Developments in securities litigation move fast, and not all of them matter equally. Each month, Alto Litigation curates and summarizes the cases, rulings, and regulatory actions most likely to shape risk and strategy in the months ahead.
Fourth Circuit Rejects Class Certification
Once upon a time, courts tended to rubber-stamp class certification, a critical step in any securities class action lawsuit. But no more. As one example, the Fourth Circuit Court of Appeals, citing Supreme Court precedent, rejected class certification in a securities action against The Boeing Company because the plaintiffs failed to provide evidence showing how damages were calculable on a class-wide basis that was consistent with their theory of liability and was not speculative.
In any securities class action, a critical hurdle for the plaintiff is obtaining class certification, in which a court certifies that the members of the purported plaintiff class may be represented by those individuals serving as class representatives. It is a large plaintiff class that generates the substantial possible damages that make the lawsuit attractive for a law firm to handle the matter on a contingent fee basis; otherwise, damages could be claimed only by the named plaintiffs. A class action also is the most efficient resolution of disputes involving common questions, as opposed to hundreds or even thousands of individual suits. But for class certification to be approved, a plaintiff must satisfy the requirements of Rule 23 of the Federal Rules of Civil Procedure. The critical issue often is whether the members of the alleged class share identical questions of law and fact.
In State of Rhode Island Office of the General Treasurer v. The Boeing Company, decided on July 20, plaintiffs alleged that the company misrepresented its safety performance after two deadly crashes. But, plaintiffs asserted, another in-flight incident and subsequent disclosures revealed the “truth” about Boeing’s safety record, resulting in a sharp price drop. Plaintiffs alleged that Boeing violated the anti-fraud provisions of the securities laws and proposed a class period running from September 2019 through May 2024. But in reversing the district court’s decision to certify the class, the Court of Appeals held that under Comcast Corp. v. Behrend, 569 U.S. 27 (2013), a district court must undertake a rigorous analysis of damages methodologies even if they overlap with an examination of the underlying merits. Here, the plaintiffs’ expert did not offer a settled damages methodology that showed how damages could be measured on a class-wide basis, but instead offered only “maybe[s], “perhap[es]” and “what ifs.” Plaintiffs also failed to offer a theory of liability supporting the damages claim, but only provided vague, generic allegations that defendants made false and misleading statements. These arguments did not satisfy the Comcast standard.
Why It Matters: Boeing represents a trend by the Supreme Court and Circuit Courts raising the bar for class certification. Instead of being a perfunctory exercise, a motion for class certification may now present a serious challenge for plaintiffs, which in turn means that defendants are more likely to oppose class action lawsuits at least through an appeal of any class certification decision. Plaintiffs could seek to avoid these challenges by choosing shorter class periods with lower alleged damages. But that also could encourage defendants to litigate. Other cases addressing class certification are pending before the Circuit Courts of Appeal and Zillow Group, Inc. has petitioned the Supreme Court to hear an appeal from the Ninth Circuit affirming class certification.
Delaware Supreme Court Rejects Jarkesy-Style Jury Challenge
In 2024, the U.S. Supreme Court ruled in SEC v. Jarkesy that actions brought by the Securities and Exchange Commission seeking penalties for alleged securities fraud require jury trials under the 7th Amendment to the Constitution, rather than such cases being adjudicated by an in-house administrative proceeding. Since the Jarkesy decision, there has been an effort to convince state courts to apply the ruling to state regulatory proceedings.
In Swan Energy Inc. v. Investor Protection Unit of the Delaware Department of Justice, issued on July 16, the Delaware Supreme Court rejected such arguments. In Swan, Delaware’s Investor Protection Unit (IPU) brought an administrative proceeding against a corporation and four individuals, charging them with securities fraud. The respondents brought an action seeking a declaratory judgment that, among other things, the action violated their right to a jury trial under the Delaware Constitution.
In affirming the decision of the Superior Court denying the challenge, the Delaware Supreme Court held that the Delaware Legislature did not require jury trials in actions brought by the IPU under the Delaware Securities Act. The Delaware Constitution guaranteed the right to a jury trial only as it existed at common law, and the IPU’s action was not analogous to a common law claim, given that there was no requirement to prove scienter or reliance. The respondents acknowledged that Jarkesy was grounded in the Seventh Amendment, which has not been incorporated and applied to the states through the Fourteenth Amendment. Nonetheless, they argued that just as Jarkesy found a close relationship between securities fraud and common law fraud, a similar finding should be made for ICU actions. But the Delaware Supreme Court held that Delaware historically had recognized a distinction between common law and statutory actions.
Why It Matters: The Jarkesy decision has provided a playbook for demanding jury trials in state administrative proceedings. For example, there are challenges to the ability of regulatory agencies in Arizona and Pennsylvania to impose civil penalties through administrative proceedings without a jury trial. But because Delaware is considered the leader in corporate and securities law, the Swan decision rejecting a Jarkesy-style challenge serves as an important precedent.
Securities Settlements Top $2.2B in First Half of 2026
An analysis by Cornerstone Research revealed that in the first half of 2026, there were 39 securities class action settlements totaling $2.2 billion. Further, according to the analysis, if the pace continued into the second half of the year, 2026 would exceed 2025 both in the number of settled cases and the total settlement amount, with the projected settlement dollars being the highest since 2020. The median settlement of $20 million in the first half of 2026 was greater than the historical typical median settlement size, which ranged from $7.7 million to $17.6 million in the prior nine years. There were four mega settlements of $100 million or greater accounting for 10% of settled cases.
One factor in the greater settlement amounts was that median plaintiff-style damages in settlements with claims under Section 10(b) of the Securities Exchange Act of 1934 was $660 million, larger than the annual medians in the prior nine years. Settlement amounts also tended to be greater in cases involving accounting irregularities, criminal charges, accompanying derivative claims or an institutional investor as lead or co-lead plaintiff.
Why It Matters: Congress enacted the Private Securities Litigation Reform Act of 1995 to increase the difficulty of bringing securities class actions, and a series of Supreme Court decisions also have imposed burdens on securities plaintiffs, both in pleading requirements and class certification. Yet the plaintiffs’ bar has adjusted to these developments and continues filing securities class actions that result in substantial settlements. The health care industry accounted for many of the settlements in the first half of 2026. But will the AI industry or some other industry become the next focus of the class action bar?
Starbucks Wins Dismissal on Rule 12(c) Motion
In a typical federal securities class action lawsuit, defendants will file a motion to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. But a less utilized approach is a Motion for Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. That avenue recently proved successful in a securities class action suit against Starbucks Corporation.
In Garbaccio v. Starbucks Corporation, filed in the U.S. District Court for the Western District of Washington, defendants initially filed a Motion to Dismiss the Complaint, which the court granted in part and denied in part. Defendants then filed an Answer. After several months of discovery, Defendants filed a motion requesting that the court grant judgment on the pleadings and dismiss the remaining claims.
In its opinion issued on July 15, the court first held that a Rule12(b)(6) motion did not preclude a subsequent Rule 12(c) motion. Nor were Defendants precluded from raising a failure-to-state-claim, even if it could have been raised in the Motion to Dismiss. However, the court stated that it would not revisit arguments – here, falsity and certain aspects of scienter – that were made and rejected in the Rule 12(b)(6) motion. But defendants made an argument concerning scienter that had not been previously made, which was that a defendant’s challenged conduct had a plausible and innocent alternative explanation. After re-evaluating scienter based on defendants’ newly proffered argument, the court concluded that plaintiffs had not adequately alleged scienter and therefore dismissed the remaining claims.
Why It Matters: This case demonstrates that a Rule 12(c) motion can be effective to raise a compelling argument that was not raised on a Motion to Dismiss. It did not matter that there had been some discovery because the Rule 12(c) motion was not threatening to interfere with the trial. Nor did it matter that the court already had considered and rejected several arguments challenging scienter; the court was willing to re-evaluate its prior decision and dismiss the claims based on a new argument concerning scienter.