Basic Inc. v. Levinson

Basic Inc. v. Levinson
Supreme Court of the United States
Argued November 2, 1987 Decided March 7, 1988
Full case name	Basic Incorporated, et al., Petitioners v. Max L. Levinson et al.
Citations	485 U.S. 224 (more) 108 S. Ct. 978; 99 L. Ed. 2d 194; 1988 U.S. LEXIS 1197; 56 U.S.L.W. 4232; Fed. Sec. L. Rep. (CCH) P93,645; 24 Fed. R. Evid. Serv. (Callaghan) 961; 10 Fed. R. Serv. 3d (Callaghan) 308
Prior history	U.S. Dist. Ct. N.D. Ohio certified plaintiffs' class, granted summary judgment to defendants; 6th circuit affirmed class certification, reversed and remanded summary judgment, 786 F.2d 741
Holding
Plaintiffs are entitled to a rebuttable presumption of reliance in a 10b-5 case, based on a fraud-on-the-market theory.
Court membership
Case opinions
Majority	Blackmun, joined by Brennan, Marshall, Stevens; White, O'Connor (parts I, II, III)
Concur/dissent	White, joined by O'Connor
Rehnquist, Scalia, and Kennedy took no part in the consideration or decision of the case.
Laws applied
Securities Exchange Act of 1934, SEC Rule 10b-5

Basic Inc. v. Levinson, 485 U.S. 224 (1988), was a case in which the Supreme Court of the United States articulated the "fraud-on-the-market theory" as giving rise to a rebuttable presumption of reliance in securities fraud cases.

Combustion Engineering, Inc. sought to acquire Basic, Inc., and had engaged in discussions with Basic's officers and directors. Three months after these discussions began, Basic asked the to suspend trading in its shares and issued a release stating that it had been "approached" by another company concerning a merger. Basic president Max Muller publicly denied Basic's involvement in any merger discussions. The next day, Basic's board approved Combustion's tender offer for all outstanding .

Plaintiff Max L. Levinson was a Basic shareholder who brought a class action suit against Basic and its directors, alleging that he and other shareholders were injured by selling Basic shares at artificially depressed prices in a market affected by—and relying on—Basic's misleading statements. Plaintiffs alleged that Basic's misrepresentations violated § 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.

The United States District Court for the Northern District of Ohio certified the class, finding that plaintiffs were entitled to a presumption of reliance on Basic's public statements, and therefore that common questions of fact or law predominated over particular questions pertaining to individual plaintiffs. However, on the merits the court granted Basic's motion for summary judgment, finding the statements to be immaterial.