limited liability company (LLC)

Stoneridge Investment Partners, LLC, a Delaware limited liability company, served as lead plaintiff in a class action filed in the United States District Court for the Eastern District of Missouri on behalf of purchasers of Charter Communications, Inc., common stock. The suit named as defendants Charter itself, some of its executives, its independent auditor Arthur Andersen LLP, and two other companies that had acted as both suppliers and customers of Charter. Charter, a cable operator, engaged in a variety of fraudulent accounting practices throughout 2000 so that its quarterly reports would meet Wall Street expectations for subscriber growth and operating cash flow. By late 2000 Charter executives realized that these practices would still leave the company short of projected operating cash flow by fifteen to twenty million dollars. To close the gap, Charter entered into arrangements with Scientific-Atlanta, Inc., and Motorola, Inc., under which Charter overpaid the respondents twenty dollars for each digital cable converter box it purchased through the end of the year. In return, the respondents agreed to purchase advertising time from Charter at prices higher than fair value, with the transactions documented through backdated contracts and false statements about increased production costs. The arrangements had no economic substance, yet Charter recorded the advertising purchases as revenue and capitalized its purchases of the set-top boxes, thereby inflating reported revenues and operating cash flow by approximately seventeen million dollars on financial statements filed with the Securities and Exchange Commission and disseminated to the public. Respondents had no role in preparing or disseminating Charter's financial statements, and they recorded the transactions as a wash on their own books under generally accepted accounting principles. It is alleged that respondents knew or were in reckless disregard of Charter's intention to use the transactions to mislead research analysts and investors. The District Court granted respondents' motion to dismiss for failure to state a claim. The Court of Appeals for the Eighth Circuit affirmed, holding that the allegations showed at most aiding and abetting by respondents. The Supreme Court granted certiorari to review the judgment.

KKR Financial Holdings LLC was structured from its inception with a management agreement under which KKR Financial Advisors, an affiliate of KKR & Co. L.P., managed its day-to-day operations. The agreement could be terminated only upon payment of a termination fee by Financial Holdings. KKR owned less than 1 percent of Financial Holdings stock and had no right to appoint directors or veto board decisions. These structural features were known to investors when they purchased shares in Financial Holdings. KKR acquired each share of Financial Holdings stock for 0.51 of a share of KKR stock, a 35% premium to the unaffected market price. The defendants moved to dismiss the complaint. The Court of Chancery dismissed the plaintiffs‘ complaint. The appeal was submitted on September 16, 2015, and the Supreme Court issued its decision on October 2, 2015.

Between June 3, 1999, and December 7, 2001, Halliburton Company and one of its executives made a series of public statements about the company's potential liability in asbestos litigation, its expected revenue from construction contracts, and the anticipated benefits of a merger with another company. Respondent Erica P. John Fund, Inc., serving as lead plaintiff, alleged that these statements were materially false and misleading and were made to inflate the price of Halliburton's common stock. Halliburton later issued corrective disclosures that EPJ Fund contends caused the stock price to drop and produced losses for investors who had purchased shares during the class period. EPJ Fund moved in the United States District Court for the Northern District of Texas to certify a class of all investors who purchased Halliburton common stock during the class period. The district court determined that the proposed class satisfied the four threshold requirements of Federal Rule of Civil Procedure 23(a). It nevertheless denied certification under Rule 23(b)(3) because Fifth Circuit precedent at the time required securities fraud plaintiffs to prove loss causation at the class certification stage to rely on the presumption from Basic Inc. v. Levinson. The Fifth Circuit affirmed the denial of class certification on the same ground. The Supreme Court granted certiorari, vacated the judgment of the Fifth Circuit in Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804 (2011), and remanded the case. On remand, Halliburton presented evidence that none of its alleged misrepresentations had actually affected the company's stock price and argued that this evidence rebutted the Basic presumption, so that individual issues of reliance would predominate. The district court declined to consider the price impact evidence at the certification stage and certified the class under Rule 23(b)(3). The Fifth Circuit affirmed the certification order. It acknowledged that Halliburton's price impact evidence could be used at trial on the merits but held that such evidence could not be considered at the class certification stage to rebut the presumption of reliance. The Supreme Court granted certiorari a second time to address whether Basic's presumption should be overruled or modified and whether defendants may present evidence of no price impact before class certification.