufficient notice of the company’s online “browsewrap” terms of use.  Because the Ninth Circuit applied New York law governing contract formation—and because the court indicated that it would have come to the same conclusion under California law—the decision is an important one for all businesses that engage in online commerce in the United States.

In the opinion, the Ninth Circuit distinguished between the familiar “clickwrap” process—in which a user affirmatively accepts terms by, for example, clicking “I agree” after receiving notice of the terms—and “browsewrap,” in which a company makes the relevant terms available to users on the web site (usually by providing a hyperlink), but does not require a customer to record his or her assent to the terms.

In Nguyen, each page on Barnes and Noble’s web site included a link to the applicable terms of use. If followed, the link would direct a user to the terms, which provided that a user accepts the terms by “visiting any area in the Barnes & Noble.com Site, creating an account, [or] making a purchase.” The terms, among other things, provided that parties would resolve their disputes by arbitration on an individual basis.

In determining whether Nguyen had agreed to those terms, the court of appeals focused on whether he had received “reasonable notice” of them.  The court pointed out that Nguyen was not “required to affirmatively acknowledge the Terms of Use before completing his online purchase” —the “clickwrap” model.  Nor was there “any evidence in the record that Nguyen had actual notice of the Terms of Use.”  The court said, however, that if there had been “actual notice”—presumably meaning proof that the plaintiff had in fact read (or at minimum was aware of) the terms—“the outcome of this case might be different,” because “courts have consistently enforced browsewrap agreements where the user had actual notice of the agreement.”

But in the absence of “actual notice,” the Ninth Circuit  held, “the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.” The answer to that question depends on website “design and content,” including the “conspicuousness and placement of the ‘Terms of Use’ hyperlink” and other design characteristics. Browsewrap agreements will not be enforceable, according to the court of appeals, when the hyperlink is “buried at the bottom of the page or tucked away in obscure corners of the website where users are unlikely to see it.” In the court’s view, “consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”

Certainly not every court would agree with the Ninth Circuit’s approach to “browsewrap” agreements.  As the court itself admitted, Barnes & Noble’s web site provided a “conspicuous hyperlink” to the terms of use “on every page of the website”—and in some places, the “link appears either directly below the relevant button a user must click on to proceed in the checkout process or just a few inches away.”  While the Ninth Circuit held that even this degree of notice is insufficient under California and New York law, the decisions of other courts suggest that they would take a different approach.

Nonetheless, Nguyen is likely to have a significant impact on the enforceability of online contracts, both in the Ninth Circuit and elsewhere.   Accordingly, businesses may wish to consider reviewing their online contracting processes; in many cases, it may be relatively straightforward to adopt changes that satisfy the Nguyen court’s concerns.

ABA Journal Accepting Nominations for Blawg 100

Posted in Uncategorized

The ABA Journal is putting together its annual list of the 100 best legal blogs.  There are many great legal blogs out there; if you think this is one of them, we’d be grateful if you would consider nominating us for the list.

To put in a good word for us, please use this form on the ABA Journal’s website.  The deadline for nominations is August 8, 2014.

Many thanks in advance for your support!

Third Circuit to Consider FTC’s Authority Over Data Security Standards in FTC v. Wyndham

Posted in Class Action Trends

We have written previously about the FTC’s action arising out of the data breach suffered by the Wyndham hotel group, and the company’s petition for permission to pursue an interlocutory appeal regarding the FTC’s use of its “unfairness” jurisdiction to police data security standards. On Tuesday, the Third Circuit granted Wyndham’s petition. Even the FTC had agreed that the “the legal issues presented are ‘controlling question[s] of law,’ and they are undoubtedly important.”  Yesterday’s ruling promises that these questions soon will be considered by the Third Circuit.

Class Action Fairness Act Roundup

Posted in Motions Practice

Nine years after the Class Action Fairness Act of 2005 (“CAFA”) was enacted, parties continue to fight over when federal jurisdiction over significant class and mass actions is proper.

In this post, we provide a rundown of some of the most important recent cases involving CAFA.

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Upcoming Class Action Seminar in Washington, DC

Posted in Class Action Trends

Later this week, DRI—an important professional organization that serves as a leading voice for the defense bar and in-house counsel—will once again hold its annual seminar on class actions in Washington, D.C.  I will be one of the speakers, and will be discussing recent developments affecting arbitration and class actions.  I plan to preview some of the issues that I’ll be discussing on the blog in the weeks to come.   More information about the seminar is available here.  I look forward to seeing readers of our blog and other friends and colleagues.

Wyndham Seeks Immediate Appeal Over Whether FTC Has Authority To Regulate Data Security

Posted in Class Action Trends

We have written previously about FTC v. Wyndham Worldwide Corp., currently pending in federal district court in New Jersey, and its potential significance for data security class actions. A recent opinion in that case has brought it back into the news—and made clear that the stakes are as high as ever.

Over the FTC’s opposition, the district court certified an interlocutory appeal to the Third Circuit regarding its earlier denial of Wyndham’s motion to dismiss. Specifically, the district court certified two questions of law for appellate review: (1) whether the FTC has the authority under Section 5 of the FTC Act to pursue an unfairness claim involving data security; and (2) whether the FTC must formally promulgate regulations before bringing such an unfairness claim. Here is a copy of Wyndham’s petition to the Third Circuit to accept the certified appeal.

ERISA Stock-Drop Class Actions: As One Door Opens for Plaintiffs, Another Closes

Posted in Employment, Securities, U.S. Supreme Court

In ERISA stock-drop class actions, plaintiffs routinely allege that their employers breached a duty of prudence by permitting employees to invest their retirement assets in their company’s stock.  Until today, defendants typically defended against such claims by invoking a judicially crafted presumption that offering company stock was prudent.  Today, in Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (pdf), the Supreme Court rejected that presumption.

But all hope is not lost for stock-drop defendants.  Much of the work previously done by the presumption of prudence will now be done by the substantive requirements of the duty of prudence.  The Court offered guidance as to what plaintiffs must demonstrate to survive a motion to dismiss—and the standards suggested by the Court will not be easy to satisfy.

As a starting point, fiduciaries who administer retirement plans governed by the Employee Retirement Income Security Act (ERISA) owe a duty of prudence to plan participants.  See 29 U.S.C. § 1104(a).  To comport with that duty, fiduciaries are generally required to “diversify[] the investments of the plan so as to minimize large losses, unless under the circumstances it is clearly prudent not to do so.”  Id. § 1104(a)(1)(C).  But because Congress wanted to encourage employees to invest in their own companies, it waived the duty of prudence “to the extent it requires diversification” for fiduciaries of an “employee stock ownership plan” (ESOP).  Id. § 1104(a)(2).

Several federal courts of appeals had inferred from this exemption that an ESOP fiduciary’s decision to hold or buy employer stock should be presumed prudent, and that the fiduciary could not be held liable unless the company was in such dire financial straits that its viability as a going concern was in doubt.  In today’s unanimous opinion by Justice Breyer, the Court held that ERISA’s text provides no presumption—in particular, although Section 1104(a)(2) expressly exempts ESOP fiduciaries from the duty of prudence, to the extent that duty requires diversification, it makes no reference to any special presumption.

Having resolved the question presented, the Court proceeded to “consider more fully one important mechanism for weeding out meritless claims, the motion to dismiss for failure to state a claim,” and explained how, in light of the substance of the duty of prudence, motions to dismiss should be assessed.

The Court effectively ruled out stock-drop claims based on publicly available information, invoking its two-day-old decision in Halliburton Co. v. Erica P. John Fund, Inc. (pdf) (previously discussed on the blog), in which the Court opined that investors may reasonably rely on the market to incorporate public information into a stock’s price.  For circumstances in which fiduciaries are alleged to possess nonpublic information that suggests it was imprudent to hold company stock, the Court held that “a plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.”  The Court emphasized that ERISA fiduciaries cannot be required to trade on insider information in violation of the securities laws.  And the Court cast doubt on other theories sometimes offered by ERISA stock-drop plaintiffs—that fiduciaries should have ceased making new investments in company stock or disclosed the previously nonpublic information.  The Court noted that ERISA’s requirements must be in harmony with “the complex insider trading and corporate disclosure requirements imposed by the federal securities laws” and the objectives of those laws, and indicated that ERISA’s fiduciary breach requirements do not require plan fiduciaries to take actions that “would do more harm than good to the fund by causing a drop in the stock price and a concomitant drop in the value of the stock already held by the fund.”

The Court’s decision fundamentally reconfigures the landscape for ERISA stock-drop class actions.  Although the rejection of the presumption of prudence is likely to result in more suits against retirement plan fiduciaries, the Court’s substantive guidance arms class-action defendants with potent defenses that can be invoked at the motion-to-dismiss stage.  The main issue left open by the Court—when, if at all, fiduciaries must act on nonpublic information—will be litigated extensively in the lower courts, and may ultimately percolate back up to the Supreme Court again.

Why The Supreme Court’s Decision in Halliburton Is Bad News For Investors And The Public

Posted in Class Certification, Securities, U.S. Supreme Court

Yesterday’s Supreme Court ruling in the Halliburton case leaves the securities class action system pretty much unchanged. And that isn’t because the Supreme Court examined the system and concluded it is working well and makes sense.  Instead,  the Court simply didn’t address those questions.

That’s very good news for the lawyers who make their living representing plaintiffs and defendants in these cases.  The gravy train will continue:  $1.1 billion in fees and expenses awarded to plaintiffs’ counsel in 2013, with hourly rates up to $1370.  Defense counsel likely took home a multiple of that amount, given that securities class actions routinely target multiple defendants with separate counsel, and that defense fees pile up in those cases that don’t reach the settlement stage.

But it’s very bad news for investors, who are forced to foot the bill for this economically-irrational litigation system that—in the words of Joseph Grundfest, former SEC Commissioner and current Stanford Law professor— “is broken” because it “fails to efficiently . . . deter fraud and fails [to] rationally compensate those harmed by fraud.”  Professor Donald Langevoort of Georgetown has said: “Were this system sold as an insurance product, consumer-protection advocates might have it banned as abusive because the hidden costs are so large.”  (More information about the dysfunctionality of the securities class action system is collected here.)

Indeed, the Court’s decision almost certainly will make this litigation even more expensive by increasing the scope of the class certification inquiry (while not changing the result in many cases).  That means even more money out of the pockets of shareholders and into the pockets of lawyers and economic experts.

Why did the Court refuse to revisit the correctness of the fraud-on-the-market presumption recognized in Basic Inc. v. Levinson and decline even to consider the mountain of evidence that securities class actions hurt shareholders?  And why is the Court’s tweak of the presumption unlikely to have any real-world effect?

The Punt to Congress

Stare decisis—respect for precedent—is the reason why this potential blockbuster case fizzled.  Ordinarily, the Supreme Court is very reluctant to overrule a prior decision interpreting a federal statute. The Court’s view is that Congress has the power to correct errors in statutory construction.

But Basic is far from a conventional statutory interpretation case: courts, not Congress, created the private cause of action for securities fraud; courts, not Congress, specified the elements that a plaintiff must prove to recover damages; and courts, not Congress, formulated the fraud-on-the market presumption as a substitute for proof of reliance.  For that reason, many observers (including me) thought that the Supreme Court would examine Basic under the different, more flexible stare decisis standard applicable to judge-made federal common law (and decisions under statutes like the antitrust laws that delegate common-law authority to courts). That standard permits the overruling of precedent in a broader range of circumstances, recognizing that Congress has allocated to the courts principal responsibility for supervising those areas of law.

Justice Thomas, writing for himself and Justices Scalia and Alito, applied that more expansive approach.  As he explained, Basic “concerned a judge-made evidentiary presumption for a judge-made element of the implied 10b−5 private cause of action, itself ‘a judicial construct that Congress did not enact in the text of the relevant statutes.’”  For that reason the high bar to overruling precedent that governs statutory construction cases should not apply:

[W]hen it comes to judge-made law like “implied” private causes of action, which we retain a duty to superintend[,] . . . . we ought to presume that Congress expects us to correct our own mistakes—not the other way around. That duty is especially clear in the Rule 10b–5 context, where we have said that “[t]he federal courts have accepted and exercised the principal responsibility for the continuing elaboration of the scope of the 10b–5 right and the definition of the duties it imposes.”

Indeed, Justice Thomas pointed out that Congress in the Private Securities Litigation Reform Act had expressly declined to ratify the courts’ creation of a private cause of action, stating that “[n]othing in this Act . . . shall be deemed to create or ratify any implied private right of action.”  That language makes clear that Congress intended that questions regarding the standards for establishing liability remain the province of the courts.  In Justice Thomas’s words, “Basic’s presumption of reliance remains our mistake to correct.”

The majority in Halliburton did not even respond to these arguments, relying instead on the general rule that “[t]he principle of stare decisis has ‘“special force”’ ‘in respect to statutory interpretation,’” and citing a decision involving the interpretation of statutory language enacted by Congress, not a case relating to judge-made law.

Most importantly, the majority did not assess the merits of the arguments challenging Basic—instead dismissing them because they had been considered and rejected by the four-Justice majority in Basic or because they did not “so discredit[] Basic as to constitute ‘special justification’ for overruling the decision.” With respect to the harm to investors from the securities class action system, the Court also refused to engage, saying that “[t]hese concerns are more appropriately addressed to Congress.”

The three Justices concurring in the judgment did address these issues.  They determined that the two assumptions underlying Basic’s presumption of class-wide reliance simply “do not provide the necessary support” for that presumption:

The first assumption—that public statements are “reflected” in the market price—was grounded in an economic theory that has garnered substantial criticism since Basic. The second assumption—that investors categorically rely on the integrity of the market price—is simply wrong.

Moreover, they recognized the reality that “in practice, the so-called ‘rebuttable presumption’ is largely irrebuttable”—“[o]ne search for rebuttals on individual-reliance grounds turned up only six cases out of the thousands of Rule 10b-5 actions brought since Basic,” likely because of the “substantial in terrorem settlement pressures brought to bear by [class] certification.”  That is a critical failing, because “without a functional reliance requirement, the ‘essential element’ that ensures the plaintiff has actually been defrauded, Rule 10b–5 becomes the very ‘“scheme of investor’s insurance”’ [that] the rebuttable presumption was supposed to prevent.”

Of course, the economic burden of this “insurance” falls squarely on investors.  One recent study found that investors’ “total wealth loss” from securities class actions “averages to about $39 billion per year, in order to collect an average of $6 billion in settlements per year ($5 billion per year after plaintiff attorneys’ fees). In other words, because of the filing of securities class actions, shareholders incrementally lost more than six times the settlement amount (or more than seven and half times the amount that shareholders would receive after plaintiffs’ attorneys’ fees).”

The majority’s decision to disclaim responsibility for addressing these very real—and very harmful—consequences of judge-made law “‘places on the shoulders of Congress the burden of the Court’s own error.’”

The Tweak With Little Real-World Impact

After declining to reconsider Basic, the Supreme Court majority addressed what has been labeled the “middle ground” argument in the case:  whether the Court should modify the factual showing that a plaintiff must make at the class certification stage in order to gain the benefit of the fraud-on-the-market presumption.

Some news reports have called the Court’s decision on this point a “new burden” on securities class action plaintiffs or a “new hurdle” to obtaining class certification.  But the consensus of informed observers is that the Court’s ruling means more litigation and cost with little ultimate difference in the results of class certification decisions.  Perhaps in some cases class certification may become more difficult, but the big picture is bleak:  The securities class action engine will roll along essentially unchanged, continuing to drain away billions of dollars in shareholder value each year.

To begin with, here’s a bit of background on the Basic presumption.  The Court held in that case that, as an alternative to proving actual reliance on the defendant’s false material misstatement, a plaintiff may—as the Halliburton majority explained—“invok[e] a rebuttable presumption of reliance” by showing that the misrepresentations were publicly known and material, that the security purchased or sold by the plaintiff “traded in an efficient market” and that the plaintiff traded in the security “between the time the misrepresentations were made and when the truth was revealed.”

In that situation, the fraud-on-the-market theory holds that the market price “‘reflects all publicly available information, and, hence, any material misrepresentations’”; that “the typical ‘investor who buys or sells stock at the price set by the market does so in reliance on’ . . . the belief that it reflects all material public information”; and that the investor therefore may be presumed to rely on any misrepresentations.  The presumption can be rebutted “if a defendant could show that the alleged misrepresentation did not, for whatever reason, actually affect the market price, or that a plaintiff would have bought or sold the stock even had he been aware that the stock’s price was tainted by fraud.”

Halliburton’s “middle ground” argument—strongly supported by an amicus brief filed by law professors Adam Pritchard and Todd Henderson—was that Basic’s focus on market efficiency was misplaced, and that plaintiffs should be required to prove “price impact”—meaning that the defendant’s alleged misrepresentation actually affected the stock price—in order to invoke the presumption of reliance.  “In light of the [courts’] difficulties in evaluating efficiency,” the brief argued, “the Court should shift the focus of fraud on the market inquiries from a market’s overall efficiency to the question whether the alleged fraud affected market price.” (emphasis added) Pritchard and Henderson further urged the Court to “limit[]” the “out-of-pocket measure of damages . . . to cases in which the plaintiff can show actual reliance or that a material misstatement has distorted the market price for a security. If a plaintiff cannot make that showing, the remedy should be limited to disgorgement.”

The Supreme Court majority rejected these arguments and refused to alter the proof needed to invoke the presumption.  It held only that a defendant may submit price impact evidence prior to class certification to demonstrate “that the alleged misrepresentation did not actually affect the stock’s market price and, consequently, that the Basic presumption does not apply.”

Most observers believe that this ruling—which places the burden on the defendant to introduce price impact evidence sufficient to rebut the presumption—will do little to change class certification results, but definitely will increase the cost and complexity of the fight over class certification as defendants submit expert analyses demonstrating the lack of price impact and plaintiffs commission their own studies to prove the opposite.  (Economic consulting firms will do better than ever given the inevitable demand for competing price impact studies.  Come to think of it, investing in one might be a good bet—particularly a firm that is not publicly traded, and therefore would not likely be subject to a class action lawsuit.)

As Professor Henderson, one of the two proponents of the price impact approach, explained:

The ruling will make these cases more expensive…without targeting the worst corporate actors….My prediction is that the average case will get longer and cost more, since defendant corporations will put on evidence that plaintiffs will have to respond to….So, all in all, I think this is very disappointing.

His co-author, Professor Pritchard, said (subscription): “We are adding to the expense. We are not getting rid of any weak lawsuits.”

The plaintiffs’ bar has been unable to disguise its glee.  Salvatore Graziano (of the plaintiffs-side securities class action firm Bernstein Litowitz Berger & Grossmann) told one reporter: “I don’t see this decision having much impact at all.” “It’s a non-event.”  David Boies, who represents the plaintiffs in Halliburton, said: “Defendants have always been permitted to try to prove the absence of price impact, and permitting them to do so at the class-certification stage will not significantly limit securities lawsuits in the future.”

In sum, plaintiff and defense-side lawyers can breathe a sigh of relief—there will be little or no change in the status quo for them.

But for investors, there is a change for the worse: these lawsuits will be more expensive and impose an even greater burden on innocent shareholders, who ultimately pay all of the costs of the securities class action system.