Thursday, May 13, 2004
On May 7, 2004, the Second Circuit, in Hevisi v. Citigroup Inc., allowed certain parties to file an interlocutory appeal of an order granting class certification. The case, as to those parties, involved a research analyst, who had expressed very positive opinions about WorldCom, which was a client of his company. The defendants, Citigroup and certain related entities had argued that the District Court had assumed that the fraud-on-the-market doctrine applied to expressions of opinions by a research analyst, which assumption the defendants felt was erroneous. Under that doctrine, reliance, an essential element of a securities fraud claim, is presumed. If it does not apply, then each plaintiff would have to show individual reliance, and individual questions would predominate over common questions of fact, meaning that a class could not be certified. The Court held that the certification order implicated a legal question about which there was a compelling need for immediate resolution. The issue would have a major effect on class action securities actions. The Court also noted that since securities actions are often not litigated to conclusion, it is unlikely that the issue would ever be resolved. The decision can be found here.