Recently, the U.S. Supreme Court ruled on whether the class of roughly 1.5 million women employed by Wal-Mart, who were seeking relief under Title VII for alleged gender discrimination, could be certified as a class. Ultimately, the Supreme Court ruled on June 20, 2011, that the class should not have been certified because it had not met the commonality requirements under Federal Rule of Civil Procedure 23. In order for a class to be certified under Rule 23, there must be questions of law or fact common to the class that demonstrate class members have suffered the same injury and contention, and that are capable of classwide resolution. The majority in the Wal-Mart case explained that this requirement is not a “mere pleading standard”; rather, it requires a class plaintiff to “prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” The Court further explained that, to determine if this standard has been met, a trial court may need to perform a “rigorous analysis” that will frequently overlap with the merits of the plaintiffs’ claim.
The Wal-Mart case has left many wondering what impact the decision will have on certification of other class actions. Some practitioners speculated that the decision dealt a significant blow to all kinds of class actions. However, securities class actions are unlikely to be impacted materially. For securities cases, the “rigorous analysis” of the merits requires, in theory, each individual investor “to prove reliance on the alleged misrepresentation.” But in practice this hurdle is easily overcome if the plaintiffs can establish a “fraud on the market” presumption by proving that the corporation’s shares were traded in an efficient market, in which traders are presumed to rely on the accuracy of a company’s public statements and alleged misrep-resentations are incorporated into the corporation’s stock price. In fact, the Wal-Mart court specifically noted in a footnote that securities plaintiffs may continue to satisfy the commonality requirement by establishing a “fraud on the market.” As a result, it is unlikely that the Wal-Mart decision will significantly impact certification of securities class actions.