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Casebook Read Credits
Corporations
Resource 11 . 1 . 1
30 minutes

Basic Inc. v. Levinson (U.S. 1988)

Holger Spamann,
Jens Frankenreiter

Questions:

  1. How does the fraud-on-the-market theory relate to reliance? Why is this important for class certification?
  2. According to the fraud-on-the-market theory, who relies on what? Why do they trade?
  3. What social good, if any, do private securities fraud class actions generate? In other words, what is the policy justification, if any, for allowing this costly litigation to proceed?
  4. In particular, how does the measure of damages relate to the social harm (as opposed to the private harm suffered by a subset of traders)?

Supreme Court of the United States
485 U.S. 224, 99 L. Ed. 2d 194, 108 S. Ct. 978, SCDB 1987-046, 1988 U.S. LEXIS 1197
No. 86-279
1988-03-07

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