The authors overview issues requiring economic analysis at the class certification stage of securities class actions and consider the effects of market disruptions on these analyses.
Relatively recent Supreme Court rulings offer avenues, in addition to evaluating market efficiency, to employ economic analysis at the class certification stage of Exchange Act securities class actions. There are a number of factors to consider in deciding whether and how to assert such challenges. For example, assessment of price impact and the adequacy of a proposed classwide damages methodology (Comcast considerations) may be aided by adopting plaintiffs’ assertion that the security in question traded in an efficient market. Price impact and Comcast challenges, in particular, are often closely tied to the merits of the case (and therefore potentially relevant for broader case strategy). Moreover, there are unique considerations that market disruptions—such as those caused by the COVID-19 pandemic—pose for each potential avenue to challenging class certification.
In addition to providing an overview of certain issues warranting economic analysis at the class certification stage (namely, assessment of market efficiency, price impact, and classwide damages methodology), authors Kristin Feitzinger and Shaama Pandya discuss the potential effects that extreme volatility and market disruptions (examples of which have been observed recently in the context of the COVID-19 pandemic) can have on the underlying economic analyses.
The views expressed herein do not necessarily represent the views of Cornerstone Research.