The Eighth Circuit has become the first federal circuit court to apply the Supreme Court’s Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014) (Halliburton II) decision. Relying on Halliburton II, the Eighth Circuit reversed the district court’s certification of a class of Best Buy shareholders in a Rule 10b-5 case. In a 2-1 opinion, the court held that the defendants had rebutted the fraud-on-the-market presumption of reliance and, as a result, class certification was improper under Civil Rule 23(b)(3) because individual questions of reliance predominated over common questions of law and fact. The case is IBEW Local 98 Pension Fund v. Best Buy Co., No. 14-3178, 2016 WL 1425807 (8th Cir. Apr. 12, 2016).
Like many Rule 10b-5 cases, Best Buy involved statements reflecting earnings per share (EPS) guidance that later proved to be too optimistic. The plaintiffs alleged the company and its executives made two sets of misleading statements regarding EPS on the same day, the first in a press release issued before the stock market opened and the second in a conference call with analysts after the market opened. Notably, the district court found that the earlier statements in the press release were nonactionable forward-looking statements, but the later statements in the conference call were potentially actionable. On appeal, the Eighth Circuit did not review the district court’s ruling on whether each set of statements was actionable. Continue Reading