District of Minnesota: Summary Judgment Granted to Defendants in a Securities Fraud Action Based on Plaintiffs’ Failure to Prove Reliance
03.27.19
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(Article from Securities Law Alert, February/March 2019)
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On March 8, 2019, the District of Minnesota granted defendants’ motion for summary judgment in a long-pending securities fraud action against a major electronics retailer. IBEW Local 98 Pension Fund v. Best Buy Co., 2019 WL 1102714 (D. Minn. 2019) (Frank, J.).[1] The court dismissed plaintiffs’ claims in full and with prejudice because plaintiffs failed to meet their burden of proving reliance upon alleged misrepresentations made during a September 14, 2010 conference call.
Plaintiffs sought to invoke the fraud-on-the-market presumption of reliance established in Basic v. Levinson, 485 U.S. 224 (1988). The district court initially granted class certification, but the Eighth Circuit reversed because it found that defendants “rebutted the Basic presumption by submitting direct evidence . . . that severed any link between the alleged conference call misrepresentations and the stock price at which plaintiffs purchased.” IBEW Local 98 Pension Fund v. Best Buy Co., 818 F.3d 775 (8th Cir. 2016).[2] Following the Eighth Circuit’s ruling, the district court found that plaintiffs could only “proceed with traditional evidence of reliance.” IBEW Local 98 Pension Fund v. Best Buy, 2017 WL 2728399 (D. Minn. June 23, 2017).
Defendants later moved for summary judgment on the ground that plaintiffs could not satisfy their burden of proving actual reliance. Defendants cited the lead plaintiff’s testimony that he had not heard or read about the conference call statements prior to purchasing the company’s shares. Defendants also pointed out that there was no evidence in the record that either of the other two plaintiffs had relied on the conference call statements in purchasing their shares. Because the court found that there was no genuine dispute of material fact concerning actual reliance, the court determined that there was “no triable claim for securities fraud.”
[1] Simpson Thacher represents Best Buy and several of its executives in this action.
[2] Please click here to read our prior discussion of the Eighth Circuit’s decision in Best Buy.