Granting plaintiffs’ motion for class certification in a securities fraud action, a federal district court held, among other things, that for purposes of their motion plaintiffs did not have to demonstrate common issues of loss causation. Plaintiffs alleged that the corporate defendant’s participation in a secret price-fixing scheme artificially inflated its stock price and that its subsequent disclosure of the scheme caused the value of the proposed class members’ stock to drop.
Finding that plaintiffs had established that the fraud-on-the-market doctrine should be applied, the Court concluded that class certification was warranted because, contrary to defendants’ argument, individual issues of reliance on the alleged fraud would not predominate over questions that were common to the class. In reaching this decision, the Court also rejected defendants’ argument that the fraud-on-the-market doctrine should not apply because individual issues of “loss causation,” i.e., whether the disclosure of the price-fixing scheme caused the class members to suffer loss, would predominate.
While recognizing that the Fifth Circuit had reached the opposite conclusion, the Court ruled that “loss causation” is not a predicate to application of the fraud-on-the-market doctrine and, thus, is not ripe for consideration at the class certification stage. (In re Micron Inc. Securities Litigation, 2007 WL 4553749 (D. Idaho Dec. 19, 2007))