2nd Circuit Reinforces Standard of Proof to Rebut Class Certification

When a plaintiff in a securities fraud class action seeks to support a motion for class certification using a presumption of reliance where the stock trades in an efficient market, what burden does a defendant have to rebut the presumption to defeat class certification? That is, does the defendant bear the burden of persuasion on the issue, or is the defendant’s burden only to produce evidence going to the issue, with the burden of persuasion remaining on the plaintiff? The Second Circuit recently issued an opinion in Arkansas Teachers Retirement System. v. Goldman Sachs Group Inc. reinforcing that the defendant bears the burden of persuasion of showing that a market was not efficient so that a presumption of reliance does not apply. The Second Circuit explained that a defendant in a securities fraud action must rebut the application of a presumption of reliance in an efficient market by a preponderance of the evidence. The Second Circuit’s decision shows that a defendant can seek to satisfy its burden with evidence going to the market’s awareness of the alleged misrepresented information.

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