In the twenty years since the Supreme Court of the United States' decision in Basic Inc. v. Levinson, lower court decisions have insisted on proof of market efficiency, materiality, and loss causation more stringent than the Court's presumption of reliance seemingly requires. This Paper looks closely at Basic's own hesitancy about how and why the presumption is justified, and the doctrinal revisionism that has since occurred. In many ways, this revisionism resurrects the conservative thinking that once strongly influenced fraud-on-the-market theory. The irony is that that thinking counseled ignoring reliance as an issue, not building an entire analytical structure around it, and confusion abounds as a result. I offer an interpretation of Basic that would have sent the case law in a more sensible, investor-friendly direction. I also reconnect the Court's seemingly separate holding on assessing materiality to its presumption of reliance, showing how discomfort with the indeterminacy of issues like materiality and duty to disclose has also played a role in the erosion of the presumption.
Description
The Continuing Evolution of Securities Class Actions Symposium
