In Re: Am. Int'l Grp. Sec. Litigation, No. 10-4401 (2d Cir. 2012)Annotate this Case
In 2004, securities fraud class actions were filed against AIG and other corporate and individual defendants, including Gen Re. The district court consolidated the actions and appointed as lead plaintiffs three Ohio public pension funds, for a putative class of investors who purchased AIG’s publicly traded securities between October 28, 1999, and April 1, 2005. The complaint alleged that AIG and Gen Re violated Rule 10b-5(a) and (c), (Securities Exchange Act, 15 U.S.C. 78j(b)), by entering into a sham $500 million reinsurance transaction designed to mislead the market and artificially increase AIG’s share price. After the parties reached a settlement agreement, the district court denied plaintiffs’ motion to certify a settlement class, finding that the class could not satisfy the predominance requirement of FRCP 23(b)(3) because the fraud-on-the-market presumption does not apply to the class’s securities fraud claims. The Second Circuit vacated, holding that, under Amchem Products, Inc. v. Windsor, 521 U.S. 591(1997), a securities fraud class’s failure to satisfy the fraud-on-the-market presumption primarily threatens class certification by creating “intractable management problems” at trial. Because settlement eliminates the need for trial, a settlement class ordinarily need not demonstrate that the fraud-on-the-market presumption applies to its claims to satisfy the predominance requirement.