Securities class actions involve contested pretrial hearings to determine the proper class of plaintiffs. The certification decision often affects the outcome of a case because defendants usually settle if the class is certified, whereas plaintiffs usually abandon the case without trial if certification is denied. Courts disagree, however, over the appropriate class certification procedure. Courts that emphasize efficiency invoke Eisen v. Carlisle & Jacquelin to preclude considering substantive issues during the pretrial hearing. Courts that emphasize the importance of determining the correct class during the pretrial stage follow General Telephone Co. of the Southwest v. Falcon and allow parties to introduce evidence going to the merits of the case. Certification procedures based on Eisen or Falcon often appear in securities class actions, which litigants usually bring tinder Rule 10b-5 and base on the fraud-on-the-market theory. Eisen's and Falcon's holdings influence securities class actions because courts rely on them to determine the proper class certification procedure. This Note argues that the apparent tension between the two cases has provided courts with the flexibility to consider just the right amount of evidence during class certification proceedings, permitting them to efficiently certify the proper class.
Fraud on the Market Gets a Minitrial: Eisen through In re IPO,
58 Duke Law Journal
Available at: http://scholarship.law.duke.edu/dlj/vol58/iss6/7