United States Court of Appeals Fifth Circuit F I L E D REVISED FEBRUARY 23, 2005 February 17, 2005 UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT Charles R. Fulbruge III Clerk _______________________
No. 03-30965 _______________________
FRANCES UNGER, ET AL.; Plaintiffs,
WILLIAM PATTERSON, lead plaintiff; GORDON ELLIS, lead plaintiff,
Plaintiffs-Appellees,
versus
AMEDISYS INC; ET AL.,
Defendants-Appellants.
Appeals from the United States District Court for the Middle District of Louisiana,
Before REAVLEY, JONES, and DENNIS, Circuit Judges.
EDITH H. JONES, Circuit Judge:
This case, on review pursuant to FED. RULE CIV. PROC. 23(f),
implicates the standards and procedures used by district courts
when considering certification of securities class actions
dependent on the “fraud on the market” theory. See Basic, Inc. v.
Levinson, 485 U.S. 224, 108 S. Ct. 978, 99 L. Ed. 2d 194 (1988).
Like our brethren in the Third, Fourth, Seventh and Ninth Circuits,
we hold that a careful certification inquiry is required and
findings must be made based on adequate admissible evidence to justify class certification. Because the district court
erroneously applied too lax a standard of proof to the plaintiffs’
fraud-on-the-market allegations, we must vacate the class certifi-
cation and remand.
BACKGROUND
Amedisys provides home health care, nursing, home infu-
sion therapy, and ambulatory surgery services. The company’s stock
is traded on the NASDAQ Over The Counter Bulletin Board (“OTCBB”).
Approximately ninety percent of Amedisys’s revenue comes from
Medicare. This case stems from the conduct of Amedisys and its
directors in reporting profits based on new Medicare procedures.
Beginning October 1, 2000, Medicare implemented the
Prospective Payment System (“PPS”), which altered the way Medicare
compensated home health care companies. Under PPS, Medicare paid
health care companies like Amedisys a portion of their fees in
advance, based on forward-looking estimates of the cost of
services. After the company provided the service, the remainder of
the fee was paid; alternatively, if the initial payment proved too
high, the company had to reimburse Medicare the difference. To
comply with the new PPS procedures, Amedisys purchased and
implemented new computer software.
Plaintiffs allege that Amedisys willfully manipulated the
PPS program to inflate the estimated costs for certain health
services; that it thereby artificially fueled company earnings;
2 and, ultimately, that Amedisys’s actions wrongfully enhanced its
stock price. On June 13, 2001, Amedisys issued a curative
statement, conceding that it had overstated revenues, but
maintaining that the overstatements were inadvertently caused by
the new software used with the PPS program. The stock price fell.
On August 21, 2001, Frances Unger filed suit against
Amedisys, alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. As is often the case, plaintiffs’ lawyers solicited
potential class members over the Internet and through newspaper
advertisements. Several other suits were consolidated with Unger’s
and five individuals were chosen as lead plaintiffs. Class
certification was requested for “all persons and entities who
purchased the common stock of Amedisys, Inc. between November 15,
2000 through [sic] June 13, 2001.” Discovery occurred to ascertain
the qualifications of the proposed class representatives. At a
hearing, the district court evaluated this evidence and the
plaintiffs’ sketchy evidence in support of the fraud-on-the-market
basis for their presumed reliance on Amedisys’s misrepresentations.
The district court certified the class under Rule 23(b)(3).
The Amedisys defendants timely sought, and this court
granted, an interlocutory appeal raising two issues embodied in the
class certification: the adequacy of the lead plaintiffs’ quali-
fications and the sufficiency of plaintiffs’ evidence to support
the fraud on the market presumption.
3 DISCUSSION
The class certification determination rests within the
sound discretion of the trial court. Gulf Oil Co. v. Bernard, 452
U.S. 89, 100, 101 S. Ct. 2193, 2200, 68 L. Ed.2d 693 (1981). That
discretion, however, must be exercised within the constraints of
Rule 23. Id. A district court that premises its legal analysis on
an erroneous understanding of the governing law has abused its
discretion. U.S. v. Insaulgarat, 378 F.3d 456, 464 (5th Cir.
2004); U.S. v. Mann, 161 F.3d 840, 860 (5th Cir. 1998).
Rule 23 requires the claims of a proposed class to meet
several requirements before the class can be certified. The party
seeking certification bears the burden of establishing that
all requirements of Rule 23 have been satisfied. Berger v. Compaq
Computer Corp., 257 F.3d 475, 479-80 (5th Cir. 2001). First, the
district court must find what has been termed numerosity,
commonality, typicality, and representativeness.1 For class
actions seeking money damages, like this one, the district court
must make additional findings of predominance and superiority.
Rule 23(b)(3). The predominance element requires a finding that
common issues of law or fact “predominate over any questions
1 The specific language of Rule 23(a) is: One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
4 affecting only individual members.” Id. This requirement,
although reminiscent of the commonality requirement of Rule 23(a),
is “far more demanding” because it “tests whether proposed classes
are sufficiently cohesive to warrant adjudication by
representation.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591,
623-24, 117 S. Ct. 2231, 2249-50, 138 L. Ed. 2d 689 (1997). Final-
ly, a class action must afford the superior means to achieve “fair
and efficient adjudication of the controversy.” Rule 23(b)(3).
Recognizing the important due process concerns of both
plaintiffs and defendants inherent in the certification decision,
the Supreme Court requires district courts to conduct a rigorous
analysis of Rule 23 prerequisites. Gen’l Tel. Co. v. Falcon, 457
U.S. 147, 161, 102 S. Ct. 2364, 2372, 72 L. Ed. 2d 740 (1982).
District courts are required to take a “close look” at the parties’
claims and evidence in making its Rule 23 decision. Amchem, 521
U.S. at 615, 117 S. Ct. at 2246. Class certification hearings
should not be mini-trials on the merits of the class or individual
claims. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.
Ct. 2140, 2152-53, L. Ed. 2d 732 (1974). At the same time,
however, “[g]oing beyond the pleadings is necessary, as a court
must understand the claims, defenses, relevant facts, and
applicable substantive law in order to make a meaningful
determination of the certification issues.” Castano v. Am. Tobacco
Co., 84 F.3d 734, 744 (5th Cir. 1996). To assist the court in this
process it may sanction controlled discovery at the certification
5 stage. See FED. R. CIV. P. 23 Advisory Committee’s Note to 2003
amendments. The plain text of Rule 23 requires the court to
“find,” not merely assume, the facts favoring class certification.
Rule 23(b)(3).
Appellants first challenge the qualifications of the
class representatives under Rule 23(a)(4). To meet Rule 23
requirements, the court must find that class representatives, their
counsel, and the relationship between the two are adequate to
protect the interests of absent class members. Stirman v. Exxon
Corp., 280 F.3d 554, 562 (5th Cir. 2002). Class representatives
must satisfy the court that they, and not counsel, are directing
the litigation. To do this, class representatives must show
themselves sufficiently informed about the litigation to manage the
litigation effort. Berger, 257 F.3d at 479.
Nothing in the record indicates that the district court
abused its discretion with regard to the Rule 23(a)(4) requirement.
The district court fully evaluated the evidence, which included
depositions and testimony of the class representatives. The court
was neither clearly erroneous in its factfindings nor in error
legally. To address this argument further would pointlessly
require us to recount the case-specific evidence.
The crux of this appeal lies in the legal basis for and
sufficiency of evidence supporting the district court’s finding of
predominance under Rule 23(b)(3). The district court here ex-
pressed skepticism that Castano, which discussed fraud and other
6 claims raised by a putative nationwide class of tobacco smokers,
should govern securities fraud class actions. Its skepticism was
unfounded. Castano is not logically so limited, and its reasoning
has been approved in the securities fraud context by other circuit
courts as well as by district courts in this circuit. Gariety v.
Grant Thornton LLP, 368 F.3d 356, 362-64 (4th Cir. 2004); Newton v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 168 (3d
Cir. 2001); see also Johnston v. HBO Film Management., Inc., 265
F.3d 178, 186-88 (3d Cir. 2001); Szabo v. Bridgeport Mach., Inc.,
249 F.3d 672, 676-77 (7th Cir. 2001); Lehocky v. Tidel Techs.,
Inc., 220 F.R.D. 491, 504 (S.D. Tex. 2004); Krogman v. Sterritt,
202 F.R.D. 467, 473 (N.D. Tex. 2001); Griffin v. G K Intelligent
Sys., Inc., 196 F.R.D. 298, 303-04 (S.D. Tex. 2000).
One of the lessons emphasized by Castano and related
cases is that a district court must perform sufficient analysis to
determine that class members’ fraud claims are not predicated on
proving individual reliance. If the circumstances surrounding each
plaintiff’s alleged reliance on fraudulent representations differ,
then reliance is an issue that will have to be proven by each
plaintiff, and the proposed class fails Rule 23(b)(3)’s
predominance requirement. Castano, 84 F.3d at 745; see also Simon
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880, 882
(5th Cir. 1973).
Only by invoking the fraud on the market theory can these
plaintiffs establish a classwide rebuttable presumption of reliance
7 on Amedisys’s alleged misrepresentations.2 In Basic, Inc., the
Supreme Court held that reliance may be presumed, enabling 10b-5
class actions to proceed, “when a fraudulent misrepresentation or
omission impairs the value of a security traded in an efficient
market.”3 As the Court explained,
The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company’s stock is determined by the available material information regarding the company and its business.... Misleading statements will therefore de- fraud purchasers of stock even if the purchasers do not directly rely on the misstatements.... The causal connection between the defendants’ fraud and the plaintiffs’ purchase of stock in such a case is no less significant than in a case of direct reliance on misrepresentations.
Basic, Inc., 485 U.S. at 241-42, 108 S. Ct. at 989 (internal
citations omitted) (emphasis added).
To support this rebuttable presumption, a securities
plaintiff must prove, inter alia, that the security at issue is
traded in an “efficient market.” Id. at 248-49, 108 S. Ct. 992-93.
In many cases, where heavily-traded or well known stocks are the
target of suits, market efficiency will not even be an issue. But
where, as here, the suit involves small-cap stocks traded in less-
organized markets, a demonstration of an efficient market is a
2 To prevail on a 10b-5 claim, a plaintiff must prove (1) a material misrepresentation or omission by the defendant, (2) scienter on the part of the defendant, (3) reliance, and (4) due diligence by the plaintiff to pursue his or her own interest with care and good faith. Stephenson v. Paine Webber Jackson & Curtis, Inc., 839 F.2d 1095, 1098 (5th Cir. 1988). 3 Newton, 259 F.3d at 175.
8 prerequisite for certification.4 Without an initial demonstration
of market efficiency, there is no assurance that the available
material information concerning the stock translates into an effect
on the market price and supports a classwide presumption of
reliance. Absent an efficient market, individual reliance by each
plaintiff must be proven, and the proposed class will fail the
predominance requirement. Cf. Castano, 84 F.3d at 745. Because
this inquiry can prove decisive for class certification, and
because, given the realities of litigation costs, certification can
compel settlements without trial, courts have frequently applied
rigorous, though preliminary, standards of proof to the market
efficiency determination. See, e.g., Gariety, 368 F.3d at 368-70;
Newton, 259 F.3d at 167-69; Szabo, 249 F.3d at 675-77; Binder v.
Gillespie, 184 F.3d 1059, 1064-65 (9th Cir. 1999); In re Seagate
Tech. II Sec. Litig., 843 F. Supp. 1341, 1354-55 (N.D. Cal. 1994);
Krogman, 202 F.R.D. at 473; Griffin, 196 F.R.D. at 303-05. Courts
have likened the degree of proof required to the standards used in
preliminary injunction hearings, see Gariety, 368 F.3d at 366, or
in FED. RULE CIV. PROC. 12(b)(1) and 12(b)(2) jurisdiction contests,
4 A recent law review article criticizes the efficient market theory adopted in Basic as out of step with current economic analysis and inconsistent with the thrust of recent legislation. See Jeffrey L. Oldham, Taking “Efficient Markets” out of the Fraud on the Market Doctrine after the Private Securities Litigation Reform Act, 97 NW. U. L. REV. 995 (2003). The author contends that “what determines whether investors were justified in relying on the integrity of the market price is not the efficiency of the relevant market but rather whether a misstatement distorted the price of the affected security.” 97 NW. L. REV. at 1035. The article is persuasively argued, but it is the Supreme Court’s job to overrule Basic, in the absence of outright conflict with the Private Securities Litigation Reform Act, Pub. L. No. 104-67, 109 Stat. 737 (1995).
9 Szabo, 249 F.3d at 676. Although the court’s determination for
class certification purposes may be revised (or wholly rejected) by
the ultimate factfinder, the court may not simply presume the facts
in favor of an efficient market.
Courts have relied on several factors to determine
whether a stock traded in an “efficient market”: (1) the average
weekly trading volume expressed as a percentage of total
outstanding shares; (2) the number of securities analysts following
and reporting on the stock; (3) the extent to which market makers
and arbitrageurs trade in the stock; (4) the company’s eligibility
to file SEC registration Form S-3 (as opposed to Form S-1 or S-2);5
(5) the existence of empirical facts “showing a cause and effect
relationship between unexpected corporate events or financial
releases and an immediate response in the stock price”; (6) the
company’s market capitalization; (7) the bid-ask spread for stock
sales; and (8) float, the stock’s trading volume without counting
insider-owned stock. See Cammer v. Bloom, 711 F. Supp. 1264, 1286-
87 (D.N.J. 1989) (using and discussing the first five factors);
Krogman, 202 F.R.D. at 477-78 (using the last three factors).
These tools for gauging market efficiency have been used by many
courts throughout the country and within this circuit. See, e.g.,
5 Form S-3 is reserved for companies whose stock is actively traded and widely followed. To file a Form S-3, a company must have filed SEC reports for twelve consecutive months and possess a seventy-five million dollar market capitalization level. See 17 C.F.R. § 239.13. By contrast, there is no minimum capitalization requirement to file either Form S-1 or S-2. Further, a company need not even meet the reporting requirements spelled out in § 239.13 to file a Form S-1. See 17 C.F.R. §§ 239.11-239.12.
10 Gariety, 368 F.3d at 368; Binder, 184 F.3d at 1064-65; Hayes v.
Gross, 982 F.2d 104, 107 (3d Cir. 1992); Freeman v. Laventhol &
Horwath, 915 F.2d 193, 198-99 (6th Cir. 1990); Lehocky, 220 F.R.D.
at 505-09.
Although this does not represent an exhaustive list, and
in some cases one of the above factors may be unnecessary, once a
court endeavors to apply these factors, they must be weighed
analytically, not merely counted, as each of them represents a
distinct facet of market efficiency. Some courts have concluded
that there is not an efficient market as a matter of law for stocks
trading in the over-the-counter market. See In re Data Access Sys.
Sec. Litig., 103 F.R.D. 130, 138 (D.N.J. 1984), rev’d on other
grounds by 843 F.2d 1537 (3d Cir. 1988); Epstein v. Am. Reserve
Corp., No. 79 C 4767, 1988 WL 40500 (N.D. Ill. Apr. 21, 1988). We
need not go so far here, but such holdings are indicative of the
wide gulf between the type of market for stocks that trade millions
of shares daily, e.g., Basic, 485 U.S. at 243-44, 108 S. Ct. at
990, and the much less active market for stocks like Amedisys.6
6 There is no requirement for expert testimony on the issue of market efficiency, but many courts have considered it when addressing this determi- nation, which may often benefit from statistical, economic, and mathematical analysis. See, e.g., Bell v. Ascendant Solutions, Inc., No. Civ. A. 301-CV-0166- N, 2004 WL 1490009 (N.D. Tex. July 1, 2004); Lehocky, 220 F.R.D. at 491; Krogman, 202 F.R.D. at 467. Although courts are not to insist upon a “battle of the experts” at the certification stage, see Manual for Complex Litigation (4th ed. 2004) § 21.21, one court explained that In many cases, it makes sense to consider the admissibility of the testimony of an expert proffered to establish one of the Rule 23 elements in the context of a motion to strike prior to considering class certification. In order to consider Plaintiffs’ motion for class certification with the appropriate amount of scrutiny, the Court must first determine whether Plaintiffs’ expert testimony
11 Unfortunately, the district court in this case devoted
insufficient attention to evaluating the market efficiency factors.
The court’s determination that, during the time in question,
Amedisys stock traded in an efficient market, was predicated on its
finding of three factors: high stock trading volume, market makers
trading the stock, and a cause-and-effect relationship between
corporate events and price movement.
A high weekly stock trading volume suggests the presence
of active, informed investors. In evaluating the stock trading
volume, however, the district court never ascertained — and the
plaintiffs never proved — the actual number of Amedisys shares
being regularly traded. Accepting the plaintiffs’ naked claim as
to this analytical starting point cannot yield a reliable result.
The court first “found” that the average weekly trading volume was
3.9% of the outstanding shares, but then conceded that the figure
could be cut in half. Because the court appears to have based its
determination only on two printouts from the Internet, the court
did not determine the mathematically correct average weekly trading
volume. As commentators observe, however, trade volume can be
grossly exaggerated on some exchanges through double-counting,
sometimes by over fifty percent. M. Barclay & F. Torchio,
A Comparison of Trading Models Used for Calculating Aggregate
Damages in Securities Litigation, 64 LAW & CONTEMP. PROBS. 105, 106
supporting class certification is reliable. Bell, 2004 WL 1490009, at *3-*4 (citations omitted).
12 (Summer 2001). At the certification stage, reliance on
unverifiable evidence is hardly better than relying on bare
allegations.
The district court also found that the presence of
twenty-two “market makers” for Amedisys stock weighed in favor of
a finding of market efficiency. To support this conclusion, the
court relied on a single Internet printout, coupled with affidavits
by plaintiffs’ witnesses that were admitted without opportunity for
cross-examination. Moreover, the court failed to acknowledge
growing concern that the mere number of market makers, without
further analysis, has little to do with market efficiency. See,
e.g., Krogman, 202 F.R.D. at 476 (noting that the “number of market
makers” factor has in practice proven an unreliable measure of
market efficiency unless tied to trade volume and price); Griffin,
196 F.R.D. at 304; Serfaty v. Int’l Automated Sys., Inc., 180
F.R.D. 418, 422 (D. Utah 1998); O’Neil v. Appel, 165 F.R.D. 479,
502 (W.D. Mich. 1996) (“The economic literature has criticized
reliance upon the number of market makers as an indicator of
efficiency.”); see also Brad M. Barber, et al., The Fraud-on-the-
Market Theory and Indicators of Common Stock’s Efficiency, 19 J.
CORP. L. 285, 307 (1994). The district court erred when it did not
consider the questionable relevance of this finding.
The district court also found a causal connection between
Amedisys corporate events and the movement of the stock price, but
did not take into account the many other factors that could affect
13 the price of Amedisys stock. The court correctly identified the
causal connection as one of the most important market-efficiency
factors. It goes to the heart of the “fraud on the market” theory:
In an efficient market, where information is nearly perfect,
material misstatements alter a stock’s price almost immediately.
In such circumstances, “it is easy to see how injury can befall a
person who is unaware of the deceit.” See Eckstein v. Balcor Film
Investors, 8 F.3d 1121, 1129-30 (7th Cir. 1993). Demonstrating
that market reactions are caused by company press releases should
not, however, be an exercise in post hoc, propter hoc logic. Many
variables have the potential to and do affect a stock price — the
daily market average; national, local and industry-specific
economic news; competitors’ activities; and on and on. The overall
volatility of the stock price and the speed of its reaction to
company news may also be significant. See, e.g., Krogman, 202
F.R.D. at 477-78. To this end, expert testimony may be helpful
because of the utility of statistical event analysis for this
inquiry. See supra, n.6.
Instead of recognizing the complexity of this cause-and-
effect factor, the court relied on a showing that on March 1 and
May 1, 2001, the stock price rose following positive announcements
issued by Amedisys on those days, and the price dropped the day the
company announced that its earnings would be restated. This
evidence is no doubt worthwhile, but standing alone, it is
insufficiently probative to determine, based on “empirical facts,”
14 see Cammer, 711 F. Supp. at 1287, that a causal connection exists.
In short, the court incorrectly used all three factors it found in
favor of market efficiency as a checklist rather than an analytical
tool.
Similarly, the court failed to evaluate the significance
of the market-efficiency factors lacking in the instant case. For
instance, the number of securities analysts following the stock is
an important factor. See, e.g., Krogman, 202 F.R.D. at 475;
Cammer, 711 F. Supp. at 1286-87. Hence, the fact that no analyst
was reporting on Amedisys stock at the time in question should have
been weighed against the rather scant utility of, for example, the
number of “market makers.” Further, the court did not address the
effect on the market efficiency determination of Amedisys’s
ineligibility to file an SEC Form S-3 at the time in question (the
other factor absent in this case).7 Because Rule 23 mandates a
complete analysis of “fraud on the market” indicators, district
courts must address and weigh factors both for and against market
efficiency.
CONCLUSION
Although we owe considerable deference to district courts
in reviewing certification decisions, we cannot affirm the order as
it is presently supported. After a more thorough inquiry, however,
certification may ultimately prove correct. When a court considers
7 The court also failed to refer to Amedisys’s market capitalization, the bid-ask spread in its stock, and the float.
15 class certification based on the fraud on the market theory, it
must engage in thorough analysis, weigh the relevant factors,
require both parties to justify their allegations, and base its
ruling on admissible evidence. Questions of market efficiency
cannot be treated differently from other preliminary certification
issues. Courts cannot make an informed decision based on bare
allegations, one-sided affidavits, and unexplained Internet
printouts.
For the foregoing reasons, the class certification order
is VACATED and REMANDED for further proceedings consistent
herewith.
VACATED AND REMANDED.
16 JAMES L. DENNIS, Circuit Judge, specially concurring:
Although I concur in the outcome, I disagree with the
majority opinion’s statement that “[c]ourts have likened the degree
of proof required [in determining market efficiency] to the
standards used in preliminary injunction hearings ... and 12(b)(2)
jurisdictional contests.”8 Contrary to the majority’s reading, the
Fourth Circuit’s opinion in Gariety v. Grant Thorton, LLP, 368 F.3d
356, 366 (4th Cir. 2004), and the Seventh Circuit’s opinion in
Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir.
2001), do not liken or compare standards or degrees of proof from
other proceedings at all. Instead, the Fourth and Seventh Circuits
simply referred to those inquiries as models or analogs of how
district courts can “probe behind the pleadings in resolving class
action certifications”9 without disobeying the Supreme Court’s
admonishment in Eisen against “expanding the...certification
analysis to include consideration of whether the proposed class is
likely to prevail ultimately on the merits.”10 For example, Gariety
simply says:
A model for [the certification] process can be observed in the context of the preliminary injunction practice.
8 Op. Pg. 10. 9 Gariety, 368 F.3d at 366 (quoting General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 160 (1982)). 10 Id. (citing Castano v. American Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996)).
17 Courts make factual findings in determining whether a preliminary injunction should issue, but those findings do not bind the jury..., and the jury’s findings on the merits govern the judgment to be entered in the case.11
And Szabo in the same vein observes that “[c]ourts make similar
inquiries routinely ... before deciding whether [courts] possess
jurisdiction over the subject matter of the case and the persons of
the defendants, the location of the proper venue, application of
forum non conveniens, and other preliminary issues.”12
The only “standards” that have ever been required in
class certifications are more open textured: e.g., “close look,”
Achem Products, Inc. v. Windsor, 521 U.S. 591, 615 (1997);
“rigorous analysis,” Falcon, 457 U.S. at 161; Spence v. Glock,
Ges.m.b.H, 227 F.3d 308 (5th Cir. 2000); Castano v. American
Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996). On the other hand,
the Supreme Court in Eisen v. Carlisle and Jaquelin, 417 U.S. 156,
177-178 (1974), admonished that a “more than likely to prevail”
standard is inappropriate in a Rule 23 certification analysis. In
fact, we recently held that a court must conduct an “intense
factual investigation” while at the same time “tak[ing] care to
inquire into the substance and structure of the underlying claims
without passing on their merits.” Robinson v. Texas Auto. Dealers
Ass’n, 387 F.3d 416 (5th Cir. 2004).
11 Id. at 366 (citing Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981)). 12 Szabo, 249 F.3d at 676.
18 Thus, although I agree with the majority’s holding that
the district court did not adequately weigh the factors for and
against a finding of market efficiency, I strongly disagree with
the majority’s reading of Gariety and Szabo. Contrary to the
majority’s impression, these cases do not support or suggest the
adoption or application of degrees or standards of proof in
efficient market determinations for the purposes of class
certification.