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Opinion
Noah Feldman

Markets Are Efficient Enough for Justice Roberts

Class-action securities litigation survived today -- and the big news is that it was saved not just by swing voting Justice Anthony Kennedy, but also by Chief Justice John Roberts.
Chief Justice John Roberts, again showing his pragmatic treachery. 
Chief Justice John Roberts, again showing his pragmatic treachery. 

Class-action securities litigation survived today -- and the big news is that it was saved not just by swing-voting Justice Anthony Kennedy, but also by Chief Justice John Roberts. Roberts wrote the opinion for the court affirming the presumption that, if you bought stock in a reasonably well functioning market, you relied on material information that the market knew. The decision showed once again the realism that has cost Roberts the admiration of hard-core conservatives ever since his pragmatist treachery in upholding the individual mandate in the Affordable Care Act case.

Modern securities class actions were invented by the Supreme Court in a 1988 decision called Basic Inc. v. Levinson -- and many corporate managers and directors have detested them ever since. In essence, the court in Basic said that because securities markets are generally efficient, you can presume that anyone who buys stock at a given moment is relying on material information disseminated to that market.