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Ann Lipton

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Ann M. Lipton is a Professor of Law and Laurence W. DeMuth Chair of Business Law at the University of Colorado Law School.  An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined the Tulane Law faculty in 2015 after two years as a visiting assistant professor at Duke University School of Law.

As a scholar, Lipton explores corporate governance, the relationships between corporations and investors, and the role of corporations in society.  Read more.

Hello, everyone.  Stefan put out a call for reasonable facsimiles of business law professors, and I figured I fit the bill.  I’m a Visiting Assistant Professor at Duke Law, currently teaching Securities Litigation.  I’ve arrived here directly from practice: For the past 11 years, I’ve worked as a plaintiff-side securities litigator.

(On my first day of class, I asked how many of my students had done securities litigation work, perhaps as summer associates.  Almost every hand went up.  Then I asked how many had worked plaintiff-side.  The hands went down so quickly I swear I heard whooshing noises.  To be fair, there was one student who’d done plaintiffs’ work – outside the US.)

Anyway, like anyone teaching securities litigation these days, there’s one thing on my mind: Halliburton, where the Supreme Court is being asked to overrule Basic Inc v. Levinson, the case where it endorsed the fraud on the market presumption of reliance for claims brought under Section 10(b) of the Securities Exchange Act.

There’s been a lot of chatter about the possibility that if Basic is overruled, plaintiffs may, in some instances, still be able to obtain a presumption of reliance under Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) – many of the Halliburton parties and amici seem to assume this is the case, and it’s come up in the blogosphere.

Affiliated Ute holds that when a fraud consists of material omissions rather than affirmative misstatements, reliance may be presumed.

The problem that often seems to be overlooked, though, is that the Affiliated Ute presumption is rebuttable – and specifically, it’s rebuttable upon a showing that disclosure would not have made a difference, because the plaintiff never read the document in which the omission is contained.  See Eckstein v. Balcor Film Investors, 58 F.3d 1162 (7th Cir. 1995); Shores v. Sklar, 647 F.2d 462 (5th Cir. 1981).

Given that, I don’t see how much of a role it can play with respect to substituting for Basic.  Defendants’ obvious ability to rebut the presumption with respect to wide swaths of the class should be enough to defeat class certification.  This is not to say that defendants’ rebuttal arguments should be entertained at class certification; the point is that there will be so many individualized differences among class members regarding what they read or did not read that class certification would usually be inappropriate, just as in any other non-fraud-on-the-market case where a defense applies differently to a significant number of class members (though there is authority the other way, see In re Smith Barney Transfer Agent Litig., 290 F.R.D. 42 (S.D.N.Y. 2013)).

But then I have a long train of speculation as I imagine how this might play out….

[More after the break]