For the first time since the Supreme Court issued its decision in Halliburton v. Erica P. John Fund, 134 S.Ct. 2398 (2014) (Halliburton II), the U.S. Court of Appeals for the Second Circuit discussed one of the key issues in securities litigation—how to rebut the fraud-on-the-market presumption of reliance.
In GAMCO Investors v. Vivendi Universal, 838 F.3d 214 (2d. Cir. 2016) (GAMCO), the Second Circuit affirmed the District Court’s finding that the defendants had successfully rebutted the presumption by demonstrating that certain opt-out plaintiffs would have purchased the securities at issue even if they had known of the fraud. This case is only the second appellate decision post Halliburton II to address the circumstances under which defendants can successfully rebut the presumption, the first being the U.S. Court of Appeals for the Eighth Circuit’s decision in IBEW Local 98 Pension Fund v. Best Buy, 818 F.3d 775 (8th Cir. 2016), released in April of this year, which addressed rebuttal through lack of price impact.
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