A&O Shearman files Washington Legal Foundation amicus brief urging Third Circuit reconsideration of class certification

The plaintiffs alleged that J&J made misleading statements about the safety of its talc products in connection with its defense of product liability suits. The lawsuit was filed after Reuters published an article about the litigation, and J&J’s stock price fell. The U.S. District Court for the District of New Jersey granted class certification, and a divided Third Circuit panel affirmed, rejecting J&J’s evidence that the purported “corrective” disclosures lacked new, corrective content.

The amicus brief argues that the panel’s decision undermines the core premise of the Basic presumption, which allows a plaintiff to establish class-wide reliance through a “fraud-on-the-market” theory, by ignoring “efficient market” principles and holding that stock price movement attributable to a fraudulent statement depends not on the market being presented with new information, but whether the market was presented with “new signals” about previously disclosed information. WLF warned that the panel’s opinion could lead to longer class periods, unjustified expansion of potential liability exposure, and abusive litigation.

The WLF is a nonprofit public-interest law firm and policy center with supporters in the U.S. Founded in 1977, WLF promotes and defends free enterprise, individual rights, limited government, and the rule of law.