Economic Analysis at the Certification Stage of Exchange Act Securities Class Actions

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The authors review the issues requiring economic analysis at the class certification stage of key credentials.

Relatively recent Supreme Court decisions provide opportunities, in addition to assessing market efficiency, to use economic analysis at the class certification stage of securities class actions under the ‘Exchange Act. There are a number of factors to consider when deciding if and how to argue such challenges. For example, the price impact assessment and suitability of a proposed methodology for class-wide damages (Comcast considerations) may be facilitated by adopting the plaintiffs’ assertion that the security in question traded in an efficient market. Impact on prices and Comcast challenges, in particular, are often closely related to the merits of the case (and therefore potentially relevant to broader business strategy). Additionally, there are unique considerations that market disruptions, such as those caused by the COVID-19 pandemic, pose for each potential avenue for challenging class certification.

In addition to providing an overview of some of the issues warranting economic analysis at the class certification stage (i.e. assessment of market efficiency, impact on prices and liquidated damages methodology class scale), authors Kristin Feitzinger, Amir Rozen, and Shaama Pandya discuss the potential effects that extreme market volatility and disruptions (examples of which have been seen recently in the context of the COVID-19 pandemic) 19) may have on the underlying economic analyses.

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This article was first published HERE.

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