On August 16th, the Third Circuit, addressing an issue of first impression in that Circuit, rejected the "fraud created the market" theory for establishing reliance in a securities fraud action. It affirmed a trial court's denial of class certification in a case against an issuer's auditor who allegedly issued deficient audits. Discussing the three categories of cases recognizing the fraud created the market theory - legal, economic, and factual - the Third Circuit found that the theory "lacks a basis in any of the accepted grounds for creating a presumption [of reliance]." Malack v. BDO Seidman, LLP.