In June, the United States Supreme Court will decide whether the fraud-on-the-market presumption should be overruled or modified. For the last quarter century, securities plaintiffs have relied on this presumption to successfully prosecute securities class actions that have resulted in substantial recoveries against publicly traded companies and the D&O insurance industry. In fact, class certification was denied based on the merits in less than 2% of securities actions filed between 2002 and 2010. Cornerstone Research & Stanford Law School Securities Class Action Clearinghouse, Securities Class Action Filings: 2013 Year in Review, 2014, at 9. The consensus of industry experts is that a decision from the Supreme Court overruling or substantially modifying the fraud-on-the-market presumption will stand as a major impediment to the ability of securities plaintiffs’ firms to continue to achieve these results. However, this impediment will not leave plaintiffs’ firms dead in the water. To the contrary, as they have done in the past with previous securities law reforms, the plaintiffs’ bar will likely adjust in a meaningful way.
