Proving Markets Inefficient: The Variability of Federal Court Decisions on Market Efficiency in Cammer v. Bloom and Its Progeny

Abstract:     
This fall, the Supreme Court will hear argument in Amgen v. Connecticut Retirement Plans. Among the issues the Court may address is the role of market efficiency in the class certification phase of securities fraud litigation.

This now decade-old paper was one of the first systematic explorations of federal courts' attempts to assess market efficiency so as to determine whether or not to apply Basic v. Levison's "Fraud-on-the-Market" presumption of reliance. Reviewing the cases available at the time, the paper explores the challenges confronting courts when economic theory is seemingly adopted as precent. It concludes by recommending that the Supreme Court revisit the issue and recognize that, at the heart of Basic, there was a policy choice to eliminate the traditional common-law requirement of reliance in the securities fraud context.

Keywords: Basic v. Levinson, fraud on the market, securities fraud, Amgen

Accepted Paper Series