Second Circuit Reverses Class Certification in In Re: Salomon Analyst Metromedia Litigation

On September 30th, the US Court of Appeals for the Second Circuit held in In Re: Salomon Analyst Metromedia Litigation that plaintiffs alleging securities fraud against research analysts do not need to  make a heightened evidentiary showing in order to benefit from the fraud-on-the-market presumption of Basic Inc. v. Levinson.  However, the Court also vacated the June 2006 grant of class certification in the case “because the district court erred in not permitting defendants to attempt to rebut the presumption prior to class certification.”

The Second Circuit praised what it characterized as “a valiant effort by a conscientious district judge to reconcile the conflicting messages from our Court on class certification standards,” and stated that if on remand the “defendants attempt to make a rebuttal, the district court will be “accorded considerable discretion to limit both discovery and the extent of the hearing on Rule 23 requirements” in order “[t]o avoid the risk that a Rule 23 hearing will extend into a protracted mini-trial of substantial portions of the underlying litigation . . . .”

Read the Second Circuit’s opinion in In Re: Salomon Analyst Metromedia Litigation