Opposition Brief — Barclays PLC, et al., Petitioners v. Joseph Waggoner, et al.

No. 17-1209

In the

Supreme Court of the United States

Barclays PLC, et al.,

Petitioners,

v.

Joseph Waggoner, et al.,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of A ppeals for the Second Circuit

BRIEF IN OPPOSITION

Jeremy A. Lieberman

Counsel of Record

Tamar A. Weinrib

Pomerantz LLP

600 Third Avenue, 20th Floor

New York, New York 10016

(212) 661-1100

jalieberman@pomlaw.com

Counsel for Respondents

279675

A

(800) 274-3321 • (800) 359-6859

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . . iv

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . 1

I.

The Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. The Opinions Below . . . . . . . . . . . . . . . . . . . . . . . . 3

A. The District Court Opinion. . . . . . . . . . . . . . 3

1.

The District Court Found that

Respondents Are Entitled to the

Basic Presumption of Reliance . . . . . . . 3

2. The District Court Found That

Petitioners Did Not Rebut the Basic

Presumption . . . . . . . . . . . . . . . . . . . . . . . 5

B. The Second Circuit Opinion . . . . . . . . . . . . . 6

1.

Direct Evidence of Market Efficiency

is Not Always Necessary . . . . . . . . . . . . 7

2. Petitioners’ Rebuttal Burden is by

Preponderance of the Evidence . . . . . . 8

REASONS TO DENY THE PETITION . . . . . . . . . . . 12

ii

Table of Contents

Page

I.

T h e S e c o n d C i r c u i t ’s O p i n i o n o n

Ma rket Eff iciency follows Supreme

Court Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 12

A. T he Lower Cou r t ’s Rul ing that

Respondents Satisf ied thei r

Bu rden t o Invoke the Ba sic

presumption Is Consistent With

Basic and Halliburton II . . . . . . . . . . . . . . 13

B. T h e L o w e r C o u r t ’ s R u l i n g

Regarding Defendants’ Rebuttal

Burden is Consistent w ith Basic

and Halliburton II . . . . . . . . . . . . . . . . . . . . 18

II. There is no Lower Court Confusion

or Circuit Split . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

A. There is No Lower Court Confusion . . . . . 23

B. There is no Circuit Split . . . . . . . . . . . . . . . 27

III. The Second Circuit’s Holdings do not

Prejudice Petitioners . . . . . . . . . . . . . . . . . . . . . . 32

iii

Table of Contents

Page

A. Even i f t he S e cond Ci r c u it

had required Cammer 5

here, the same result would

ensue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

B. Petitioners have failed to rebut

the Basic presumption under

any standard . . . . . . . . . . . . . . . . . . . . . 34

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

iv

TABLE OF CITED AUTHORITIES

Page

Cases:

Amgen Inc.,

133 S. Ct. 1193, 185 L. Ed. 2d 308 . . . . . . . . . . . . . 7, 31

Aranaz v. Catalyst Pharm. Partners Inc.,

302 F.R.D. 657 (S.D. Fla. 2014) . . . . . . . . . . . . . . 16, 24

Basic Inc. v. Levinson,

485 U.S. 224 (1988) . . . . . . . . . . . . . . . . . . . . . . . passim

Billhofer v. Flamel Techs., S.A.,

281 F.R.D. 150 (S.D.N.Y. 2012) . . . . . . . . . . . . . . 24-25

Cammer v. Bloom,

711 F. Supp. 1264 (D.N.J. 1989) . . . . . . . . . . . . . passim

Carpenters Pension Trust Fund of St. Louis v.

Barclays PLC,

310 F.R.D. 69 (S.D.N.Y. 2015) . . . . . . . . . . . . . . . . . . . 24

DuPont v. Brady,

828 F.2d 75 (2d Cir. 1987) . . . . . . . . . . . . . . . . . . . . . . 10

Erica P. John Fund, Inc. v. Halliburton Co.,

309 F.R.D. 251 (N.D. Tex. 2015), leave to appeal

granted, No. 15-90038, 2015 WL 10714013

(5th Cir. Nov. 4, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . 22

Halliburton Co. v. Erica P. John Fund, Inc.,

134 S. Ct. 2398 (2014) . . . . . . . . . . . . . . . . . . . . . passim

v

Cited Authorities

Page

IBEW Local 98 Pension Fund v. Best Buy Co.,

818 F.3d 775 (8th Cir. 2016) . . . . . . . . . . . . . . . . passim

In re Comput. Sci. Corp. Sec. Litig.,

288 F.R.D. 112 (E.D. Va. 2012) . . . . . . . . . . . . . . 16, 24

In re Fed. Home Loan Mortg. Corp. (Freddie

Mac) Sec. Litig.,

281 F.R.D. 174 (S.D.N.Y. 2012) . . . . . . . . . . . . . . . . . . 26

In re Goldman Sachs Grp., Inc. Sec. Litig.,

2015 U.S. Dist. LEXIS 128856 (S.D.N.Y.

Sep. 24, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

In re Petrobras Sec. Litig.,

862 F.3d 250 (2d Cir. 2017) . . . . . . . . . . . . . . . . . . . . . . 7

In re Xcelera.com Sec. Litig.,

430 F.3d 503 (1st Cir. 2005) . . . . . . . . . . . . . . . . . . . . 25

Krogman v. Sterritt,

202 F.R.D. 467 (N.D. Tex. 2001) . . . . . . . . 8, 15, 24, 32

Petrie v. Elec. Game Card, Inc.,

308 F.R.D. 336 (C.D. Cal. 2015) . . . . . . . . . . . . . . . . . 24

Schleicher v. Wendt,

618 F.3d 679 (7th Cir. 2010) . . . . . . . . . . . . . . . . . . . . 16

Smilovits v. First Solar, Inc.,

295 F.R.D. 423 (D. Ariz. 2013) . . . . . . . . . . . . . . . 16, 24

vi

Cited Authorities

Page

Teamsters Local 445 Freight Div. Pension, Fund v.

Bombardier Inc.,

546 F.3d 196 (2d Cir. 2008) . . . . . . . . . . . . . . . . 4, 26-27

U.S. Dep’t of Justice v. Landano,

508 U.S. 165 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Unger v. Amedisys Inc.,

401 F.3d 316 (5th Cir. 2005) . . . . . . . . . . . . . . . . . . . . 26

United States Department of Justice v. Landano,

508 U.S. 165, 113 S. Ct. 2014,

124 L. Ed. 2d 84 (1993) . . . . . . . . . . . . . . . . . . . . . . . . 11

Statutes & Other Authorities:

15 U.S.C. §78a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Fed. R. Evid. 301 . . . . . . . . . . . . . . . . . . . . . . 10, 11, 27, 30

Alon Brav and J.B. Heaton, Event Studies in

Securities Litigation: Low Power, Confounding

Effects, and Bias, Washington University Law

Review, 93 Wash. U. L. Rev. 583 (2016) . . . . . . . . . . . 4

Mueller and Kirkpatrick, Federal Evidence

4th Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Ninth Circuit Manual of Jury Instructions:

Civil § 18.5 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

1

STATEMENT OF THE CASE

I.

The Fraud.

Barclays had been marred by a series of unprecedented

scandals predating the August 2, 2011 to June 25, 2014

Class Period. In light of these scandals and the 2008

financial crisis, which placed significant scrutiny on the

banking industry ethics, Barclays’ investors placed great

emphasis on its reputation and integrity.

Nevertheless, unbeknownst to its ADS investors,

Barclays continued its penchant for dishonesty during

the Class Period. This case involves Barclays’ “dark-pool”

(“LX”), an alternative trading system, where the size and

price of orders are not revealed to other participants. A

unique attribute of dark pools is that the operating broker

need not provide equal access to all market participants

and can take steps to exclude or minimize predatory

trading.

During the Class Period, Barclays touted LX as a

safe trading venue “built on transparency,” with “built in

safeguards to manage toxicity [of aggressive traders]” who

could victimize other dark pool investors by trading ahead

of anticipated purchase and sell orders, thereby rapidly

capitalizing on proprietary information regarding trading

patterns. Barclays also touted its Liquidity Profiling

tool, which Defendant William White (who oversaw LX)

described, as “a sophisticated surveillance framework

that protects clients from predatory trading activity

in LX.” Liquidity Profiling was supposed to categorize

LX clients into one of six categories that identified that

client as passive or aggressive. Other LX clients could

2

then purportedly opt to avoid interacting with aggressive

traders like predatory high frequency traders (“HFT”).

However, in reality, Barclays allowed predatory

HFTs to take advantage of its liquidity clients. Barclays

failed to disclose that it did not effectively protect LX

clients from predatory trading with Liquidity Profiling

partly because Barclays applied manual overrides to

re-categorize “aggressive” clients as “passive,” failed to

police LX to prevent/punish toxic trading, intentionally

altered marketing materials to omit reference to the

largest predatory HFT in LX, preferentially routed dark

orders to LX where those orders rested for two seconds

seeking a “fill” vulnerable to toxic traders, and did not

include the NYSE and EDGX direct feeds to construct the

national best bid and best offer (“NBBO”) used to update

the prices of orders resting in LX.

As a result, Petitioners improperly maintained the

price of Barclays’ securities at levels reflecting investor

confidence in the integrity of the Company. Were

Petitioners honest about the workings of LX and the level

of “transparency” surrounding its operations, Barclays’

securities would have traded at a substantially lower price.

Investors learned about Barclays’ persistent

misconduct on June 25, 2014, when the New York State

Office of the Attorney General (“NYAG”) commenced a

lawsuit against Barclays under the New York Martin Act,

asserting that Barclays concealed material information

regarding the operation of its dark pool. As a result,

Barclays’ shares fell 7.38% on June 26, 2014––the biggest

decline in over two years.

3

II. The Opinions Below.

A.

The District Court Opinion.

Respondents moved for class certification on July

24, 2015. In support thereof, Respondents submitted a

market efficiency report prepared by Dr. Zachary Nye.

Prior to ruling, the Hon. Judge Shira Scheindlin held a

hearing on November 5, 2015, during which she questioned

the market efficiency experts proffered by both parties.

Thereafter, she engaged in a thorough and careful analysis

based on Supreme Court and Second Circuit precedent

and the parties’ comprehensive briefing, resulting in the

order certifying the Class entered on February 2, 2016

(“D.C. Order”). Petitioners’ Appendix, filed on February

26, 2018, (“Pet. App.”), at 57a. In rendering her opinion,

Judge Scheindlin had the benefit of a substantial record

of direct evidence of efficiency. The D.C. Order, described

below, is beyond reproach.

1.

The District Court Found that Respondents

Are Entitled to the Basic Presumption of

Reliance1

As the District Court noted, in opposing class

certification, Petitioners only challenged market efficiency,

thus conceding the other requisites for invoking Basic’s

fraud on the market presumption of reliance. Id. at 83a.

Moreover, Petitioners conceded seven out of the eight

factors courts consider in assessing market efficiency. Id.

Consistent with a vast body of case law, Judge Scheindlin

1. Established by this Court in Basic Inc. v. Levinson, 485

U.S. 224 (1988) (“Basic”).

4

held that because the other seven factors without

exception supported a finding of market efficiency she

need not consider Cammer 5, though the record is replete

with evidence supporting such a finding, all of which Judge

Scheindlin carefully assessed at the evidentiary hearing.

Id. at 83a-92a.

Judge Scheindlin never held that Respondents had

failed to satisfy Cammer 5 but rather simply rejected

Petitioners’ contention that Respondents could not

establish market efficiency without it. Id. The District

Court noted that accepting Petitioners’ position regarding

Cammer 5 would obviate the need to consider any other

factors at all. Id. at 85a-86a (citing the Second Circuit

decision in Teamsters Local 445 Fright Division Pension

Fund v. Bombardier declining to find any particular

factor dispositive, as well as other Circuit Court decisions

adopting a similar approach). Notably, neither Petitioners

nor their expert have ever argued that Barclays ADS did

not trade in an efficient market.

The District Court also acknowledged the pitfalls

of using event studies to test market efficiency in

securities litigation. Event studies are typically, and more

accurately, conducted across “a large swath of firms” in

academic research. Id. at 88a-89a. In securities litigation,

however, event studies only examine a single firm thus

“dramatically” decreasing the “chances of finding

statistically significant results,” yielding an unworkably

small sample size. Id. As a result, the latter type of event

study is often “unreliable” and not an accurate indicator

of market efficiency. Id. at 88a, fn. 94 (citing Alon Brav

and J.B. Heaton’s article, Event Studies in Securities

Litigation: Low Power, Confounding Effects, and Bias,

5

thereafter published in the Washington University Law

Review, 93 Wash. U. L. Rev. 583, 585 (2016)). Given these

questions regarding the reliability of event studies and

the overwhelming indirect evidence of market efficiency

here, the court did not consider Cammer 5 in its written

opinion. However, it did so at length during the evidentiary

hearing. Regardless, there can be little question that Dr.

Nye’s event study satisfied Cammer 5—it showed that

Barclays’ securities moved in a statically significant and

directionally consistent manner on nine out of fourteen

earnings release event dates. The event study also showed

that for the five dates on which Barclays’ securities did not

move in a statistically significant manner, the Company’s

earnings results were generally in line with market

expectations, and/or the results were largely mixed, such

that the insignificant returns are consistent with that

expected in an efficient market.

Following an extensive analysis, Judge Scheindlin

found the market for Barclays ADS efficient and certified

the class.

2.

The District Court Found That Petitioners

Did Not Rebut the Basic Presumption

The District Court concluded that Petitioners did not

meet their burden of proving a lack of price impact and

explained that though the Supreme Court in Halliburton

Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 240708 (2014) (Halliburton II) provides a right of rebuttal,

“having this right does not mean that it is easily done.”

Id. at 94a. Indeed, Petitioners did not present an event

study or any affirmative evidence to prove a lack of price

impact. Id. at 98a. Acknowledging the price maintenance

6

theory of Respondents’ case, the District Court discounted

Petitioners’ criticism that Respondents’ expert, Dr. Nye,

did not show a statistically significant rise in Barclays’

ADS price on the misrepresentation dates, because “[u]

nder [plaintiff’s] theory, “a material misstatement can

impact a stock’s value ... by improperly maintaining the

existing stock price.” Id. Hence, given that Respondents’

rely on a price maintenance theory, the Court held that

there was no obligation to show a statistically significant

stock price increase following misstatements.

Lastly, the District Court rejected Petitioners’

argument that there is no price impact because other

factors might have contributed to the price decline on

the corrective disclosure date because Petitioners did not

meet their burden of showing “by a preponderance of the

evidence that the drop in the price of Barclays ADS was

not caused at least in part by the disclosure of the fraud

at LX.” Id. at 103a.

B. The Second Circuit Opinion.

Petitioners sought interlocutory review under Rule

23(f), which the Second Circuit granted. Thereafter

the Second Circuit affirmed the District Court’s class

certification order, holding that “direct evidence of

price impact under Cammer 5 is not always necessary

to establish market efficiency and invoke the Basic

presumption.” Pet. App., at 1a-56a. (“Order”). The Court

further held that defendants seeking to rebut the Basic

presumption must do so by a preponderance of the

evidence.

7

1.

Direct Evidence of Market Efficiency is

Not Always Necessary

In determining that direct evidence of market

efficiency through event studies is not always necessary,

the Second Circuit noted that “the Supreme Court has

suggested that the burden required to establish market

efficiency “is not an onerous one.”“ Id. at 35a; In re

Petrobras Sec. Litig., 862 F.3d 250, 278 (2d Cir. 2017)

(citing Halliburton II, 134 S. Ct. at 2410 (“Even the

foremost critics of the efficient-capital-markets hypothesis

acknowledge that public information generally affects

stock prices,” and so “[d]ebates about the precise degree to

which stock prices accurately reflect public information

are [] largely beside the point.”); id. at 2417 (Ginsburg, J.,

concurring) (interpreting the holding in Halliburton

II as “impos[ing] no heavy toll on securities-fraud

plaintiffs with tenable claims”); Amgen, 133 S. Ct. at

1192 (“[I]t is reasonable to presume that most investors

. . . will rely on [a] security’s market price as an unbiased

assessment of the security’s value in light of all public

information.”); Basic, 485 U.S. at 246 n.24 (“For purposes

of accepting the presumption of reliance . . . , we need only

believe that market professionals generally consider most

publicly announced material statements about companies,

thereby affecting stock market prices.”); see also id. at

246 (“The presumption is supported by common sense

and probability.”)).

Moreover, the Second Circuit explained that “indirect

evidence of market efficiency” under the other four

Cammer factors would “add little to the Basic analysis if

courts only ever considered them after finding a strong

showing based on direct evidence alone.” Pet. App., at 35a.

8

The Second Circuit did not rule that direct evidence

pursuant to Cammer 5 is never necessary. Indeed, it

recognized the importance of direct evidence where

indirect Cammer factors suggest inefficiency. Id. at

36a-37a. Indeed, the court made clear that:

The Cammer and Krogman factors are simply

tools to help district courts analyze market

efficiency in determining whether the Basic

presumption of reliance applies in class

certification decision-making. But they are no

more than tools in arriving at that conclusion,

and certain factors will be more helpful than

others in assessing particular securities and

particular markets for efficiency.

Id. at 37a. The Second Circuit then ruled that in this

case, for this security, direct evidence of market

efficiency was unnecessary because “[a]ll seven of the

indirect factors considered by the district court (the first

four Cammer factors and the three Krogman factors)

weighed so clearly in favor of concluding that the market

for Barclays’ ADS was efficient that the Defendants did

not even challenge them.” Id. at 38a. As the Second Circuit

noted, “because Barclays is one of the largest financial

institutions in the world, it is unsurprising that the market

for Barclays’ ADS is efficient.” Id.

2.

Petitioners’ Rebuttal Burden is by

Preponderance of the Evidence

Next, relying on Supreme Court precedent, the

Second Circuit held that defendants have the right to

rebut the Basic presumption, as provided for in Basic

9

and reaffirmed in Halliburton II, but must do so by a

preponderance of the evidence.

The court noted that “[i]t would be inconsistent

with Halliburton II to require that plaintiffs meet [their]

evidentiary burden while allowing defendants to rebut

the Basic presumption by simply producing some evidence

of market inefficiency, but not demonstrating its

inefficiency to the district court. The presumption of

reliance would also be of little value if it were so easily

overcome. Id. at 43a. Moreover, the Supreme Court’s

language in Halliburton II makes clear that defendants’

burden is one of persuasion:

Quoting Basic, the Halliburton II Court

also explained that the showing to sever

the link between the misrepresentation

and the price received or paid would rebut

t he Ba s i c pr e su mpt ion “ b e c au s e ‘ t he

basis for finding that the fraud had been

transmitted through market price would be

gone.’“ Halliburton II, 134 S. Ct. at 241516 (quoting Basic, 485 U.S. at 248). The

Court then stated that although “Basic allows

plaintiffs to establish [price impact] indirectly, it

does not require courts to ignore a defendant’s

direct, more salient evidence showing that the

alleged misrepresentation did not actually affect

the stock’s market price.” Id. at 2416(emphasis

added).

Id. at 43a-44a. Justice Ginsburg also made clear in

the concurring opinion in Halliburton II “that it is

incumbent upon the defendant to show the absence of price

10

impact.” Id. at 2417 (Ginsburg, J., concurring) (emphasis

added). Id. at 44a.

The Second Circuit found that the phrase ““[a]ny

showing that severs the link” aligns more logically with

imposing a burden of persuasion rather than a burden

of production.” Id. (citing Halliburton II, 134 S. Ct. at

2408 (alteration in original)). Requiring that defendants

make a “showing” that “severs the link” demonstrates

the Supreme Court’s understanding that it is a burden

of persuasion that shifts to defendants, not merely one

of production, because “‘the basis for finding that the

fraud had been transmitted through market price would

be gone,’“ and the defendants’ “direct, more salient

evidence” that the misrepresentations did not affect

the stock price would rebut the Basic presumption. Id.

at 45a (citing Hallibur ton II, 134 S. Ct. at 2415 16 (quoting Basic, 485 U.S. at 248)). The Court also noted

that requiring defendants to show a lack of price impact by

a preponderance of the evidence is consistent with its prior

holding that the Affiliated Ute presumption (which, like

the Basic presumption, is also a presumption of reliance)

is rebutted if a defendant proves “by a preponderance of

the evidence that the plaintiff did not rely on the omission

[at issue] in making” his investment decision. Id. at 46a

(citing duPont v. Brady, 828 F.2d 75, 76 (2d Cir. 1987)).

The Second Circuit also rejected Petitioners’ contention

that Federal Rule of Evidence 301 (“Rule 301”) states

that they only hold a burden of production in rebutting

the Basic presumption. Rule 301 does not apply when

“a federal statute… provide[s] otherwise.” The Second

Circuit, citing numerous decisions of the Supreme Court,

noted that “[t]he Basic presumption was adopted by the

Supreme Court pursuant to federal securities laws. Thus,

11

there is a sufficient link to those statutes to meet Rule 301’s

statutory element requirement.” Id. at 48a. (citing United

States Department of Justice v. Landano, 508 U.S. 165,

113 S. Ct. 2014, 124 L. Ed. 2d 84 (1993)(referring to

the Basic presumption as one of several “judicially created

presumptions under federal statutes that make no express

provision for their use); Amgen, 568 U.S. at 462 (referring

to the Basic presumption as “a substantive doctrine of

federal securities-fraud law”); Basic, 485 U.S. at 245 (“The

presumption of reliance . . . supports[] the congressional

policy embodied in the 1934 Act.”)). Indeed:

In Halliburton II the Supreme Court stated that

“[a]lthough the [Basic] presumption is a judicially

created doctrine designed to implement a judicially

created cause of action, we have described the

presumption as a substantive doctrine of federal

securities-fraud law.” 134 S. Ct. at 2411 (internal

quotation marks omitted). Rule 301 therefore

imposes no impediment to our conclusion that the

burden of persuasion, not production, to rebut

the Basic presumption shifts to defendants.

Id. at 49a. The Second Circuit noted that its holding does

not conflict with the Eighth Circuit’s decision in IBEW

Local 98 Pension Fund v. Best Buy Co., 818 F.3d 775,

782 (8th Cir. 2016), because it only referred to Rule 301

in dictum:

The Eighth Circuit ultimately concluded that

the “overwhelming evidence” in the case

demonstrated that there had been no price

impact and that the Basic presumption had

therefore been rebutted. Id. at 782. Thus, the

Eighth Circuit’s ruling did not depend on the

standard of proof.

12

Id. at, fn. 36 (citing Best Buy, 818 F.3d at 782-83).

Having established that defendants hold a burden of

persuasion, the Second Circuit then ruled that Petitioners

failed to meet that burden. Specifically, the court ruled

that a lack of statistically significant price movement on

the misstatement dates is consistent with Respondents’

price maintenance theory of the case and the suggestion

by Petitioners’ expert that another factor may have

contributed to the ADS price decline following the

corrective disclosure does not negate price impact. Id.

at 50a-52a.

REASONS TO DENY THE petition

The Petition should be denied for three reasons. First,

the Second Circuit’s decision follows clearly established

Supreme Court precedent. Second, there is no lower court

confusion or circuit split regarding the issues identified

in Petitioners’ “Questions Presented.” Third, Petitioners

have no legitimate claim that they will suffer prejudice

as a result of the Second Circuit’s ruling.

I.

The Second Circuit’s Opinion on Market Efficiency

follows Supreme Court Precedent.

Petitioners’ arg uments fall woefully shor t of

demonstrating any need for Supreme Court review. As

the Second Circuit aptly recognized, the D.C. Order

meticulously applied the now well-established standards

articulated in Basic and Halliburton II.

13

A.

The Lower Court’s Ruling That Respondents

Satisfied Their Burden to Invoke the Basic

Presumption is Consistent With Basic and

Halliburton Ii

Petitioners improperly ask this Court to expend

its limited resources to review legal issues it already

addressed in Basic and Halliburton II.

Specifically, to resolve the difficulties inherent in

proving direct reliance in modern securities markets,

the Supreme Court held in Basic that plaintiffs could

invoke a rebuttable presumption of reliance by resorting

to the “fraud on the market theory,” which provides

that “[a]n investor who buys or sells stock at the price

set by the market does so in reliance on the integrity of

that price.” Basic, 108 S. Ct. at 992. The Basic decision

recognized that direct contact between buyer and seller

anticipated in the original securities laws had given way

to a mostly indirect relationship intermediated through

markets. The Supreme Court explained that modern

securities markets differ significantly “from the faceto-face transactions contemplated by early fraud cases,”

and flexibility becomes necessary if the law is to fulfill the

fundamental purposes of the securities laws. Id. at 990.

The Basic court made clear that the presumption was

grounded in “considerations of fairness, public policy…as

well as judicial economy,” “common sense and probability.”

Id. at 990-91.

In Halliburton II, the Supreme Court rejected

defendant’s plea to overrule or modify the Basic

presumption. The Court did not credit Halliburton’s

argument that the Basic presumption is no longer tenable

14

in light of “[empirical] studies purporting to show that

‘public information is often not incorporated immediately

(much less rationally) into market prices.’” Id. Instead,

the Court stated:

To recognize the presumption of reliance,

the Court explained, was not “conclusively to

adopt any particular theory of how quickly

and completely publicly available information

is reflected in market price.” Id., at 248 n.28,

108 S. Ct. 978. The Court instead based the

presumption on the fairly modest premise that

“market professionals generally consider most

publicly announced material statements about

companies, thereby affecting stock market

prices.” Id., at 247 n.24, 108 S. Ct. 978.

***

Even the foremost critics of the efficientcapital-markets hypothesis acknowledge that

public information generally affects stock

prices... Debates about the precise degree to

which stock prices accurately reflect public

information are thus largely beside the

point. “That the ... price [of a stock] may be

inaccurate does not detract from the fact that

false statements affect it, and cause loss,” which

is “all that Basic requires.”

Halliburton II, 134 S. Ct. at 2410 (internal citation

omitted; emphasis added). Adhering to the dictates of

Basic and its progeny, and their underlying rationale, the

Second Circuit affirmed the District Court’s unsurprising

15

conclusion that Barclays ADS traded in an efficient market

based on uncontested and sufficiently overwhelming

evidence.

Courts evaluating market efficiency nearly universally

consider the five factors the district court suggested in

Cammer v. Bloom, 711 F. Supp. 1264, 1283–87 (D.N.J.

1989) and the three factors the district court suggested

in Krogman v. Sterritt, 202 F.R.D. 467, 478 (N.D. Tex.

2001). Seven of the Cammer/Krogman factors look at

indirect evidence of market efficiency while one, known

as “Cammer 5,” examines direct evidence, often through

use of an event study.

Petitioners ask this Court to review the Second

Circuit’s decision to reject their untenable position

that market efficiency can never be established without

Cammer 5. However, as both the Second Circuit and the

District Court pointedly noted, adopting Petitioners’

position would obviate the need to ever consider any of the

other seven factors. Pet. App. at 35a (“indirect evidence of

market efficiency” under the other four Cammer factors

would “add little to the Basic analysis if courts only ever

considered them after finding a strong showing based

on direct evidence alone.”); Pet. App., at 85a-86a (“there

would be no need for a five factor test—or consideration

of the other factors described earlier in part III.B.—if

one factor were dispositive in every context”).

Petitioners’ position is indefensible in light of Supreme

Court precedent and extensive lower court decisions that

have found efficiency without Cammer 5. Pet. App., at 87a

(“Requiring a plaintiff to submit proof of market reactions–

– and to do so with an event study– – ignores Supreme

16

Court precedent as well as practical considerations.”);

Aranaz v. Catalyst Pharm. Partners Inc., 302 F.R.D.

657, 669 (S.D. Fla. 2014) (finding market efficient for

common stock even though expert had not performed an

event study and implicitly finding that empirical evidence

of the stock price change on the corrective disclosure

date satisfied Cammer 5); In re Comput. Sci. Corp. Sec.

Litig., 288 F.R.D. 112, 120 (E.D. Va. 2012) (rejecting the

argument that plaintiffs had failed to establish market

efficiency because they had not submitted an event study);

Smilovits v. First Solar, Inc., 295 F.R.D. 423, 437 (D. Ariz.

2013) (holding that where Cammer 1, 2, and 4 weighed

in plaintiffs’ favor, Cammer 3 was partially unsatisfied,

and Cammer 5 did not favor either the plaintiffs or the

defendants, plaintiffs’ evidence was sufficient to establish

market efficiency by a preponderance of the evidence).

In holding that Barclays ADS traded in an efficient

market, neither the Second Circuit nor the District Court

“radically alter[ed]” the required showing for market

efficiency established by this Court, as Petitioners

incorrectly assert. Pet. at 22. The decisions below simply

recognized Halliburton II’s conclusion that no specific

degree of efficiency is mandated to invoke the Basic

presumption. Halliburton II, 134 S. Ct. at 2410 (“Debates

about the precise degree to which stock prices accurately

reflect public information are thus largely beside the point.

“That the ... price [of a stock] may be inaccurate does not

detract from the fact that false statements affect it, and

cause loss,” which is “all that Basic requires.” Schleicher

v. Wendt, 618 F.3d 679, 685 (7th Cir. 2010) (Easterbrook,

C.J.)”). An event study is thus not required to determine

the level and extent that the securities in question react

to new information. That is entirely consistent with

17

Basic’s unambiguous holding that the fraud on the market

presumption is based on a “fairly modest premise.”

Halliburton II at 2410 (quoting Basic, 485 U.S. at 247, n.

24, 108 S. Ct. 978 (1988)). By insisting that plaintiffs cannot

invoke the presumption without Cammer 5, Petitioners are

seeking to eradicate the very foundation of Basic.

Petitioners argue that in Halliburton II, “this Court

presumed that securities plaintiffs provide direct evidence

of market efficiency…” Pet. at 20. Halliburton II, however,

did not obligate plaintiffs to do so. The decision simply

states that “plaintiffs themselves can and do introduce

evidence of the existence of price impact in connection

with “event studies,” not that they must. Halliburton

II, 134 S. Ct. at 2415. This is entirely consistent with the

Second Circuit’s ruling here that while direct evidence

is sometimes necessary, it is not always necessary when

the indirect evidence of market efficiency is overwhelming

and, as here, uncontested.

Here, there was no “reason to doubt the efficiency of the

market” necessitating utilization of a direct test. Having

assessed all of the indirect evidence overwhelmingly

demonstrating the efficiency of the market, a point

Petitioners conceded, as well as Circuit Court precedent

regarding how to test for market efficiency, and having

conducted a thorough evaluation of the pitfalls involved in

utilizing event studies, the District Court properly held:

Having considered the parties’ arguments

and evidence, including that Barclays ADS

trades on the NYSE at high volumes with heavy

analyst coverage, I conclude that plaintiffs have

established market efficiency indirectly and

18

therefore do not consider whether they have

also satisfied Cammer 5 by proof of an event

study.

Pet. App. at 92a (Emphasis supplied).

Indeed, given the overwhelming size of Barclays

market capitalization and extensive analyst coverage on

the Company, and that there was no inhibition to trading

Barclays’ securities during the Class Period, Petitioners

have never deigned to argue that Barclays traded in an

inefficient market.

Nevertheless, though not required, Respondents

proffered an event study in support of Cammer 5 which

provides prodigious evidence that Barclays ADS traded

in an efficient market, a conclusion Petitioners do not

dispute. Moreover, Judge Scheindlin did in fact evaluate

Cammer 5, though stating it was unnecessary in light of

the overwhelming indirect evidence of efficiency. Pet.

App. at 92a. (“Having considered the parties arguments

and evidence…”). Indeed, almost every question Judge

Scheindlin asked Dr. Nye at the evidentiary hearing

pertained to the event study he conducted in support

of Cammer 5.

B. T he L ower Cou r t’s Ruli ng R eg a rd i ng

Defendants’ Rebuttal Burden is Consistent

with Basic and Halliburton II

The Supreme Court has already addressed the burden

defendants must carry to rebut the Basic presumption and

the Second Circuit properly adhered to that precedent in

its ruling below. Justice Blackmun recognized in Basic that

19

a defendant could only rebut the presumption of reliance

based on, “[a]ny showing that severs the link between the

alleged misrepresentation and either the price received

(or paid) by the plaintiff, or his decision to trade at a fair

market price…” 485 U.S. at 248-249. Petitioners latched on

to the “any showing” phrase and misguidedly interpreted

it to mean that their rebuttal burden is “minimal” and

thus inconsistent with a preponderance of the evidence

standard of proof. However, by requiring a “showing”

the Basic Court made clear that defendants cannot

simply introduce unproven theory, but must make an

evidentiary showing of proven fact. Moreover, Petitioners

cannot focus on the phrase “any showing” in a vacuum.

What they must accomplish when offering direct proof

is set forth in the very same sentence--- their evidence

must actually “sever the link.” The Second Circuit

recognized that the phrase ““[a]ny showing that severs

the link” aligns more logically with imposing a burden of

persuasion rather than a burden of production.” Pet. App.

at 44a. The Court’s use of the word “any” simply suggests

multiple possible routes of making the showing so long

as the evidence “severs the link” between the alleged

misrepresentation and the presumed fact of reliance. The

link cannot be severed without evidence that breaks the

chain of inferences giving rise to the presumption, and

that break requires that a defendant actually show, i.e.,

prove, severance. As the Second Circuit aptly noted, “[i]t

would be inconsistent with Halliburton II to require that

plaintiffs meet [their] evidentiary burden while allowing

defendants to rebut the Basic presumption by simply

producing some evidence of market inefficiency, but not

demonstrating its inefficiency to the district court. The

presumption of reliance would also be of little value if it

were so easily overcome.” Pet. App. at 43a.

20

A mere suggestion or minimal evidence implying

that the link does not or might not exist is undeniably

insufficient--- defendants must entirely sever the link for

a particular misrepresentation to rebut the presumption.

This is no easy feat. Nor was it meant to be. Indeed,

through examples, the Basic Court made apparent how

compelling the rebuttal evidence needs to be, and how

completely that evidence must sever the link. See, e.g.,

Basic, 485 U.S. at 248 (“For example, if petitioners could

show that the “market makers” were privy to the truth

about the merger discussions here with Combustion, and

thus that the market price would not have been affected

by their misrepresentations, the causal connection could

be broken: the basis for finding that the fraud had been

transmitted through market price would be gone.”).

Moreover, correspondence between Justices Brennan

and Blackmun confirms that the Supreme Court viewed

the rebuttal burden as virtually insurmountable. See

Letter from Harry Blackmun to William Brennan at 2

(Jan. 15, 1988) Letter from William Brennan to Harry

Blackmun (Jan. 27, 1988) in case files for each justice at

the Library of Congress. In their correspondence, both

justices agreed that the burden imposed on a defendant

to rebut the presumption of reliance was, in Justice

Blackmun’s words “very burdensome to prove” and in

Justice Brennan’s words “impractical to use.” Id.

The Supreme Court reaffirmed defendants’ heavy

burden in Hallibur ton II, making clear that the

defendants must prove the absence of price impact.

Halliburton II, 134 S. Ct. at 2405, 2414, 2417 (defendants

can only “defeat the presumption through evidence that

an alleged misrepresentation did not actually affect the

21

market price of the stock.”). It is insufficient for defendants

to proffer any evidence, no matter how frail, to rebut the

presumption. The evidence must be “direct” and “more

salient” than that proffered by plaintiffs to trigger the

presumption. Id. at 2416. As in Basic, the Court provides

an example of how defendants can rebut the presumption:

So for example, if a defendant could show that

the alleged misrepresentation did not, for

whatever reason, actually affect the market

price, or that a plaintiff would have bought or

sold the stock even had he been aware that the

stock’s price was tainted by fraud, then the

presumption of reliance would not apply.

Id. at 2408 (internal citation omitted)(emphasis added).

In other words, for evidence to be sufficiently “salient”

to “sever the link”—defendants must either show, not

merely suggest, that a misrepresentation did not impact

the market price of the security or that plaintiff would

have transacted in the security regardless of the fraud.

Citing Halliburton II, the Second Circuit explained that a

showing that severs the link only rebuts the presumption

“because ‘the basis for finding that the fraud had been

transmitted through market price would be gone.’“ Pet.

App. at 43a (citing Halliburton II, 134 S. Ct. at 2415-16).

The concurrences of six justices of the Supreme Court

in Halliburton II cement the Court’s intention to make

defendants actually prove the absence of price impact;

with defendants bearing a heavy burden to do so. Justice

Ginsburg’s concurring opinion, joined by Justices Breyer

and Sotomayor, concluded that “the Court recognizes

that “it is incumbent upon the defendant to show the

22

absence of price impact.” Id. at 2417 (emphasis added).

Justice Ginsburg made clear that, “[t]he Court’s judgment,

therefore, should impose no heavy toll on securities-fraud

plaintiffs with tenable claims. On that understanding, I

join the Court’s opinion.” Even Justice Thomas, concurring

in the judgment and joined by Justices Scalia and Alito,

who would have overruled Basic, id. at 2418, acknowledged

that the presumption “is virtually irrebuttable in practice.”

Id. at 2424. Justice Thomas recognized that defendant’

burden is more than simply producing some evidence to

burst the Basic presumption.

Under Petitioners’ logic, they could meet their rebuttal

burden with a minimal showing upon which the presumption

immediately evaporates. This would shift the onus back

to Respondents to show price impact and individual

reliance without the benefit of any presumption. Such

an outcome squarely contravenes Halliburton II’s clear

directive that plaintiffs are not required to directly prove

price impact at class certification. Id, 2414-15 (for example,

the Court stated that, “Far from a modest refinement

of the Basic presumption, [requiring plaintiffs to prove

price impact directly] would radically alter the required

showing for the reliance element of the Rule 10b–5 cause

of action.”).

It is for this reason that the district court in

Halliburton on remand following Halliburton II, agreed

that the burden of persuasion shifted to defendants to

rebut the Basic presumption. Erica P. John Fund, Inc. v.

Halliburton Co., 309 F.R.D. 251, 258–59 (N.D. Tex. 2015),

leave to appeal granted, No. 15-90038, 2015 WL 10714013

(5th Cir. Nov. 4, 2015). Specifically, the court stated that:

23

[R]elieving Halliburton of the burden of

persuasion wou ld ev iscerat e the Ba sic

presumption because Hallibur ton could

arguably satisfy its burden merely by having

an expert opine that price impact was absent.

Shi f ting the bu rden would requ i re the

Fund to prove price impact directly at class

certification—a proposal the Supreme Court

said would radically alter the reliance showing.

In Halliburton II, the Court saw no reason to

“artificially limit the [price impact] inquiry at

the certification stage to indirect evidence,”

and authorized defendants to seek to defeat

the Basic presumption at the class certification

stage through direct as well as indirect price

impact evidence. Halliburton Co., 134 S. Ct.

at 2417. By requiring plaintiffs to carry the

burden of persuasion to show price impact at

the class certification stage, this Court would,

in effect, be requiring the Fund to prove price

impact directly, a proposition the Supreme

Court refused to adopt.

Id.

Ii. There is no Lower Court Confusion or Circuit Split

Petitioners suggest a sense of urgency in their bid to

have the Supreme Court grant certiorari by asserting that

there is lower court confusion regarding whether direct

evidence of market efficiency is always required to trigger

the Basic presumption; and a circuit split regarding

defendants’ burden in rebutting the Basic presumption.

24

Such assertions are belied by the very cases Petitioners

cited to support their contention.

A.

There is No Lower Court Confusion

Consistent with Basic and Halliburton II, district

courts have nearly universally adopted the five Cammer

factors (with many also adopting the Krogman factors)

as the appropriate yardstick to analyze market efficiently,

while recog nizing that no one factor is outcome

determinative, including Cammer 5. See, e.g., Carpenters

Pension Trust Fund of St. Louis v. Barclays PLC, 310

F.R.D. 69, 84 (S.D.N.Y. 2015) (“Requiring a plaintiff to

submit proof of market reactions– – and to do so with

an event study– – ignores Supreme Court precedent as

well as practical considerations.”); Aranaz v. Catalyst

Pharm. Partners Inc., 302 F.R.D. 657, 669 (S.D. Fla. 2014)

(finding market efficient for common stock even though

expert had not performed an event study and implicitly

finding that empirical evidence of the stock price change

on the corrective disclosure date satisfied Cammer 5);

In re Comput. Sci. Corp. Sec. Litig., 288 F.R.D. 112, 120

(E.D. Va. 2012) (rejecting the argument that plaintiffs

had failed to establish market efficiency because they

had not submitted an event study); Smilovits v. First

Solar, Inc., 295 F.R.D. 423, 437 (D. Ariz. 2013) (holding

that where Cammer 1, 2, and 4 weighed in plaintiffs’

favor, Cammer 3 was partially unsatisfied, and Cammer

5 did not favor either the plaintiffs or the defendants,

plaintiffs’ evidence was sufficient to establish market

efficiency by a preponderance of the evidence); Petrie

v. Elec. Game Card, Inc., 308 F.R.D. 336, 349 (C.D. Cal.

2015)(“The Cammer factors are “an analytical tool, not

a checklist” of requirements); Billhofer v. Flamel Techs.,

25

S.A., 281 F.R.D. 150, 160 (S.D.N.Y. 2012)(“These factors

should be used as an analytical tool rather than as

a checklist”). These holdings comport with both Basic

and common sense, as there can be scenarios where

an event study is impracticable, such as where a class

period lasts for only a few days or a very short period,

rendering the sample size too small for a proper event

study. Moreover, as the D.C. Order recognized using an

illustrative example, “[t]he notion that event studies are

the paramount tool for testing market efficiency comes

from multi-firm event studies, and courts have generally

not distinguished between the power of multi-firm and

single firm event studies. However, when the event

study is used in a litigation to examine a single firm, the

chances of finding statistically significant results decrease

dramatically.” Pet. App. at 88a.

Neither the First Circuit’s decision in Xcelera, nor

the Fifth Circuit’s decision in Unger, cited by Petitioners,

actually holds that a plaintiff must always satisfy Cammer

5 with direct evidence to establish market efficiency. In In

re Xcelera.com Sec. Litig., 430 F.3d 503, 511-512 (1st Cir.

2005), defendants challenged three of the indirect Cammer

factors, rendering the Cammer 5 test significantly more

important in the analytical framework. In stark contrast,

Petitioners have conceded that Respondents satisfied all

seven indirect factors demonstrating market efficiency. In

any event, though opining on the importance of Cammer 5,

the First Circuit never stated that it must be satisfied in

every case. Indeed, in affirming the district court’s order

certifying the class, the First Circuit stated, “[b]ecause

there is no “magic number” of factors for determining

efficiency, we leave it to the district court in the first

instance to decide which factors and how many factors

26

it will consider…” Id. at 518. In Unger v. Amedisys Inc.,

401 F.3d 316 (5th Cir. 2005), the Fifth Circuit made clear

that plaintiff had not satisfied all of the indirect factors

of efficiency. Moreover, the Unger court recognized that

“[t]here is no requirement for expert testimony on the

issue of market efficiency, Id. at 323 n. 6, and faulted the

district court for using the factors “as a checklist rather

than an analytical tool.” Id. at 325.

The only other two cases Petitioners cite as purportedly

supporting their “lower court confusion” argument also

do not hold that a plaintiff must always satisfy Cammer

5 to prove market efficiency. Pet. at 20. For example, in

Best Buy, the issue before the Eighth Circuit was whether

defendants successfully rebutted the Basic presumption

by demonstrating a lack of price impact. Best Buy, 818

F.3d 775. The court did not opine on the necessity of

Cammer 5 but rather noted that, unlike here, plaintiffs’

and defendants’ experts agreed that the inflation of the

stock resulted from a non-fraudulent press release. Id.

at 783. The Eighth Circuit then held that defendants had

presented “overwhelming evidence of no “front-end” price

impact.” Id. at 782. The Freddie Mac decision also does

not support Petitioners’ position. In re Fed. Home Loan

Mortg. Corp. (Freddie Mac) Sec. Litig., 281 F.R.D. 174

(S.D.N.Y. 2012). As the D.C. Order recognized, Freddie

Mac pre-dated Halliburton II and, in any event, in

contrast to the securities at issue here, the shares at issue

there were “a limited series of preferred shares, which

are traded in patterns significantly different from the

trading patterns typical of common shares.” Moreover, the

district court’s statements in Freddie Mac regarding the

importance of Cammer 5 relied on the Second Circuit’s

decision in Teamsters Local 445 Freight Div. Pension,

27

Fund v. Bombardier Inc., 546 F.3d 196, 207 (2d Cir.

2008). However, the Second Circuit itself made clear in

the Order here that Cammer 5 was an important part of

the analysis in Bombardier only because “we concluded

that certain of the indirect factors did not demonstrate

market efficiency. Pet. App. at 38a.

Having failed to cite a single lower court decision

holding that a plaintiff must always satisfy Cammer 5,

Petitioners have failed to evidence any confusion from

the lower courts regarding the necessity of Cammer 5.

Indeed, all courts agree that it is a relevant analytical

tool, but by no means a necessary one for demonstrating

market efficiency.

B. There is no Circuit Split

Petitioners also ask this Court to resolve an imaginary

circuit split regarding their rebuttal burden, an argument

they base on a mischaracterization of the Eighth

Circuit’s decision in Best Buy. No such circuit split exists.

Petitioners incorrectly contend that the Order contradicts

Best Buy’s holding that pursuant to Rule 301 defendants

have only a burden of production when rebutting the

Basic presumption. See, e.g., Pet. at 3, 9, 12, 13; Best

Buy, 818 F.3d at 782 (“We agree with the district court

that, when plaintiffs presented a prima facie case that

the Basic presumption applies to their claims, defendants

had the burden to come forward with evidence showing

a lack of price impact. See Fed. R. Evid. 301 (“the party

against whom a presumption is directed has the burden

of producing evidence to rebut the presumption”)2). . It

2. There is no analysis or discussion of Rule 301 beyond this

single statement. In fact, the district court’s decision in Best Buy,

28

does not appear, however, that there was any dispute

about the burden of persuasion in Best Buy. Moreover, the

Eighth Circuit’s ultimate holding was that the defendants’

“overwhelming evidence of no ‘front-end’ price impact

rebutted the Basic presumption” and plaintiffs “presented

no contrary evidence of price impact.” Id. at 782. In other

words, any allocation of the burden of persuasion was of

no consequence. The plain language from the relevant

text in Best Buy evidences that the Eighth Circuit was

merely citing Rule 301 as additional authority for the

general proposition regarding rebuttal of presumptions,

but was not addressing in any meaningful fashion the

burden required for doing so. This passing reference to

Rule 301 hardly constitutes a circuit split worth of this

Court’s review.

Indeed, the Best Buy decision actually supports

the lower courts’ analysis. Best Buy confirms that it is

defendants’ “burden [to produce] evidence to rebut the

[Basic] presumption,” and concluded that defendants met

their burden with “strong evidence.” Here, Petitioners

provided no evidence at all. Considering both parties’

experts, Best Buy found defendants’ demonstrated

“overwhelming evidence” rebutting price impact. Id.

at *6. The District Court here similarly assessed both

parties’ experts but found that Petitioners had presented

no rebuttal evidence—through either party’s expert. See

Pet. App. at 98a (Assessing Plaintiffs’ expert: “Dr. Nye did

not attempt to show price movement on the misstatement

dates... because plaintiffs’ case is premised on a price

maintenance theory.” Assessing Petitioners’ expert: “the

with which the Eighth Circuit expresses agreement, does not make

any reference to Rule 301 or evidentiary burden at all.

29

defendants in the instant case have not submitted an event

study—either analyzing the price impact on the date of

the misstatements or on the corrective disclosure date—to

prove lack of price impact.”). 3

Moreover, the Second Circuit here directly addressed

the Best Buy decision, noting:

We do not, however, read the Eighth Circuit’s

decision as being in direct conflict with our

holding. The Eighth Circuit’s statement

appears to be dictum because the extent

of the burden was not at issue. Id. at 78283. The Eighth Circuit ultimately concluded

that the “overwhelming evidence” in the case

demonstrated that there had been no price

impact and that the Basic presumption had

therefore been rebutted. Id. at 782. Thus, the

Eighth Circuit’s ruling did not depend on the

standard of proof.

Pet. App. at 49a, n.36.

Indeed, in the nearly thirty years since Basic, no court

has allowed defendants to utilize Rule 301 to eviscerate

the presumption by merely proffering “any” admissible

contrary evidence, no matter how flimsy.

3. Indeed, given Petitioners’ failure to proffer any evidence

in the form of an event study or otherwise demonstrating lack of

price impact, this case would present a poor vehicle for this Court

to weigh in on the requisite evidentiary burden necessary to rebut

Basic’s presumption of reliance.

30

Not only is there no circuit split regarding defendants’

rebuttal burden, but, other circuit courts have placed

the burden of persuasion for rebuttal on defendants. For

example, the Ninth Circuit’s model jury instruction states:

If you find that the plaintiff has proved by a

preponderance of the evidence that (1) an active,

open market for the [security] [securities]

existed and (2) investors reasonably relied

on that market as an accurate reflection of

the current market value of the [security]

[securities], you may find that the plaintiff

has proved that [he] [she] [it] relied on the

defendant’s statements.

If, however, the defendant proves by a

preponderance of the evidence that (1) the

plaintiff did not actually rely on the integrity of

the market or (2) the alleged misrepresentation

or omission did not affect the market price of

the security, then the defendant has rebutted

any presumption that the plaintiff relied on

the market. In that event, the plaintiff must

then prove that [he] [she] [it] justifiably relied

directly on the alleged misrepresentation or

omission.

Ninth Circuit Manual of Jury Instructions: Civil § 18.5,

at 422. (2007) (emphasis added).

The Second Circuit Order is also consistent with the

plain language of Rule 301. Rule 301 states:

In a civil case, unless a federal statute or these

rules provide otherwise, the party against

31

whom a presumption is directed has the burden

of producing evidence to rebut the presumption.

But this rule does not shift the burden of

persuasion, which remains on the party who

had it originally.

(Emphasis added). In creating the fraud on the market

presumption, the Basic court sought to effectuate the

congressional intent underlying the Securities Exchange

Act of 1934 (“Exchange Act”), 15 U.S.C. §78a et seq.

See U.S. Dep’t of Justice v. Landano, 508 U.S. 165, 174

(1993) (identifying the Basic presumption as a judicially

created presumption pursuant to federal statute). As

Rule 301 states, it is not meant to apply to a presumption

created pursuant to federal statute, particularly where

its application would thwart the policies underlying that

presumption. See Mueller and Kirkpatrick, Federal

Evidence 4th at 441 (noting that courts can and do give

greater effect to a presumption in order to implement

“statutory policy”: “Rule 301 contains exempting language

. . . that permits courts to accord to statutory presumptions

(and to court-made presumption implementing statutes)

an effect other than the one prescribed by Rule 301”)

(emphasis added). The Supreme Court has made clear

that the Basic presumption is “a substantive doctrine of

federal securities-fraud law” and thus outside the reach of

Rule 301. See Amgen Inc., 133 S. Ct. at 1193, 185 L. Ed. 2d

308. The preponderance of the evidence standard, applied

to burdens of persuasion in civil litigation, is therefore

the proper burden defendants must satisfy to rebut the

Basic presumption.

Moreover, the Supreme Court made clear that

plaintiffs can only invoke the Basic presumption when

they satisfy four factors by a preponderance of the

32

evidence (in sharp contrast to simple presumptions

based on proof of a single factor): “(1) that the alleged

misrepresentations were publicly known, (2) that they

were material, (3) that the stock traded in an efficient

market, and (4) that the plaintiff traded the stock between

the time the misrepresentations were made and when

the truth was revealed.” Halliburton II, 134 S. Ct. at

2408. Further, to establish “that the stock traded in an

efficient market,” plaintiffs introduce substantial evidence

regarding up to eight separate factors that courts have

used as an analytical tool in evaluating market efficiency,

as Respondents have done here. See Cammer, 711 F. Supp.

at 1283; Krogman, 202 F.R.D. at 478.

It strains reason to posit that the Supreme Court

intended that plaintiffs making such a substantial and

complex showing would lose the benefit of the presumption

simply because a defendant offered “some” rebuttal

evidence, no matter how frail. To promote fairness and

uphold the policies underpinning the relevant federal

statutes, there should be parity in the respective

burdens of proof to trigger, and rebut, the presumption.

The Second Circuit therefore properly held, that “Rule

301 therefore imposes no impediment to our conclusion

that the burden of persuasion, not production, to rebut

the Basic presumption shifts to defendants.” Pet. App.

at 49a.

III. THE SECOND CIRCUIT’S HOLDINGS DO NOT

PREJUDICE PETITIONERS.

Lastly, Petitioners have failed to establish that they

suffer any prejudice as a result of the Order. Indeed, even

if the Second Circuit had held that district courts must

33

always consider Cammer 5 or that defendants’ rebuttal

burden is only one of production, and remanded back to

the district court, the class would remain certified. That is

because Respondents satisfied Cammer 5 and Petitioners

failed to meet their rebuttal burden even under the

minimal threshold they espouse.

A.

Even if the Second Circuit had required

Cammer 5 here, the Same Result would

ensue

Ironically, though Petitioners seek review of the

decision below, there is no actual dispute regarding

the efficiency of the market for Barclays’ ADS. At no

point have Petitioners ever argued that any Cammer

5 analysis would warrant a finding that Barclays

ADS did not trade in an efficient market. Even at the

District Court level, Petitioners’ expert, Dr. James, simply

quibbled with Dr. Nye’s methodologies with regard to

Cammer 5—but never his conclusions. Petitioners’ chosen

strategy of attacking the Cammer 5 journey but not the

destination bespeaks their concession regarding the

efficiency of the market for Barclays ADS. In re Goldman

Sachs Grp., Inc. Sec. Litig., 2015 U.S. Dist. LEXIS 128856

(S.D.N.Y. Sep. 24, 2015) (“Plaintiffs are correct that there

is no real dispute concerning the market efficiency for

Goldman’s stock…While Defendants take issue with Dr.

Finnerty’s evaluation of the fifth Cammer factor … they

do not otherwise suggest that the market for Goldman’s

stock was not efficient”).

Even though Petitioners have never deigned to

suggest that Barclays ADS did not trade in an efficient

market, they ask the Supreme Court to review the decision

34

below and to obligate the district court to review Cammer

5 as part of every market efficiency analysis--- no matter

the circumstances--- only to have the district court in this

case consider Cammer 5 and once again certify the Class.

That the same result would ensue is a near certainty. Dr.

Nye’s event study overwhelmingly demonstrates cause

and effect as it shows that Barclays’ securities moved

in a statically significant and directionally consistent

manner, on nine out of fourteen earnings release event

dates. The event study also shows that for the five dates

on which Barclays’ securities did not move in a statistically

significant manner, the Company’s earnings results were

generally in line with market expectations, and/or the

results were largely mixed, such that the insignificant

returns are consistent with that expected in an efficient

market.

Dr. Nye’s event study thus clearly satisfies Basic and

Halliburton, which simply require evidence sufficient to

support the “modest premise” that stock prices reflect

publicly available information, not prophecy. With no event

study of their own and no suggestion that Barclays ADS

did not trade in an efficient market, Petitioners provided

no basis for the District Court to discredit Dr. Nye’s event

study and find the market for Barclays ADS’ inefficient.

B. Petitioners have failed to rebut the Basic

presumption under any standard

Petitioners base their argument to this Court on the

faulty premise that they “presented evidence rebutting

the fraud-on the-market presumption.” Pet. at 3. They

did not. Indeed, Petitioners did not proffer any evidence

at all, much less “direct, more salient” evidence that

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“sever[ed] the link between the alleged misrepresentation

and either the price received (or paid) by the plaintiff, or

his decision to trade at a fair market price.” Halliburton

II, 134 S. Ct. at 2408.

Petitioners did not conduct any price impact analysis,

either through their expert or otherwise, to rebut the

presumption of reliance, implicitly acknowledging the

futility of such analysis.

Instead, ignoring Respondents’ theory of the case,

Petitioners argued that Barclays’ ADS did not react to

the alleged misstatements. The District Court aptly noted

that Petitioners had not met their burden because they

failed to demonstrate a lack of price maintenance by the

misrepresentations. Pet. App. at 98a-101a, (noting, among

other things, that Petitioners failed to provide a regression

model or event study to support their assertions).

Petitioners’ only other rebuttal argument was that

they “presented evidence that the decline in the price of

Barclays’ ADS was the result of investor concerns about

the risk of a regulatory lawsuit and resulting fines, as

opposed to alleged concerns about Barclays’ financials or

the LX business.” Pet. at 29. As the D.C. Order recognized,

however, “[a]gain, [defendants] do not offer their own

regression analysis to show that the price drop on the

corrective disclosure date was not due to the alleged

fraud.” Pet. App. at 101a-103a. Instead, Petitioners offered

a baseless hypothesis that the price decline resulted from

investor concerns over regulatory scrutiny and litigation

risk, which they illogically deemed unrelated to the

fraudulent conduct alleged in this case, even though it is

the very subject of the regulatory scrutiny and litigation

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risk to which they refer. Regardless, as the Second

Circuit correctly noted, “merely suggesting that another

factor also contributed to an impact on a security’s price

does not establish that the fraudulent conduct complained

of did not also impact the price of the security.” Pet. App.

at 52a.

The D.C. Order is consistent with the Supreme Court’s

directive that defendants must “sever the link” completely.

If they cannot disprove that the disclosure of fraud at least

partly caused the drop in price, then they have not met

their rebuttal burden under Basic and Halliburton II.

Thus, while quibbling with the lower courts over the

proper standard for establishing a lack of price impact,

Petitioners fail to acknowledge that they have failed to

show lack of price impact under any standard. Supplanting

theory and conjecture for fact does not satisfy Rule 301’s

requirements for rebutting presumptions. In other words,

though correct, the District Court’s application of the

preponderance of the evidence standard was not outcome

determinative in this case.

37

CONCLUSION

Having failed to provide any grounds for review, the

Supreme Court should reject the Petition for a Writ of

Certiorari.

Respectfully Submitted,

Jeremy A. Lieberman

Counsel of Record

Tamar A. Weinrib

Pomerantz LLP

600 Third Avenue, 20th Floor

New York, New York 10016

(212) 661-1100

jalieberman@pomlaw.com

Counsel for Respondents