No Class Cert. For Deutsche Fraud Suit: 9th Circ.

No Class Cert. For Deutsche Fraud Suit: 9th Circ. - 7/29/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

No Class Cert. For Deutsche Fraud Suit: 9th Circ.
Morgan Bettex

Securities Law 360. July 29, 2009
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EXCERPT: A federal appeals court has upheld a decision to deny class certification in a long-standing securities fraud suit alleging Deutsche Bank Securities Ltd. manipulated the stock price of an Internet company. In a decision handed down Wednesday, the U.S. Court of Appeals for the Ninth Circuit ruled that the U.S. District Court for the Central District of California did not err when it denied class certification in the suit because individual questions of reliance predominate over the common claims. Filed by investors in 2001, the suit alleges that Deutsche Bank, through a vice president, manipulated the stock of GenesisIntermedia Inc. by using securities loans to inflate the company’s stock price without having to sell its shares, which would have depressed the stock price. But when the price of GENI’s stock collapsed in September 2001 for reasons that remain unclear, borrowers of the stock demanded their cash collateral back. While Deutsche Bank was able to recover nearly all the collateral it had pledged, many intermediary broker-dealers could not because GENI had spent the cash collateral. Thus, not only had Deutsche Bank profited through the rebate payments it received, but it had also managed to recover almost of all the cash collateral it had advanced, according to the complaint. […] But the district court denied class certification in 2006, arguing that the investors would have to prove reliance, which establishes the causal connection between the alleged fraud and the securities transaction, on an individual basis because they could not prove it classwide. The plaintiffs countered that they did not have to prove individualized reliance because of the “fraud on the market theory,” which presumes reliance because it allows the plaintiff to connect causally the defendant’s bad act with the plaintiff’s decision to buy or sell the security.

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