CLASS ACTION PROCEEDINGS
On the federal level, securities class action proceedings first gained popularity with the rendering of the Basic v. Levinson opinion by the United States Supreme Court.[1] In Basic the Supreme Court established a rebuttable presumption that satisfies the reliance requirement, described under Rule 10b-5 above, based upon what has become commonly known as the “Fraud-on-the market” theory. According to this theory: “…the market price of shares traded on well-developed markets reflects all publically available information, and hence, any material misrepresentations.”[2] As such, individual shareholders need not establish that they all relied upon the same purported misrepresentations of the corporation or its directors and officers, a commonality virtually impossible to prove on behalf of a class. Rather, the fluctuation of an actively traded company’s stock price may be used to establish reliance. The application of the “Fraud-on-the Market” theory along with the opt-out nature of U.S. class action proceedings makes the U.S. the most attractive venue in the world for filing securities class actions.
Washington State has not been immune from the plethora of securities class actions filed around the country. The following is a sample of securities class actions filed against Washington State Corporations and their directors and officers in both state and federal courts, primarily for alleged securities fraud, under Section 10(b), and Rule 10b-5 of the SEC, as well as challenges to proposed merger transactions.
ProCyte Corporation Securities Litigation
U.S. District Court for the Western District of Washington.
Omega Environmental Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Metawave Communications Corporation Securities Litigation
U.S. District Court for the Western District of Washington.[3]
Expedia Inc. Shareholder Litigation
King County Superior Court (Washington), arising from exchange offer transaction.
Egghead.com Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Eddie Bauer Inc. Shareholders Litigation
King County Superior Court (Washington), challenging merger transaction.
Digital Systems International Inc. Securities Litigation
U.S. District Court for the Western District of Washington
Cobalt Group Inc. Shareholders Litigation
King County Superior Court (Washington), involving a going private transaction.
Digital Systems International Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Burrick v. Spacelabs Medical Inc.
King County Superior Court (Washington), challenging merger transaction.
Boeing Securities Litigation
U.S. District Court for the Western District of Washington.[4]
Since Basic, the U.S. Supreme Court has actively weighed in on a number of issues relating to securities class actions including the pleading standards that must be satisfied to establish class certification, along with the corresponding elements of “Causation;”[5] “Scienter;”[6] “Aider and Abettor Liability;”[7] and most recently “Materiality.”[8] For the most part, these decisions have had the effect of raising the bar on the requirements necessary for a securities class action to be certified. However, this bar was slightly altered with the Court’s recent decision in the case of Halliburton v. Erica P. John Fund, Inc. In Halliburton, the Court declined to overturn the holding of Basic to the extent that it established the “fraud-on-the-market” presumption of reliance, but it confirmed that under Basic, a defendant can challenge and defeat the presumption of reliance at the class certification stage by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.[9]
[1] Basic Inc. v. Levinson, 485 U.S. 224 (1988)
[2] Id. at 246
[3] 298 F.Supp. 2d 1056 (W.D. Wash. 2003); 629 F.Supp. 2d 1207 (W.D. Wash. 2009)
[4] Litigation Experience, Perkins Coie, at http://www.perkinscoie.com/boeing-securities-litigation/ (n.d.)
[5] Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005)
[6] Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007)
[7] Stoneridge Investment Partners, LLC. V. Scientific-Atlantic, Inc, 552 U.S.148 (2008)
[8] Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, 132 S. Ct. 2742 (2013)
[9] Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317, slip op. (S. Ct. 2014).
Washington State has not been immune from the plethora of securities class actions filed around the country. The following is a sample of securities class actions filed against Washington State Corporations and their directors and officers in both state and federal courts, primarily for alleged securities fraud, under Section 10(b), and Rule 10b-5 of the SEC, as well as challenges to proposed merger transactions.
ProCyte Corporation Securities Litigation
U.S. District Court for the Western District of Washington.
Omega Environmental Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Metawave Communications Corporation Securities Litigation
U.S. District Court for the Western District of Washington.[3]
Expedia Inc. Shareholder Litigation
King County Superior Court (Washington), arising from exchange offer transaction.
Egghead.com Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Eddie Bauer Inc. Shareholders Litigation
King County Superior Court (Washington), challenging merger transaction.
Digital Systems International Inc. Securities Litigation
U.S. District Court for the Western District of Washington
Cobalt Group Inc. Shareholders Litigation
King County Superior Court (Washington), involving a going private transaction.
Digital Systems International Inc. Securities Litigation
U.S. District Court for the Western District of Washington.
Burrick v. Spacelabs Medical Inc.
King County Superior Court (Washington), challenging merger transaction.
Boeing Securities Litigation
U.S. District Court for the Western District of Washington.[4]
Since Basic, the U.S. Supreme Court has actively weighed in on a number of issues relating to securities class actions including the pleading standards that must be satisfied to establish class certification, along with the corresponding elements of “Causation;”[5] “Scienter;”[6] “Aider and Abettor Liability;”[7] and most recently “Materiality.”[8] For the most part, these decisions have had the effect of raising the bar on the requirements necessary for a securities class action to be certified. However, this bar was slightly altered with the Court’s recent decision in the case of Halliburton v. Erica P. John Fund, Inc. In Halliburton, the Court declined to overturn the holding of Basic to the extent that it established the “fraud-on-the-market” presumption of reliance, but it confirmed that under Basic, a defendant can challenge and defeat the presumption of reliance at the class certification stage by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.[9]
[1] Basic Inc. v. Levinson, 485 U.S. 224 (1988)
[2] Id. at 246
[3] 298 F.Supp. 2d 1056 (W.D. Wash. 2003); 629 F.Supp. 2d 1207 (W.D. Wash. 2009)
[4] Litigation Experience, Perkins Coie, at http://www.perkinscoie.com/boeing-securities-litigation/ (n.d.)
[5] Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005)
[6] Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007)
[7] Stoneridge Investment Partners, LLC. V. Scientific-Atlantic, Inc, 552 U.S.148 (2008)
[8] Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, 132 S. Ct. 2742 (2013)
[9] Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317, slip op. (S. Ct. 2014).