The case against Barclays PLC (“Barclays”) concerned defendants’ concealment of information and misleading statements regarding its “dark pool,” a private trading platform where the size and price of the orders are not revealed to other participants. Pomerantz was Lead Counsel for a class of investors who purchased Barclays’ American Depository Shares (“ADS”) and lost hundreds of millions of dollars when the truth about Barclays’ management of its dark pool came to light.

During the Class Period, Barclays’ dark pool catapulted into the financial stratosphere, with market share growth of 33% per year, as Barclay falsely promised investors that it would police the pool to “protect [clients] from predatory trading.” In fact, not only did Barclays allow aggressive traders into its dark pool, but it wooed them with perks that gave them a competitive edge over traditional traders.

In certifying the class in February 2016 – following a thorough analysis of the parties’ briefing, expert reports, and an in-depth evidentiary hearing—the district court concluded that under the Supreme Court’sBasic “fraud-on-the-market” doctrine, investors’ reliance on defendants’ affirmative misleading statements could be presumed, because Barclays’ ADS trade in an efficient market. Judge Scheindlin rejected defendants’ argument that to show market efficiency, plaintiffs must provide event studies showing that the market price of the company’s stock price reacted quickly to the disclosure of new material information about the company. While plaintiffs did in fact proffer an event study, the court held – consistent with a vast body of case law – that no one measure of market efficiency was determinative and that plaintiffs could demonstrate market efficiency through indirect evidence. After extensive analysis, the district court found that plaintiffs sufficiently established market efficiency indirectly, and thus direct evidence from event studies was unnecessary.

In November 2017, the Second Circuit affirmed the district court’s certification of a class of Barclays’ investors. Leaving no ambiguity, the Second Circuit’s decision affirming that of the district court cited its own recent decision in Petrobras– another Pomerantz victory – and stated that, “We have repeatedly – and recently – declined to adopt a particular test for market efficiency.”

This decision is a significant win for plaintiffs as it conclusively holds that “direct evidence of price impact … is not always necessary to establish market efficiency and invoke the Basicpresumption.” The Court further made clear that the burden on plaintiffs is not “onerous” and that there would be little point to considering factors looking at indirect evidence of market efficiency if they only came into play after a finding of direct efficiency through an event study.

The Second Circuit also put an end to effort by defendants to minimize their burden of rebuttal, making it clear that defendants seeking to rebut the presumption that investors rely on prices set on an efficient market must do so by a preponderance of the evidence. In so holding, the Second Circuit recognized that the presumption of reliance would be of little value if defendants could overcome it easily. Specifically, the Court – pointing to the Supreme Court’s language in Halliburton IIthat stated that defendants could only rebut the presumption of reliance by making a showing that “sever[ed] the link” between the misrepresentation and the price a plaintiff paid and that any such evidence must be “direct, more salient evidence” – held that it would be inconsistent with Halliburton II to “allow[] defendants to rebut the Basicpresumption by simply producing someevidence of market inefficiency, but not demonstrating its inefficiency to the district court.” The Court elucidated that to rebut the Basicpresumption, the burden of persuasion properly shifts to defendants, and confirmed that plaintiffs have no burden to show price impact at the class certification stage.

Jeremy Lieberman, Managing Partner of Pomerantz, commented: “We are very gratified by the Second Circuit’s decision. In reaching this and thePetrobrasdecision, the Second Circuit has unambiguously reaffirmed Halliburton IIand Basic’sguidance that class certification for widely traded securities such as Barclays and Petrobras is a “common sense” proposition. For too long, Defendants have tried to obscure this guidance by attempting to require arcane event studies at the class certification stage, which had little to do with the merits of the case, or the damages suffered by investors. This decision debunks that effort, providing a far easier and more predictable path for securities class actions plaintiffs going forward.”

The action, filed in United States District Court, Southern District of New York, and docketed under 14-cv-5797, was on behalf of a class consisting of all persons or entities who purchased Barclays securities between August 2, 2011 and June 25, 2014, inclusive, and sought to recover damages against defendants for alleged violations of the federal securities laws under the Securities Exchange Act of 1934 (the "Exchange Act").

Pomerantz’s Barclays litigation was overseen by Jeremy Lieberman and Tamar Weinrib.
Marc I. Gross and Emma Gilmore assisted them on the appeal.