Petition for Writ of Certiorari — Johnson & Johnson, et al., Petitioners v. San Diego County Employees Retirement Association, et al.

No. 25IN THE

Supreme Court of the United States

___________

JOHNSON & JOHNSON, ET AL.,

Petitioners,

v.

SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION; FRANK HALL, INDIVIDUALLY AND ON BEHALF OF

ALL OTHERS SIMILARLY SITUATED,

___________

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Third Circuit

___________

PETITION FOR A WRIT OF CERTIORARI

___________

Kristen R. Seeger

Tacy F. Flint

John M. Skakun III

Neil H. Conrad

SIDLEY AUSTIN LLP

One South Dearborn

Chicago, IL 60603

(312) 853-7000

kseeger@sidley.com

Kwaku A. Akowuah

Counsel of Record

Manuel Valle

SIDLEY AUSTIN LLP

1501 K Street, NW

Washington, DC 20005

(202) 736-8000

kakowuah@sidley.com

Counsel for Petitioners

February 4, 2026

i

QUESTIONS PRESENTED

Securities-fraud class actions overwhelmingly rely

on the “inflation-maintenance” theory, which posits

that misrepresentations maintain an inflated stock

price until “corrective disclosures” reveal their falsity

and cause the price to drop. Plaintiffs in these cases

pursue class certification by invoking the efficientmarket hypothesis adopted in Basic Inc. v. Levinson,

485 U.S. 224 (1988). They argue that reliance can be

presumed classwide because stock prices in efficient

markets incorporate all publicly available information,

including misstatements. Based on this presumption,

lower courts grant 90% of class-certification motions.

This Court’s decision in Goldman Sachs Group, Inc.

v. Arkansas Teacher Retirement System, 594 U.S. 113

(2021), installed guardrails on these cases. It required

courts to evaluate the match between the “contents of

the misrepresentation and the corrective disclosure,”

to ensure the disclosure “actually corrected” the misrepresentation. Id. at 123. Where a “mismatch” exists,

class certification is “inappropriate.” Id. at 119, 123.

Here, the Third Circuit concluded that Goldman’s

match requirement is satisfied where the misrepresentation and corrective disclosure merely touch the same

subject matter, regardless of whether the disclosure

actually reveals the misstatement’s falsity. It also concluded that disclosures may have price impact even

when they only republish already-public information.

The questions presented are:

1. Under Goldman, must the contents of corrective

disclosures actually reveal the falsity of misrepresentations, as the Second Circuit requires; or is

it sufficient if the misrepresentations and disclosures merely relate to the same general subject,

as the Third and Ninth Circuits allow?

ii

2. Under this Court’s Basic precedents, may a securities-fraud class action be certified where the

plaintiff invokes the efficient-market hypothesis

to establish classwide reliance, but the corrective

disclosures repeat information that was already

publicly available?

iii

RELATED PROCEEDINGS

United States District Court (D.N.J.):

Hall v. Johnson & Johnson, No. 18-1833 (Dec. 29,

2023)

United States Court of Appeals (CA3):

San Diego Cnty. Emps. Ret. Ass’n v. Johnson &

Johnson, No. 24-1409 (July 30, 2025)

iv

PARTIES TO THE PROCEEDINGS BELOW

Petitioners (Defendants-Appellants below) are Johnson & Johnson, Alex Gorsky, Joan Casalvieri, Tara

Glasgow, and Carol Goodrich.

Respondent (Plaintiff-Appellee below) is San Diego

County Employees Retirement Association, individually and on behalf of all others similarly situated.

Frank Hall, listed in the caption as an Appellee by the

Third Circuit, did not participate in the Third Circuit

proceeding and is no longer a party to the district court

proceeding.

v

CORPORATE DISCLOSURE STATEMENT

Pursuant to Supreme Court Rule 29.6, Petitioner

Johnson & Johnson discloses that it has no parent corporation and that no publicly held company owns 10%

or more of its stock.

For the avoidance of doubt, Johnson & Johnson also

discloses that it does not own any shares of Kenvue

Inc.’s common stock. Kenvue is not a party to, and has

no interest in, this litigation.

vi

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ......................................... i

RELATED PROCEEDINGS.......................................iii

PARTIES TO THE PROCEEDINGS BELOW .......... iv

CORPORATE DISCLOSURE STATEMENT ............. v

TABLE OF CONTENTS............................................. vi

TABLE OF AUTHORITIES ..................................... viii

INTRODUCTION ........................................................ 1

OPINIONS BELOW .................................................... 7

JURISDICTION........................................................... 7

FEDERAL RULE INVOLVED .................................... 7

STATEMENT............................................................... 8

I. BACKGROUND ................................................... 8

A. Legal Background ............................................ 8

B. Facts and Procedural History ....................... 11

REASONS FOR GRANTING THE PETITION ........ 15

I. THE CIRCUITS ARE DIVIDED ON TWO

ASPECTS OF HOW TO ASSESS CLASSCERTIFICATION

DISPUTES

IN

INFLATION-MAINTENANCE CASES ............ 16

A. The circuits are split on what constitutes

a sufficient match under Goldman ............... 17

B. The circuits are also divided over

whether corrective disclosures must

contain new information. ............................... 21

II. THE DECISION BELOW CONTRADICTS

THIS COURT’S PRECEDENTS. ....................... 27

A. Goldman forecloses the Third Circuit’s

subject-matter test for correctiveness. ......... 27

vii

B. Basic requires corrective disclosures to

contain new information ............................... 29

III. THIS COURT SHOULD CORRECT THE

PANEL’S

ERRORS

AND

AFFIRM

CRUCIAL

GUARDRAILS

ON

INFLATION-MAINTENANCE CASES. ........... 31

A. Checking the abuse of inflationmaintenance cases is exceptionally

important. ..................................................... 31

B. This case presents an ideal vehicle .............. 33

CONCLUSION .......................................................... 35

APPENDICES

APPENDIX A: Opinion, San Diego Cnty. Emps.

Ret. Ass’n v. Johnson & Johnson, No. 24-1409,

2025 WL 2176586 (3d Cir. July 30, 2025)................ 1a

APPENDIX B: Opinion, Hall v. Johnson &

Johnson, No. 18-1833 (ZNQ) (TJB) (D.N.J.

Dec. 29, 2023) .......................................................... 31a

APPENDIX C: Order Denying Rehearing, San

Diego Cnty. Emps. Ret. Ass’n v. Johnson &

Johnson, No. 24-1409 (3d Cir. Oct. 7, 2025)............. 70a

viii

TABLE OF AUTHORITIES

Page(s)

CASES

In re Allstate Corp. Sec. Litig.,

966 F.3d 595 (CA7 2020) ............................... 21, 26

Amgen Inc. v. Conn. Ret. Plans & Tr. Funds,

568 U.S. 455 (2013) ......................................... 5, 29

Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp.,

Inc., 77 F.4th 74 (CA2 2023) ............... 5, 17, 18, 28

Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp.,

Inc., 955 F.3d 254 (CA2 2020) ............................. 10

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ............................................. 32

Basic Inc. v. Levinson,

485 U.S. 224 (1988) ........................................... 2, 8

In re BofI Holding, Inc. Sec. Litig.,

977 F.3d 781 (CA9 2020) ............................... 24, 25

Bricklayers & Trowel Trades Int’l Pension

Fund v. Credit Suisse Sec. (USA) LLC,

752 F.3d 82 (CA1 2014) ....................................... 22

Emps’. Ret. Sys. v. Whole Foods Mkt., Inc.,

905 F.3d 892 (CA5 2018) ..................................... 22

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

563 U.S. 804 (2011) ............................................. 29

In re Genius Brands Int’l, Inc. Sec. Litig.,

97 F.4th 1171 (CA9 2024) ................................... 24

Goldman Sachs Grp., Inc. v. Ark. Tchr. Ret.

Sys., 594 U.S. 113 (2021) ..... 2-4, 10, 11, 17, 27, 28

Halliburton Co. v. Erica P. John Fund,

573 U.S. 258 (2014) ............... 2, 8-10, 23, 25, 29-31

Jaeger v. Zillow Grp., Inc.,

2025 WL 2741642 (CA9 Sep. 26, 2025) ........ 20, 25

ix

TABLE OF AUTHORITIES—continued

Page(s)

Katyle v. Penn Nat’l Gaming, Inc.,

637 F.3d 462 (CA4 2011) ..................................... 22

Lab’y Corp. of Am. Holdings v. Davis,

605 U.S. 327 (2025) ............................................. 32

In re LTL Mgmt., LLC,

64 F.4th 84 (CA3 2023) ....................................... 11

MacPhee v. MiMedx Grp., Inc.,

73 F.4th 1220 (CA11 2023) ........................... 22, 23

In re Merck & Co., Sec. Litig.,

432 F.3d 261 (CA3 2005) ..................................... 25

Meyer v. Greene,

710 F.3d 1189 (CA11 2013) .................. 5, 22-24, 31

Norfolk Cnty. Ret. Sys. v. Cmty. Health Sys.,

Inc., 877 F.3d 687 (CA6 2017) ....................... 23, 30

In re Omnicom Grp., Inc. Sec. Litig.,

597 F.3d 501 (CA2 2010) ......................... 21, 22, 24

Rand-Heart of N.Y., Inc. v. Dolan,

812 F.3d 1172 (CA8 2016) ................................... 22

STATUTES & REGULATIONS

15 U.S.C. § 78j(b) ...................................................... 8

28 U.S.C. § 1254(1) ................................................... 7

15 C.F.R. § 240.10b-5(b) ........................................... 8

RULE

Fed. R. Civ. P. 23(b)(3) ......................................... 7, 8

SCHOLARLY AUTHORITIES

Amanda M. Rose, A Response to Calls for

SEC-Mandated ESG Disclosure,

98 Wash. U. L. Rev. 1821 (2021)......................... 32

Emily Strauss, Is Everything Securities

Fraud?, 12 U.C. Irvine L. Rev. 1331 (2022) ....... 32

x

TABLE OF AUTHORITIES—continued

Page(s)

Merritt B. Fox & Joshua Mitts, Event-Driven

Suits and the Rethinking of Securities

Litigation, 78 Bus. Law. 1 (2023) ....................... 32

Note, Congress, the Supreme Court, and the

Rise of Securities-Fraud Class Actions,

132 Harv. L. Rev. 1067 (2019) ............................ 32

Richard A. Booth, Price Inflation and Price

Maintenance in Securities Fraud Class

Actions, 30 Stan. J.L. Econ. & Bus. 133

(2025) ............................................................... 1, 31

OTHER AUTHORITIES

Cornerstone Rsch., Securities Class Action

Filings: 2024 Year In Review (2025),

https://tinyurl.com/yh3ydp48 ................................ 2

Cornerstone Rsch., Securities Class Action

Filings: 2025 Midyear Assessment (July 30,

2025), https://perma.cc/S6R7-6853 ............. 1, 6, 34

Jessica Corso, Securities Class Actions Had A

Late Summer Appellate Bloom (Sep. 8,

2025), https://tinyurl.com/wjja2s93 .................... 34

Matt Levine, Everything Everywhere Is

Securities Fraud, Bloomberg (June 26,

2019), https://tinyurl.com/5hcepuc6 ............... 1, 32

Securities Litigation Trends: Key Takeaways

from a 2025 PLUS D&O Symposium Panel,

Woodruff Sawyer (Mar. 12, 2025),

https://tinyurl.com/46jhds3t ................................ 10

INTRODUCTION

This case presents an ideal vehicle for the Court to

resolve two related splits of authority on how class-certification analysis should proceed in inflation-maintenance securities-fraud cases.

In such cases, plaintiffs do not contend that misrepresentations increased a company’s stock price at the

time they were made, i.e., on the front end of the alleged fraud. Instead, the theory is that the false statements maintained the price at a higher level than if

the truth had been disclosed, and the inflated price

persisted until a corrective disclosure revealed the

truth and caused the price to fall. The misrepresentation’s impact on the stock price is then inferred solely

from the stock drop on the back end.

Of the roughly 200 securities-fraud class actions

filed each year, the overwhelming majority are inflation-maintenance cases. See Richard A. Booth, Price

Maintenance and Price Inflation, 30 Stan. J.L. Econ. &

Bus. 133, 135 (2025). They follow a familiar playbook.

Some crisis or controversy occurs; the stock price falls;

multiple plaintiffs’ firms rush to the courthouse. The

negative event – say, adverse press coverage or a jury

verdict or unwanted regulatory action – is dubbed a

corrective disclosure that revealed prior statements to

have been false. The stakes in these cases are extraordinary: $1.8 trillion in exposure for cases filed in the

first half of 2025 alone. See Cornerstone Rsch., Securities Class Action Filings: 2025 Midyear Assessment at

10 (July 30, 2025), https://perma.cc/S6R7-6853. With

incentives like that, well-financed litigation follows almost any time a company “does something bad, or

something bad happens to it”; now, “everything everywhere is securities fraud.” Matt Levine, Everything

Everywhere Is Securities Fraud, Bloomberg (June 26,

2019), https://tinyurl.com/5hcepuc6.

2

The vast majority of securities cases settle. On average, fewer than 1 goes to trial per year. See Cornerstone Rsch., Securities Class Action Filings: 2024 Year

In Review at 16 (2025), https://tinyurl.com/yh3ydp48.

One of the few checkpoints on the road to settlement

is class certification. If a class is certified, damages

claims are typically astronomical – as are defense costs

– and all but the most well-funded defendants knuckle

under, often settling for tens or hundreds of millions.

Those figures, though huge in their own right, generally reflect a single-digit percentage of claimed damages, and thus imply a low probability that the plaintiffs ultimately would have succeeded on the merits.

Securities-fraud class actions typically can be certified only by applying the presumption of classwide reliance endorsed by this Court in Basic Inc. v. Levinson,

485 U.S. 224 (1988). “The Basic presumption is premised on the theory that investors rely on the market

price of a company’s security, which in an efficient

market incorporates all of the company’s public misrepresentations.” Goldman Sachs Grp., Inc. v. Ark.

Tchr. Ret. Sys., 594 U.S. 113, 117 (2021). “[W]ithout

the presumption of reliance, a [securities fraud] suit

cannot proceed as a class action.” Halliburton Co. v.

Erica P. John Fund, 573 U.S. 258, 281 (2014) (Halliburton II). But with the Basic presumption in hand,

plaintiffs, historically, have almost always obtained

class certification, especially when the defendant company is traded on a national stock exchange.

This Court has long sought to balance the Basic

framework by emphasizing that defendants must have

an opportunity to rebut the Basic presumption and defeat class certification by showing a lack of “price impact” – i.e., that the alleged misrepresentations did not

actually affect the stock price. Halliburton II, 573 U.S.

at 284. Then, in Goldman, this Court underscored that

3

courts must consider “all evidence relevant to price impact.” 594 U.S. at 122. In particular, Goldman taught

that courts must evaluate whether there is a “mismatch” between “the contents of the misrepresentation

and the corrective disclosure.” Id. at 123. If the contents of the disclosure did not “actually correct[]” the

misrepresentation, “there is less reason to infer frontend price inflation – that is, price impact – from the

back-end price drop.” Id. And without that inference,

the Court explained, class certification is not warranted. Id.

This case underscores the need for further guidance

on the pivotal question of when securities class actions

may be certified under Goldman and Basic. Plaintiff

here claims that J&J’s public statements defending

the safety of its talc products in separate tort litigation1 maintained the company’s stock at an inflated

price until a series of corrective disclosures revealed

the “truth” and caused the stock to drop. The alleged

corrective disclosures are three plaintiffs-lawyer advertisements (out of thousands) soliciting clients; two

articles (out of thousands) about product-liability trials; and one jury verdict (out of dozens, mostly won by

J&J). Each disclosure came after years of heavily publicized litigation thoroughly airing the parties’ positions.

As relevant to class certification, the central flaw in

Plaintiff’s contention is that none of the disclosures actually revealed new information that corrected J&J’s

prior statements. As a result, the “inference” necessary

for price impact and thus certification – that the “back1 The talc lawsuits are ongoing, and J&J disputes the claims

alleged in that litigation. But that litigation is wholly separate

from this securities class action, which does not resolve talc’s

safety or implicate consumer protection whatsoever.

4

end price drop equals front-end inflation” – “break[s]

down.” Id.

The district court certified a class anyway. In direct

conflict with Goldman, the district court said it “need

not determine whether the disclosures are corrective

at this stage.” Pet. App. 63a. Though that was plainly

wrong, a divided panel of the Third Circuit affirmed.

It did so on the theory that the alleged corrective disclosures matched the “subject” of J&J’s alleged misrepresentations. Id. at 10a. The panel held Goldman was

satisfied because “each disclosure contained information relating to J&J’s alleged misrepresentations

concerning the presence of asbestos in its talc product,

its commitment to safety, or its potential asbestos-related liability.” Id. at 9a-10a. Further, though J&J

proved through exhaustive fact and expert evidence

that every piece of purportedly corrective information

in the disclosures was previously publicly available,

the panel deemed that showing irrelevant. It reasoned

that re-publishing information that was not new could

nonetheless “communicate a new signal to the market.” Id. at 8a. Judge Chung dissented, explaining that

Goldman requires explicit findings that corrective disclosures both disclose new information and correct

prior misstatements. Judge Bibas and Judge Krause

joined Judge Chung in calling for en banc rehearing.

Both the correctiveness and newness aspects of the

Third Circuit’s decision warrant review.

First, the Third Circuit’s correctiveness standard

squarely conflicts with Goldman. Under Goldman, the

test is whether the contents of the corrective disclosure

“actually correct[]” the misrepresentation by revealing

its falsity. The Third Circuit held instead that it suffices if the misrepresentation and corrective disclosure

concern the same general “subject matter,” i.e., talc

safety. That much looser standard cannot be

5

reconciled with Goldman – which involved alleged

misstatements and corrective disclosures about the

same general subject, i.e., conflicts of interest – and

makes it trivially easy for securities plaintiffs to construct a “match” for any large stock drop.

For much the same reason, the decision below creates a circuit conflict. Carefully implementing this

Court’s Goldman mandate, the Second Circuit held “it

was clear error for the district court to rely on [a] subject-matter match” between the alleged corrective disclosures and misstatements. See Ark. Tchr. Ret. Sys.

v. Goldman Sachs Grp., Inc., 77 F.4th 74, 93 (CA2

2023). After extended analysis of their informational

contents, the Second Circuit found an “insufficient link

between the corrective disclosures and the alleged misrepresentations” even though they related to “the

same subject matter.” Id. at 103-05. A similar analysis

would have defeated class certification in this case.

The Third Circuit’s lax approach thus conflicts directly

with the Second Circuit’s correct reading of Goldman.

Second, the Third Circuit’s decision deepens a distinct (but related) circuit conflict on newness. A plaintiff who invokes Basic’s presumption necessarily

adopts Basic’s efficient-market premise that “all publicly available information is rapidly incorporated into,

and thus transmitted to investors through, the market

price.” Amgen Inc. v. Conn. Ret. Plans & Tr. Funds,

568 U.S. 455, 466 (2013) (emphasis added). And as

most circuits have held, a plaintiff cannot “embrace

the efficient market theory for purposes of proving one

element of a § 10(b) claim,” and then “turn around and

contend that the market is not efficient for [other] purposes.” Meyer v. Greene, 710 F.3d 1189, 1199 (CA11

2013). But the Third Circuit (following the Ninth) allowed Plaintiff to discard Basic’s premise where the

disclosures merely republished old, already-available

6

information – for example, “information revealed during a then-recent trial” and addressed in “articles published days earlier.” Pet. App. 10a n.11. The facts of

this case starkly illustrate the resulting incoherence.

Under the Third Circuit’s decision, the market was

sufficiently efficient to incorporate all alleged misstatements published on J&J’s factsabouttalc.com

website, yet insufficiently efficient to recognize that

the alleged corrective disclosures were already made

public on that same website. That asymmetric application of market efficiency cannot be reconciled with

Basic, with the approach of most other circuits, or with

common sense.

The questions presented here are a matter of pressing national importance because of the magnitude and

ubiquity of inflation-maintenance securities claims.

These cases often seek (as here) double-digit billions in

damages. See 2025 Midyear Assessment, supra at 11.

When class-certification decisions place sums that

large at stake, appropriate guardrails are indispensable. The decision below erases the limits Goldman imposed and distorts the logic underpinning Basic.

Moreover, if allowed to stand, the decision leaves

companies exposed – in some circuits but not others –

to class actions reverse-engineered from stock drops,

as some “corrective disclosure” can always be found

when the stock price falls. Worse still, companies face

a litigation double-whammy: defending themselves in

underlying litigation, whether product-liability or environmental or antitrust, becomes fodder for securities-fraud claims. Securities plaintiffs can claim anything except a confession is a misrepresentation, and

adverse verdicts as well as self-serving plaintiffs-lawyer advertising and publicity become corrective disclosures. No valid class action or securities law purpose

is served by this.

7

The Court should grant certiorari and reverse.

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-30a)

has not been published in the Federal Reporter, but is

reported at 2025 WL 2176586. The opinion of the district court (Pet. App. 31a-69a) is unpublished but is reported at 2023 WL 9017023.

JURISDICTION

The judgment of the court of appeals was entered on

July 30, 2025. A timely petition for rehearing was denied on October 7, 2025 (Pet. App. 70a-71a). On January 5, 2026, Justice Sotomayor extended the time to

file this petition until February 4, 2026. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1).

FEDERAL RULE INVOLVED

Federal Rule of Civil Procedure 23 provides in relevant part:

(a) Prerequisites. One or more members of a class

may sue or be sued as representative parties on behalf of all members only if:

(1) the class is so numerous that joinder of all

members is impracticable;

(2) there are questions of law or fact common to

the class;

(3) the claims or defenses of the representative

parties are typical of the claims or defenses of the

class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

8

(b) Types of Class Actions. A class action may be

maintained if Rule 23(a) is satisfied and if:

***

(3) the court finds that the questions of law or fact

common to class members predominate over any

questions affecting only individual members, and

that a class action is superior to other available

methods for fairly and efficiently adjudicating the

controversy.

STATEMENT

I.

BACKGROUND

A.

Legal Background

Federal law prohibits securities fraud. 15 U.S.C.

§ 78j(b); 15 C.F.R. § 240.10b-5(b). The reliance element

of the implied private right of action for securities

fraud would normally entail individualized questions

precluding class certification. Fed. R. Civ. P. 23(b)(3).

Basic Inc. v. Levinson, 485 U.S. 224 (1988), created

an alternative and bespoke framework for securitiesfraud class actions. Securities plaintiffs may seek class

certification by invoking a “rebuttable presumption of

reliance, rather than proving direct reliance on a misrepresentation.” Halliburton II, 573 U.S. at 268. This

approach rests on the assumption that an “efficient

market” “reflects all publicly available information,

and, hence, any material misrepresentations.” Basic,

485 U.S. at 246 (emphasis added). Basic’s embrace of

the efficient-market hypothesis turned securitiesfraud class actions against companies that trade on

highly efficient national stock exchanges into a multibillion-dollar industry.

9

The use of “the efficient capital markets hypothesis”

in securities class actions has “‘garnered substantial

criticism since Basic.’” Halliburton II, 573 U.S. at 272

(quoting id. at 289 (Thomas, J., concurring in the judgment)). Critics have argued that “efficiency is not a binary, yes or no question” because the market “can process different kinds of information more or less efficiently, depending on how widely the information is

disseminated and how easily it is understood,” and so

“the price of a stock may be inaccurate” even in an efficient market. Id. at 271-72 (cleaned up).

The Court nonetheless upheld Basic as a matter of

stare decisis, reasoning that certain of these criticisms

“fail to take Basic on its own terms.” Id. at 271. Basic

did not “‘conclusively [] adopt any particular theory of

how quickly and completely publicly available information is reflected in market price[s].’” Id. at 272

(quoting Basic, 485 U.S. at 248 n.28). Instead, it

adopted the “modest premise” that “public information

generally affects stock prices.” Id. Accordingly,

“[d]ebates about the precise degree to which stock

prices accurately reflect public information are thus

largely beside the point.” Id.

Halliburton II also emphasized that defendants

must have a meaningful “opportunity to rebut the presumption by showing” that there was no “price impact”

(i.e., “the particular misrepresentation at issue did not

affect the stock’s market price”). Id. at 279. “In the absence of price impact,” the Court explained, the “presumption of reliance collapse[s].” Id. at 278. Of course,

price impact evidence “is also highly relevant” to the

merits questions of loss causation and materiality. Id.

at 283. But that overlap does not preclude courts from

considering such evidence at the class-certification

stage, and defendants must be allowed to present

10

“direct as well as indirect price impact evidence” to

“defeat the Basic presumption at that stage.” Id.

Since Halliburton II, defendants have sometimes

sought to defeat class certification by showing that the

stock price did not increase in response to the alleged

misstatement, thus demonstrating that there was no

front-end price impact. But that approach is unavailable in inflation-maintenance cases because, by definition, the price did not move at the time of the alleged

misstatement. Instead, inflation-maintenance plaintiffs point to a later disclosure and an associated price

drop on the back end, claiming that the new disclosure

corrected the alleged misstatement and that “the price

drop is equal to the amount of inflation maintained by

the earlier misrepresentation.” Goldman, 594 U.S. at

123. And plaintiffs’ lawyers are adept at characterizing almost any news or event associated with a stock

drop as correcting some prior statement. These dynamics have made class certification in inflationmaintenance cases “all but a certainty.” Ark. Tchr. Ret.

Sys. v. Goldman Sachs Grp., Inc., 955 F.3d 254, 278

(CA2 2020) (Sullivan, J., dissenting); see also Securities Litigation Trends: Key Takeaways from a 2025

PLUS D&O Symposium Panel, Woodruff Sawyer

(Mar. 12, 2025) https://tinyurl.com/46jhds3t (noting

that courts ruling on class-certification motions certify

a class in roughly nine out of ten cases).

Goldman supplied a vital check on the inflationmaintenance theory by requiring courts to scrutinize

whether back-end corrective disclosures “actually correct” front-end misstatements.2 Courts should do this,

Goldman held, by comparing “the contents of the

2 Goldman pointedly “expressed no view on [the] validity or []

contours” of the inflation-maintenance theory. 594 U.S. at 120

n.1.

11

misrepresentation and the corrective disclosure” to ensure there is no “mismatch.” 594 U.S. at 123. Where a

mismatch exists and the later statements do not falsify

the earlier ones – e.g., because “the earlier misrepresentation is generic” and “the later corrective disclosure is specific” – then the back-end price drop does

not imply price impact and class certification is inappropriate. Id.

B.

Facts and Procedural History

J&J first released its talc-based baby powder in

1894. In the 1970s, concerns arose that consumer talc

products across the industry were contaminated with

asbestos. A194 ¶ 51.3 Those concerns were highly publicized, fully investigated, and thoroughly refuted. But

in the early 2010s, product-liability plaintiffs revived

the asbestos claims, and mass tort litigation proliferated. By early 2020, plaintiffs’ lawyers had spent tens

of millions on TV ads touting their allegations. By October 2021, more than 38,000 talc lawsuits were pending against J&J. See In re LTL Mgmt., LLC, 64 F.4th

84, 94 (CA3 2023). Tens of thousands of additional

claims have since been asserted.

The initial complaint in this case was filed in February 2018. It alleged securities fraud on behalf of a putative class of investors who purchased J&J stock between February 22, 2013, and February 7, 2018. The

complaint alleged that J&J had “known for decades”

that its talc products were contaminated with asbestos

and caused cancer, and had committed fraud by arguing that talc was safe during the product-liability litigation, thereby maintaining an inflated stock price.

A137, A155. The initial complaint alleged that the

3 Citations to “A###” are to the appendix filed in San Diego

County Employees Retirement Association v. Johnson & Johnson,

No. 24-1409 (3d Cir. July 26, 2024), Dkt. 21.

12

“truth” was “revealed” by three disclosures: a September 21, 2017, Bloomberg article about an upcoming talc

trial; a February 5, 2018, CNBC article about a blog

post funded by a product-liability plaintiffs’ firm; and

a February 7, 2018, press release by a product-liability

plaintiffs’ firm. These disclosures were functionally indistinguishable from the tens of thousands of articles,

posts, tweets, and attorney advertisements regarding

the talc product-liability litigation.

Ten product-liability cases went to trial by the end

of 2018. One of those cases, Ingham, produced a $4.69

billion jury verdict (later reduced to $2.24 billion). The

trials were public and closely watched. Most were

broadcast live online by Courtroom View Network. Between 2016 and 2018, approximately 40,000 articles

about the litigation were published by national, local,

and legal industry news organizations.

Thousands of internal J&J documents produced in

the product-liability litigation were also posted on two

publicly available websites: asbestosandtalc.com,

which was run by an expert witness for the productliability plaintiffs, and factsabouttalc.com, which was

run by J&J to provide factual and scientific information in response to the litigation. This J&J website

is the source of many of the alleged misrepresentations

in this securities case.

Ten months after the initial complaint was filed,

Reuters published an article about the product-liability litigation. A1829-45. The article adopted and sensationalized the plaintiffs’ theories, and claimed to reveal “never-before-seen” J&J documents. The journalist’s claim was wrong: every one of those documents

was already publicly available. That was proved during class-certification discovery, where J&J and its expert traced every single internal J&J document linked

or quoted in the Reuters article and showed that all of

13

them were publicly available before the article was

published. Discovery also revealed that the reporter’s

primary source was the lead plaintiffs’ lawyer in the

Ingham case. The lawyer stated that his interests in

the product-liability litigation were served by the publicity putting pressure on J&J’s stock price, and that

everything he gave Reuters “was publicly available

prior to the publication.” A5094-95. Following the Reuters article, J&J’s stock dropped 10%.

To capture this stock drop, Plaintiff amended the

complaint. A176. The new complaint alleged that the

“truth” about J&J’s talc products was not fully revealed until the Reuters article. This additional stock

drop nearly trebled the alleged damages to more than

$10 billion. The amended complaint also alleged five

more corrective disclosures related to the tort litigation: two press releases by plaintiffs’ firms, a blog post

funded by a plaintiffs’ firm, a Law360 article about a

trial, and the bare fact of the Ingham jury verdict.

A264-83; A5193-94.

Plaintiff sought class certification based on the Basic

presumption, offering expert evidence that the market

for J&J stock was efficient. J&J sought to rebut the

presumption by painstakingly tracing the facts in each

alleged corrective disclosure – including every document quoted, linked, or referenced therein – to public

trials, publicly accessible websites, and contemporaneous press coverage, demonstrating that none contained new information that revealed the falsity of any

alleged misrepresentation. J&J argued that its comprehensive evidence severed the link between the

back-end stock drop and the alleged misrepresentations, and therefore there was no basis to infer price

impact.

The district court certified Plaintiff’s proposed class.

Pet. App. 31a-69a. Contrary to Goldman, the court

14

held that it did not need to decide whether the disclosures were in fact “corrective.” Id. at 63a. The court

also rejected J&J’s argument that the efficient-market

hypothesis invoked by Plaintiff requires corrective disclosures to reveal new information, asserting: “the fact

that the information was previously made public does

not preclude the possibility that any later disclosure of

that information could impact a stock’s price.” Id. at

58a.

J&J sought interlocutory review by the Third Circuit

under Federal Rule of Civil Procedure 23(f). A motions

panel granted review, but a divided merits panel affirmed.

On correctiveness, the majority addressed J&J’s

Goldman argument in just three sentences. It found

there was “no mismatch between the subject of the alleged misrepresentation[s] and the content of the disclosures.” Pet. App. 9a-10a (emphasis added). This

subject-matter test was met, the panel explained, because the disclosures “contained information relating

to J&J’s alleged misrepresentations” about talc. Id.

(emphasis added). The court did not analyze whether

the information contained in any particular disclosure

actually conflicted with any of J&J’s alleged misstatements. Indeed, the panel did not even explain which

specific alleged J&J misstatements it thought were

“matched” to any disclosure.

On newness, the panel agreed with the district court.

The panel did not dispute J&J’s factual showing that

the corrective disclosures “contained information that

was already public and thus not new,” Pet. App. 8a,

but rejected J&J’s position as a matter of law. The

panel concluded that “disclosures based on public information may nevertheless communicate a new signal to the market in certain situations,” including

where there is “re-publication of information by a more

15

credible source to a broader audience.” Id. For example, the panel concluded that a client-solicitation press

release issued by a small, 14-person plaintiff-side

product-liability firm – though it concededly republished information from a six-day-old Bloomberg article – nonetheless “communicated something new to the

marketplace, namely that [the] Bernstein Liebhard

[law firm] viewed the total body of unsealed documents

as sufficiently credible and compelling to merit the filing of additional suits making similar claims.” Id. at

10a n.11. The panel reached similar conclusions about

the other alleged corrective disclosures.

Judge Chung dissented. She would have held that

the district court failed to “assess evidence introduced

by J&J showing that the disclosures did not contain

newly public information and were not corrective,” and

failed to make necessary factual findings. Pet. App.

14a, 25a-26a. And she criticized the majority’s approach as functionally turning on bare price reaction –

the simple movement of the stock price on the date of

the disclosures – which “does not address whether

newly publicly known information in the disclosure related to and corrected a prior misrepresentation.” Id.

at 27a.

J&J timely but unsuccessfully sought en banc rehearing. Judge Bibas, Judge Krause, and Judge

Chung dissented.

This petition followed.

REASONS FOR GRANTING THE PETITION

This case warrants review for three reasons.

First, the decision below deepens interlocking circuit splits on correctiveness and newness. On correctiveness, the Second Circuit requires that the information contained in an alleged corrective disclosure

16

actually reveals the falsity of an alleged misstatement,

while the Third and Ninth Circuits accept a mere subject-matter match as sufficient. On newness, the Third

and Ninth Circuits permit class certification based on

corrective disclosures that do not disclose new information. Nearly every other court of appeals has required corrective disclosures to disclose new information in the overlapping loss-causation context.

These positions conflict because both are grounded in

the same efficient-market hypothesis.

Second, the decision below departs from this Court’s

precedent. By allowing class certification based solely

on subject-matter overlap and supposed “new signals,”

the Third Circuit disregarded Goldman’s “match” requirement, abandoned the economic logic underpinning Basic, and adopted a standard that makes defeating class certification in inflation-maintenance cases

all but impossible.

Third, this case is an ideal vehicle for resolving

these exceptionally important questions. Both questions presented were thoroughly briefed below and are

outcome-determinative. Together, the two issues

squarely present the systemic problem of high-exposure inflation-maintenance suits fueled by recycled or

lawyer-generated publicity. Only this Court’s intervention can restore uniformity and maintain safeguards on inflation-maintenance cases.

I.

THE CIRCUITS ARE DIVIDED ON TWO

ASPECTS OF HOW TO ASSESS CLASSCERTIFICATION DISPUTES IN INFLATION-MAINTENANCE CASES.

There is a clear circuit split concerning how to apply

Goldman’s mismatch analysis. And there is a related

split over whether the efficient-market hypothesis underlying the Basic presumption necessarily requires

17

that corrective disclosures contain new information.

Together, these conflicts have created significant uncertainty regarding the proper analysis of defendants’

attempts to rebut the Basic presumption in inflationmaintenance cases.

A.

The circuits are split on what constitutes a sufficient match under Goldman.

Five years ago, Goldman instructed lower courts to

police class certification by comparing “the contents of

the misrepresentation and the corrective disclosure” to

ensure there is no “mismatch” between the front-end

statement and the back-end disclosure. 594 U.S. at

123. The circuits have divided over what constitutes a

sufficient match. The Second Circuit has held that a

mere subject-matter match is inadequate. The Third

and Ninth Circuits have adopted the opposite position.

The Second Circuit. On remand from Goldman,

the court of appeals illustrated what it means for a

truth-revealing disclosure to “match” (i.e., correct) an

inflation-maintaining misstatement. Ark. Tchr. Ret.

Sys., 77 F.4th at 80. A “clean match,” the court explained, occurs when “the earlier statement is precisely negated, or rendered false, by the later news.”

Id. For example, when a car manufacturer tells the

market that its vehicle “passed all safety tests,” but it

is later revealed “that, in fact, the car failed several

crash tests,” there is a “clean match” because the

crash-test news precisely falsifies the manufacturer’s

prior statement. Id. Put differently, a corrective disclosure must provide “the truthful substitute for the [initial] lie.” Id. at 98. Where such a match exists, a backend price drop can “operat[e] as an indirect proxy for

the front-end inflation.” Id. at 80.

18

The Second Circuit also explained what is plainly insufficient for correctiveness after Goldman: a mere

subject-matter match. “[R]equiring only a general

front-end—back-end subject matter match,” the court

explained, “does not meaningfully account for the Supreme Court’s guidance.” Id. at 100-01. After all, this

Court had reversed in Goldman even though it was undisputed that the specific disclosures and general

statements at issue concerned the same subject. Id. at

81. Thus, if the car manufacturer in the above example

had said only that “it strives to ensure that all its vehicles are road-ready,” then “the later news of failed

crash tests” would not necessarily suggest “that, in

fact, the manufacturer did not seek to make its automobiles safe to drive.” Id. at 80-81. In that circumstance, a court could not “infer that the back-end price

drop equals the front-end inflation” even though the

front-end statement and the alleged corrective disclosure both concerned road safety. Id. at 81. Accordingly,

after “a searching review” of the substantive “contents,” the Second Circuit found an “insufficient link

between the corrective disclosures and the alleged misrepresentations,” despite their subject-matter overlap.

Id. at 89, 104-05.

The Third and Ninth Circuits. In the decision below, the Third Circuit adopted a view of correctiveness

that squarely conflicts with the Second Circuit’s. The

panel held there was a sufficient match “between the

subject of the alleged misrepresentation and the content of the disclosures,” because the disclosures “contained information relating to J&J’s alleged misrepresentations concerning the presence of asbestos in its

talc product, its commitment to safety, or its potential

asbestos-related liability.” Pet. App. 9a-10a (emphasis

added). Having found a mere subject-matter match,

the panel declined to analyze whether the contents of

19

particular disclosures actually revealed the falsity of

any specific alleged misrepresentations. Id.

The Third Circuit’s rule necessarily produces different outcomes than the Second Circuit’s test. This is a

case in point. Plaintiff claimed, for example, that the

Ingham jury verdict, in and of itself, was corrective

even though J&J had never claimed the company

would prevail in every single product-liability trial.

The verdict was nevertheless deemed corrective because it concerned the general subject of J&J’s talc.4

The same was true of the Reuters article. Plaintiff

claimed it was corrective because it noted that J&J

had not “adopted a concentration method for preparing

talc samples before asbestos testing.” A3906. But that

detail did not contradict any of J&J’s prior statements

because J&J had never represented that it used concentration testing. The article was deemed corrective

simply because it addressed the same broad subject

matter of asbestos testing.

4 The panel’s treatment of the Ingham jury verdict highlights

the asymmetrical and illogical nature of the Third Circuit’s approach. Plaintiff alleges that mid-trial coverage of an earlier product-liability trial in the form of the January 30, 2018, Law360 article and the February 5, 2018, blog post from Mesothelioma.net

– both of which commented on the ongoing Lanzo trial – constituted corrective disclosures, but does not allege that the Lanzo

verdict for plaintiffs was a corrective disclosure. None of Plaintiff,

the Third Circuit, or the district court have ever explained why

the inverse is true for Ingham: why the mid-trial coverage of the

Ingham trial by a huge number of different sources was not a corrective disclosure, but the Ingham verdict was. The answer, of

course, is that J&J’s stock price dropped in the middle but not at

the end of the Lanzo trial, and at the end but not in the middle of

the Ingham trial. Plaintiff cherry-picked the corrective disclosures based on the stock drops, not the allegedly corrective information.

20

The Ninth Circuit has announced a similarly loose

standard for correctiveness. In Jaeger v. Zillow Group,

Inc., plaintiffs brought an inflation-maintenance case

based on stock drops following Zillow’s closure of its

home-buying business. 2025 WL 2741642, at *2 (CA9

Sep. 26, 2025). Plaintiffs argued that Zillow maintained an inflated stock price by (mis)stating that it

“had made progress … in strengthening [its] pricing

models,” and that this statement was corrected when

Zillow later shut down its home-buying business because it could not “accurately forecast future home

prices.” Id. But as Zillow explained, that sequence did

not undermine its earlier assertion that it “had made

progress”; the company could have made progress

while still falling short of what was needed for longterm viability. Under the Second Circuit’s test, there

would have been no “match” because the supposed correction did not reveal the falsity of the front-end statements. Indeed, Zillow’s statements fit the crash-test

analogy used by the Second Circuit in rejecting a subject-matter rule.

For the Ninth Circuit, however, “Zillow’s front-end

and back-end statements are matched enough.” Id.

(emphasis added). The panel reached that conclusion

because the two sets of statements concerned the same

general subject matter. In this way, the Ninth Circuit

aligned itself with the Third Circuit, holding that a

back-end disclosure “matches” a front-end statement

so long as both address the same subject. See id. (“The

back-end disclosures thus revealed new information

about how Zillow’s home-pricing struggles threatened

the business and suggested that its earlier statements

may have obscured how Zillow’s pricing model misfired.” (emphasis added)). Under this approach, a rigorous comparison of the “contents” of the alleged misstatements and corrective disclosures, as applied by

21

the Second Circuit, is not necessary. The Ninth Circuit

(and the Third) stop after finding a loose subject-matter link.

B.

The circuits are also divided over

whether corrective disclosures must

contain new information.

The panel’s decision also reflects a division on a second issue, which goes to the heart of Basic’s application to inflation-maintenance cases. Namely, must a

corrective disclosure actually reveal new information?

Most circuits have addressed this question in the

analogous loss-causation context5 and have held that

corrective disclosures must indeed disclose something

new. These circuits hold that the efficient-market hypothesis necessarily means that all publicly available

information is presumed incorporated into the stock

price such that later repetition of the same information

cannot, by definition, cause a price decline – i.e., impact the stock price. The Third and Ninth Circuits

have now taken the polar opposite position, holding

that at class certification, the republication of old information can constitute a corrective disclosure by

sending a “new signal” to the market.

The Newness Requirement. Circuits addressing

this issue in the loss-causation context have generally

held that corrective disclosures must “reveal some

then-undisclosed fact with regard to the [] misrepresentations alleged in the complaint.” In re Omnicom

Grp., Inc. Sec. Litig., 597 F.3d 501, 511 (CA2 2010)

5 Loss causation and price impact are “closely related” inquiries, with a “conceptual and evidentiary overlap,” because market

efficiency affects both elements. See In re Allstate Corp. Sec.

Litig., 966 F.3d 595, 600, 606 (CA7 2020). As a result, argument

and facts potentially “refuting the Basic presumption” must be

considered as part of both inquiries. Id. at 600.

22

(emphasis added). This means that a corrective disclosure “cannot be merely confirmatory” of already public

facts. MacPhee v. MiMedx Grp., Inc., 73 F.4th 1220,

1243 (CA11 2023). It “must reveal some information

not already known to the market.” Emps.’ Ret. Sys. v.

Whole Foods Mkt., Inc., 905 F.3d 892, 904 (CA5 2018);

see also Rand-Heart of N.Y., Inc. v. Dolan, 812 F.3d

1172, 1180 (CA8 2016) (“Corrective disclosures must

present facts to the market that are new, that is, publicly revealed for the first time.”); Katyle v. Penn Nat’l

Gaming, Inc., 637 F.3d 462, 473 (CA4 2011) (quoted by

Rand-Heart).

A necessary consequence of this newness requirement is that the “mere repackaging of already-public

information by an analyst … is simply insufficient to

constitute a corrective disclosure,” because “if the information relied upon in forming an opinion was previously known to the market, the only thing actually

disclosed to the market when the opinion is released is

the opinion itself, and such an opinion, standing alone,

cannot ‘reveal[ ] to the market the falsity’ of a company’s prior factual representations.” Meyer, 710 F.3d

at 1199. The Second Circuit agrees: A “negative journalistic characterization of previously disclosed facts

does not constitute a corrective disclosure of anything

but the journalists’ opinions.” Omnicom, 597 F.3d at

512; see also Bricklayers & Trowel Trades Int’l Pension

Fund v. Credit Suisse Sec. (USA) LLC, 752 F.3d 82, 95

(CA1 2014) (affirming finding that disclosure “would

not have moved AOL’s share price” where it “did no

more than [] provide gloss on public information”).

These circuits strictly enforce this newness requirement because they believe, correctly, that Basic demands it. Basic’s efficient-market hypothesis – taken

“on its own terms” as this Court has instructed – dictates that “the market price of shares traded on well-

23

developed markets reflects all publicly available information.” Halliburton II, 573 U.S. at 268, 270 (emphasis added). And a “corollary of the efficient market hypothesis is that disclosure of confirmatory information

– or information already known by the market – will

not cause a change in the stock price.” MiMedx, 73

F.4th at 1243. Unless information is new, “the market

will have processed and reacted to that information already.” Norfolk Cnty. Ret. Sys. v. Cmty. Health Sys.,

Inc., 877 F.3d 687, 695 (CA6 2017).

In this way, these courts have affirmed that the efficient-market hypothesis “is a Delphic sword: it cuts

both ways.” Meyer, 710 F.3d at 1198. Thus, plaintiffs

“cannot contend that the market is efficient for purposes of [proving] reliance and then cast the theory

aside when it no longer suits their needs.” Id. at 119899. They must instead “take the bitter with the sweet.”

Id. at 1199.

The “New Signals” Rule. The Third Circuit broke

with this near-uniform approach to the efficient-market hypothesis. It held that, for purposes of assessing

price impact at class certification, republishing old information – such as information already revealed in

televised trials that received daily press coverage, or

that had been posted on the same webpage containing

alleged misrepresentations – may constitute a corrective disclosure. The panel theorized that “disclosures

based on public information may nevertheless communicate a new signal to the market,” in part because

“re-publication of information by a more credible

source to a broader audience may convey to the market

that the information is particularly significant and

worthy of monitoring.” Pet. App. 8a (emphasis added).

This created out of whole cloth a subjective “credibility” inquiry. And, without explanation or evidence, the

panel treated certain self-serving statements by

24

product-liability lawyers as “more credible” than functionally identical, but earlier, press articles and statements by competing product-liability lawyers. That

approach is arbitrary and irreconcilable with the conclusions drawn from the efficient-market hypothesis

by the other circuits.

Class certification could not have been affirmed

without this “new signals” hypothesis. J&J showed

that every allegedly corrective fact identified in the

complaint was already publicly available prior to

Plaintiff’s cherry-picked “corrective disclosures.” Most

obviously, the record here contains unrebutted declarations from authors of two of the “corrective disclosures” who stated that their “disclosures” contained no

new content and had instead been based on publicly

available information. One author even admitted to

having googled the allegedly corrective information before posting it on their blog. A5193-94. And in other

circuits, such disclosures – including the Reuters article – could not qualify as corrective disclosures because

they are “negative journalistic characterization[s],”

Omnicom, 597 F.3d at 512 (CA2), and “mere repackaging of already-public information by an analyst,”

Meyer, 710 F.3d at 1199 (CA11). The Third Circuit was

undeterred.

In so holding, the Third Circuit aligned itself with

the Ninth Circuit. Like the panel here, the Ninth Circuit has held that “some information, although nominally available to the public, can still be ‘new’ if the

market has not previously understood its significance.” In re BofI Holding, Inc. Sec. Litig., 977 F.3d

781, 794 (CA9 2020). Thus, publicly available information “tucked in a deep corner of the internet” may,

if more widely publicized, subsequently prove corrective. In re Genius Brands Int’l, Inc. Sec. Litig., 97 F.4th

1171, 1186 (CA9 2024). In Zillow, the Ninth Circuit

25

extended its view of efficient markets to the class-certification context, rejecting Zillow’s newness argument

because the information in the alleged corrective disclosure had not previously been “widely discussed or

accessible.” 2025 WL 2741642, at *2.

Neither the panel below nor the Ninth Circuit has

attempted to reconcile this approach with this Court’s

teaching that classwide treatment of the reliance element is possible only if one “take[s] Basic on its own

terms” and holds firm to the premise that an efficient

market “reflects all publicly available information.”

Halliburton II, 573 U.S. at 268, 271 (emphasis added).

The “all” part is essential for plaintiffs, because it allows them to assume that every alleged misrepresentation and every alleged corrective disclosure was fully

incorporated into the market price, without themselves having to address relative questions like credibility or breadth of distribution. But the Third and

Ninth Circuits let plaintiffs take the sweet without the

bitter.6

The decision below underscores the extraordinary

implications of the Third and Ninth Circuits’ approach. Just take the panel’s holding as to the press

releases and blog post produced by product-liability

6 Nor did the panel attempt to reconcile its price-impact analysis with the Third Circuit’s prior precedent affirming a newness

requirement at the merits stage. See In re Merck & Co. Sec. Litig.,

432 F.3d 261, 269 (CA3 2005). It is difficult to know what the

panel could have said on that score. Although the merits and

class-certification inquiries are separate, the efficient-market hypothesis applies to both. So there is no reason that a newness requirement should apply to one inquiry but not the other. In this

respect, at least, the Ninth Circuit is consistent – shunning a

strict newness requirement at both stages. See BofI Holding, 977

F.3d at 794 (merits); Zillow, 2025 WL 2741642, at *2 (class certification).

26

plaintiffs’ firms. Pet. App. 10a & n.11. Those “disclosures” were lawyer advertisements crafted by productliability lawyers to sensationalize their claims, posture

about filing more suits, and attract additional clients

to ongoing litigation. Yet to the panel, the advertisements were truth-revealing “new signals” that could

serve as indirect evidence that J&J’s statements about

the safety of its talc made months and in some cases

years earlier had price impact. The notion that two

press releases and a blog post – plucked post hoc from

a sea of lawyer-generated publicity about the talc litigation – could disclose anything new about the scientific dispute in which J&J had been embroiled for

years is not the least bit rational, let alone consistent

with Basic, and there is no evidence in this record to

support it. Indeed, the only apparent basis for the

Third Circuit’s conclusion that these were “new signals” is the stock price decline, which as Judge Chung

observed, confuses bare price reaction with price impact. In re Allstate Corp. Sec. Litig., 966 F.3d 595, 612

(CA7 2020) (“[P]rice reaction (the simple movement of

the price in response to a given statement) is quite different from the legal concept of price impact.”).

In practice, the “new signals” approach means that

courts in the Third and Ninth Circuits will recognize

Basic’s market-efficiency assumptions to presume

classwide reliance for plaintiffs, yet deny defendants

the benefit of those same assumptions when they attempt to rebut it. The result is disagreement between

the circuits over whether Basic’s market-efficiency

logic applies consistently in the inflation-maintenance

context or is merely a one-way ratchet favoring plaintiffs and class certification.

27

II.

THE DECISION BELOW CONTRADICTS

THIS COURT’S PRECEDENTS.

On correctiveness, the panel declined to apply the

rigorous matching inquiry required by Goldman, substituting a bare subject-matter comparison that requires no actual contradiction between front- and

back-end statements. On newness, the panel abandoned Basic’s efficient-market logic for defendants opposing class certification. Each error effectively nullifies crucial limits this Court has imposed on securitiesfraud cases after Basic.

A.

Goldman forecloses the Third Circuit’s subject-matter test for correctiveness.

The Third Circuit’s subject-matter test for correctiveness cannot be reconciled with Goldman.

Goldman makes clear that a subject-matter match

is not enough to establish correctiveness. There, the

plaintiffs alleged that “Goldman maintained an inflated stock price by making repeated misrepresentations about its conflict-of-interest policies,” and that

the stock dropped when the “market learned the truth

about Goldman’s conflicts.” 594 U.S. at 120. No one

disputed that both the alleged misstatements and the

supposed corrective disclosures concerned the same

subject (Goldman’s conflicts). Yet the Court held that

this overlap was insufficient to establish correctiveness because the front-end statements were generic

(e.g., “Our clients’ interests always come first”), while

the back-end disclosures were specific (e.g., reports of

“several allegedly conflicted transactions”). Id. If the

Third Circuit’s rule were correct – and a subject-matter match suffices for correctiveness – that should

have been the end of Goldman’s analysis. Thus, as the

Second Circuit recognized on remand, a subject-matter

28

test “does not meaningfully account for the Supreme

Court’s guidance.” Ark. Tchr. Ret. Sys., 77 F.4th at

100-01.

Goldman instead requires a more searching analysis to ensure “the earlier statement is precisely negated, or rendered false, by the later news.” Id. at 80.

This rigorous correctiveness inquiry is essential to ensure a valid inference of price impact in inflationmaintenance cases. Under that theory, the back-end

price drop serves as an indirect proxy for front-end inflation; the model works only if the later disclosure actually conflicts with the earlier statement. Where the

front- and back-end statements are connected only

loosely by subject matter, and the latter does not negate or render false the former, then the inference of

price impact from the back-end price drop “break[s]

down.” 594 U.S. at 123.

Without a clear connection between the front- and

back-end statements, there is no reason to believe the

back-end disclosures actually falsified the front-end

statements. And without that, there is no reason to believe that the front-end statements actually affected

the stock price in the first place. By definition in an

inflation-maintenance case, the price did not rise at

the time of the misrepresentations. And the only reason to think the back-end price drop is evidence of

front-end price impact is if the back-end disclosure revealed the falsity of the front-end statement. Otherwise, the “back-end price drop” does not “equal[]” the

“front-end inflation,” cf. id. at 123, but rather reflects

any number of unrelated developments from adverse

publicity, litigation setbacks, or other new risks.

When courts like the Third and Ninth Circuits treat

subject-matter overlap as sufficient, they convert what

should be a narrow and economically grounded inference into an all-purpose mechanism for backfilling

29

price impact and creating a securities class action anytime negative news coincides with a stock decline.

This eviscerates Goldman’s “match” requirement, and

explodes an important limit on the Basic presumption.

B.

Basic requires corrective disclosures to contain new information.

The panel also erred by holding that a corrective disclosure need not disclose new information – a rule irreconcilable with Basic.

Basic held – and this Court has repeated multiple

times – “that in an efficient market, all publicly available information is rapidly incorporated into … the

market price.” Amgen, 568 U.S. at 466 (emphasis

added); Halliburton II, 573 U.S. at 283; Erica P. John

Fund, Inc. v. Halliburton Co., 563 U.S. 804, 811 (2011)

(Halliburton I). That “is ‘Basic’s fundamental premise.’” Halliburton II, 573 U.S. at 283. Taking “Basic on

its own terms,” id. at 271, requires accepting that “all”

means “all.”

Of course, the Basic premise is a simplifying assumption – and one that does not always align with

intuition. Markets may not be efficient, and “market

efficiency is a matter of degree.” Id. at 272. It is no

doubt true, as the Third Circuit stated below, that “republication of information by a more credible source to

a broader audience” may affect a stock’s price in a particular market even if prior disclosure under different

circumstances did not. Pet. App. 8a. But where that is

true, the Basic presumption cannot apply and class

certification is inappropriate because reliance on a

misrepresentation cannot be inferred from assumed

reliance on the price of the stock: the presumption is

“rebuttable” precisely because “Basic recognized that

market efficiency is a matter of degree and accordingly

made it a matter of proof.” Halliburton II, 573 U.S. at

30

272. Indeed, the Third Circuit’s “broader audience” observation directly echoes the criticism of Basic advanced in Halliburton II that a “market can process

different kinds of information more or less efficiently,

depending on how widely the information is disseminated.” Id. at 271. That criticism, this Court said, is

“beside the point,” as it “fail[s] to take Basic on its own

terms.” Id.

Thus, if the Third Circuit was right to conclude that

the repetition of already-available information created

a “new signal” because it reached a “broader audience,”

then Basic should not have applied at all. If, on the

other hand, plaintiffs are entitled to use the efficientmarket theory to prove the reliance element with

classwide evidence and thus satisfy the requirements

of Rule 23, then defendants must equally be permitted

to use the exact same theory to establish that a putative “corrective disclosure” had no price impact because it disclosed nothing new. The Third Circuit’s

“new signals” approach preserves Basic’s benefit for

plaintiffs but creates an illogical carve-out that handicaps defendants.

Evenhanded application of the efficient-market hypothesis has led the vast majority of courts of appeals,

at the merits stage, to reject a new-signals-type approach and affirm that corrective disclosures must reveal new substantive information; “otherwise the market will have processed and reacted to that information already.” Norfolk Cnty. Ret. Sys., 877 F.3d at

695; see also supra at 21-23 (citing cases). There is no

logical reason for the efficient-market hypothesis to

preclude a connection between the back-end stock drop

and the alleged fraud at the merits stage but not at the

class-certification stage. Plaintiffs “must take the bitter with the sweet,” and cannot “cast the [efficient

31

market hypothesis] aside when it no longer suits their

needs.” Meyer, 710 F.3d at 1199.

Because the Third Circuit allowed Plaintiff to do

just that, its “new signals” rule cannot be reconciled

with “Basic’s fundamental premise.” Halliburton II,

573 U.S. at 283. Review is warranted to restore a coherent and evenhanded application of this Court’s

precedents.

III.

THIS COURT SHOULD CORRECT THE

PANEL’S ERRORS AND AFFIRM CRUCIAL GUARDRAILS ON INFLATIONMAINTENANCE CASES.

Granting certiorari to resolve the questions presented would clarify the standard for rebutting the

Basic presumption in inflation-maintenance cases.

And it would dispel the costly lower-court confusion

that predated Goldman and has persisted since. The

importance of these issues merits action by this Court,

and this case is an excellent vehicle.

A.

Checking the abuse of inflationmaintenance cases is exceptionally

important.

Both questions presented target doctrinal moves the

plaintiffs’ bar has leveraged to twist Basic to effectively guarantee class certification in inflation-maintenance cases.7

Today, “[m]ost securities fraud class actions are

based on” theories like the one asserted here. Booth,

supra at 135. By 2018 (just four years after Halliburton II), 71% of cases involved inflation-maintenance

7 Because these questions concern the proper interpretation of

the federal securities laws, the views of the Solicitor General may

assist the Court in considering this petition.

32

theories. Note, Congress, the Supreme Court, and the

Rise of Securities-Fraud Class Actions, 132 Harv. L.

Rev. 1067, 1077 (2019). Such cases have grown more

“prevalent in recent years.” Merritt B. Fox & Joshua

Mitts, Event-Driven Suits and the Rethinking of Securities Litigation, 78 Bus. Law. 1, 1 (2023).

Plaintiffs now routinely convert stock price declines

into billion-dollar securities lawsuits by arguing that

some adverse event that is accompanied by a stock reaction – ranging from natural disasters to regulatory

changes to outlier litigation verdicts – “corrects” some

prior company statement. In practice, this means that

whenever a public company experiences a setback, “a

plaintiff’s law firm files a securities class action alleging that the company previously deceived shareholders by concealing a risk that led to the disaster.” Id. at

3. With these suits proliferating, “everything, everywhere is securities fraud.” Levine, supra; see also

Emily Strauss, Is Everything Securities Fraud?, 12

U.C. Irvine L. Rev. 1331, 1331 (2022) (noting that

these cases “have become more common and have

drawn increasing criticism on the grounds that they

are opportunistic and generally lack merit”).

And, of course, class certification in these securities

actions is often functionally dispositive. The sheer

magnitude of potential classwide damages frequently

creates overwhelming pressure “to settle rather than

incur the costs of defending a class action and run the

risk of potentially ruinous liability.” See Lab’y Corp. of

Am. Holdings v. Davis, 605 U.S. 327, 333 (2025) (Kavanaugh, J., dissenting); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 350 (2011) (same); Amanda M.

Rose, A Response to Calls for SEC-Mandated ESG Disclosure, 98 Wash. U. L. Rev. 1821, 1852-53 (2021)

(“costs of discovery and extremely large potential

33

damage awards . . . means that the risk of vexatious

litigation is high”).

Under the Third and Ninth Circuits’ rules, inflationmaintenance claims are dangerously easy to manufacture. Plaintiffs find a stock drop and then can pick and

choose any tangentially related tweet, article, blog

post, or lawyer advertisement based solely on whether

it coincides with the price movement. The bare price

reaction then does the work – as it did for the Third

Circuit – of suggesting there must have been some

“new signal” even if there was no new substance. And

so price reaction becomes both necessary and sufficient for price impact – and the Basic presumption becomes irrebuttable as a practical matter. That is what

the Seventh Circuit warned against in Allstate.

Allowing the Third and Ninth Circuit’s rulings to

stand will thus invite abusive litigation. Indeed, they

strengthen the incentive for aggressive plaintiffs’ lawyers to create events that “driv[e] the stock down” because that serves their self-interest – as the lead

Ingham plaintiffs’ lawyer admitted on national TV.

A5095-96, ¶ 6.

B.

This case presents an ideal vehicle.

This case is the ideal vehicle to bring coherence and

evenhandedness to the law governing Basic’s application to inflation-maintenance cases. Both the newness

and correctiveness questions were extensively developed in the record, fully briefed, and carefully argued

in the district court and the court of appeals. Indeed,

in both courts below, “the parties dispute[d] only

whether common questions of reliance on J&J’s alleged misrepresentations predominate over individual

questions.” Pet. App. 3a-4a. The panel’s resolution of

those issues was outcome-determinative: agreeing

with J&J on either correctiveness or newness would

34

have required the panel to reverse the district court’s

class-certification order. And there are no vehicle problems that might prevent the Court from reaching and

resolving the legal questions.

Nor does the panel’s choice not to publish its opinion

diminish the significance of the Third Circuit’s decision or the need for this Court’s review. The decision

below is only the second court of appeals opinion – after the Second Circuit’s remand decision – to interpret

and apply Goldman. See Jessica Corso, Securities

Class Actions Had A Late Summer Appellate Bloom,

Law360 (Sep. 8, 2025), https://tinyurl.com/wjja2s93.

The Ninth Circuit’s decision in Zillow is the third and

latest such opinion. For this reason, the Third and

Ninth Circuits’ opinions, though unpublished, will

have outsized importance in shaping how courts across

the country view the newness and correctiveness issues presented here. At a minimum, district courts in

those circuits, with no other on-point, in-circuit precedent to look to, are likely to view the panel’s decision

and Zillow as strongly persuasive authority.

The rarity of circuit court opinions addressing these

issues is explained by the massive exposure in these

cases and the concomitant settlement pressure. Securities class action cases routinely involve multi-billiondollar damages claims, with one financial estimate

placing the maximum potential damages against private securities fraud defendants at roughly $1.8 trillion – for just the first half of 2025. See 2025 Midyear

Assessment, supra at 10. Here, the exposure is over

$10 billion. So it is little wonder cases seldom progress

past the district court.

In all events, the frequency with which these issues

are disputed, and the infrequency with which they are

litigated through appeal, underscores the importance

of taking this case now rather than waiting for another

35

opportunity that may not arrive for years. The court of

appeals itself signaled the importance and difficulty of

the issues: one judge dissented, and three judges

would have granted rehearing en banc. En banc disagreement in a leading commercial circuit, in a case

that directly implicates this Court’s controlling precedents, underscores this is not a one-off error.

Ultimately, there is no reason the standard for rebutting Basic should differ so dramatically depending

on which side of the Hudson River a case is filed. This

case is uniquely suited to restore uniformity.

CONCLUSION

The Court should grant the petition.

Respectfully submitted,

Kristen R. Seeger

Tacy F. Flint

John M. Skakun III

Neil H. Conrad

SIDLEY AUSTIN LLP

One South Dearborn

Chicago, IL 60603

(312) 853-7000

kseeger@sidley.com

Kwaku A. Akowuah

Counsel of Record

Manuel Valle

SIDLEY AUSTIN LLP

1501 K Street, NW

Washington, DC 20005

(202) 736-8000

kakowuah@sidley.com

Counsel for Petitioners