Federal courts have been struggling with deciding motions for class certification as there have been a number of recent rulings by the U.S. Supreme Court and certain of the courts of appeals that answer certain questions while creating others. In Halliburton II, the Supreme Court held that a defendant in a securities class action may rebut the Basic presumption of reliance at the class certification stage by producing direct evidence that a misrepresentation did not affect stock prices. After all, the Supreme Court reasoned, “in the absence of price impact, Basic’s fraud-on-the-market theory and presumption of reliance collapse.” See Halliburton v. Erica P. John Fund, 573 U.S. 258, 278 (2014). Standing alone, the Halliburton II decision offers a deceivingly simple rule for lower courts to apply when deciding whether to certify a class where the plaintiffs invoke, and the defendants attempt to rebut, the fraud-on-the-market theory.

But simple it is not, the U.S. Court of Appeals for the Seventh Circuit recently opined in In re Allstate Securities Litigation, No. 19-1830, 2020 U.S. App. LEXIS 22121 (7th Cir. July 16, 2020). The challenge lies in applying the teachings of Halliburton II without violating the teachings of Halliburton I and Amgen. Both Halliburton I and Amgen provided guidance to lower courts on the appropriate evidence that can be considered at the class certification stage. In Halliburton I, the Supreme Court held that securities fraud plaintiffs do not need to prove loss causation to obtain class certification. In Amgen, the Supreme Court clarified that proof of materiality is not a prerequisite to class certification. See Amgen v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455 (2013).