Unger v. Amedisys, Inc.

Certain shareholders (plaintiffs) of Amedisys, Inc. (defendant) brought a putative class-action suit against Amedisys alleging it manipulated its stock price in violation of federal securities law. The shareholders moved for class certification, arguing they were entitled to a class-wide presumption of reliance on the alleged misrepresentations based on the fraud-on-the-market theory. The fraud-on-the-market theory only applies if the market for the relevant stock was efficient. The district court found an efficient market for Amedisys stock because there (1) was a significant weekly trading volume in Amedisys stock, (2) were numerous market makers for Amedisys stock, and (3) was a causal relationship between Amedisys’s corporate news and its stock price. With respect to trading volume, the district court exclusively relied on two printouts from the internet; it did not venture its own calculation, leaving open the possibility of significant double-counting based on defects in the underlying data. With respect to market makers, the district court relied on an internet printout and affidavits submitted by the shareholders (which were not subject to cross-examination) in finding that Amedisys had 22 market makers. The district court did not consider the extent to which the number of market makers, standing alone, demonstrates market efficiency. With respect to the relationship between corporate news and the stock price, the district court noted stock-price increases after good corporate news and stock-price decreases after bad corporate news, but it did not examine other potentially relevant factors that may have affected Amedisys’s stock price. In addition, the district court did not address at least two other factors courts traditionally evaluate regarding market efficiency: (1) that no securities analysts covered Amedisys stock and (2) that Amedisys was ineligible to file a registration statement using Securities and Exchange Commission (SEC) Form S-3. Based on its finding of market efficiency, the district court granted the shareholders’ motion for class certification. Amedisys appealed.