IBEW Local 98 Pension Fund v. Best Buy Co., Inc., No. 14-3178 (8th Cir. 2016)Annotate this Case
Plaintiffs filed suit against Best Buy and three of its executives, alleging violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. Plaintiffs alleged that defendants made fraudulent or recklessly misleading public statements in a press release and conference call, which artificially inflated and maintained Best Buy's publicly traded stock price until the misstatements were disclosed. In this interlocutory appeal, defendants challenged the district court's certification of the class. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), the Supreme Court concluded that loss causation has no logical connection to the facts necessary to establish the efficient market predicate to Basic, Inc. v. Levinson's fraud-on-the-market theory. The court agreed with the district court that, when plaintiffs presented a prima facie case that the Basic presumption applies to their claims, defendants had the burden to come forward with evidence showing a lack of price impact. However, what the district court ignored is that defendants did present strong evidence on this issue. Defendants rebutted the Basic presumption by submitting direct evidence (the opinions of both parties’ experts) that severed any link between the alleged conference call misrepresentations and the stock price at which plaintiffs purchased. Because plaintiffs presented no contrary evidence of price impact, they failed to satisfy the predominance requirement of Rule 23(b)(3). Therefore, the district court abused its discretion in certifying the class, and the court reversed and remanded.
Court Description: Loken, Author, with Murphy and Colloton, Circuit Judges] Civil case - Securities law. In action alleging Best Buy violated Rule 10b-5 by making fraudulent or recklessly misleading public statements in a press release and conference call to artificially inflate and maintain its publicly traded stock price, the district court misapplied the price impact analysis mandated in Halliburton Co. v. Erica P. John Fund, Inc. 134 S.Ct 2398 (2014) in certifying the matter as a class action; the defendants presented strong evidence showing a lack of price impact which was sufficient to rebut the fraud-on-the-market presumption set out in Basic, Inc. v. Levinson, 485 U.S. 224 (1998), and the district court erred in applying the presumption to find plaintiffs satisfied the Rule 23 requirement that common questions predominated. Judge Murphy, dissenting.