On July 29, 2009, the Ninth Circuit Court of Appeals affirmed the denial of class certification of a purported securities class action lawsuit against Davis Polk & Wardwell LLP clients Deutsche Bank AG, Deutsche Bank Securities Inc. and Deutsche Bank Securities Limited. Plaintiffs alleged that defendants intentionally manipulated the market for shares of GenesisIntermedia, Inc. Plaintiffs argued that class certification was appropriate because they were entitled to a class-wide presumption of reliance premised either on the Affiliated Ute presumption applied in cases primarily alleging omissions, or on a new presumption of reliance based on a novel "integrity of the market" theory. Under plaintiffs' novel theory, class-wide reliance would be satisfied by demonstrating that plaintiffs relied on the fact that the market generally was free from manipulation.

In a per curiam opinion, the court first rejected plaintiffs' Affiliated Ute argument, noting that under plaintiffs' approach, every manipulative conduct claim would be transformed into an omissions claim. With respect to plaintiffs' "integrity-of-the-market" theory, the court held that because the theory lacked legal precedent, the district court did not abuse its discretion in declining to adopt the theory. A concurring opinion by Judge O'Scannlain addressed the underlying merits of the argument and determined that the creation of such a presumption would be "logically inadvisable." To do so, Judge O'Scannlain reasoned, would essentially eliminate the requirement that a plaintiff establish reliance and the key causal connection between a plaintiff's purchase or sale and a defendant's alleged fraudulent act: "The integrity of the market presumption that [plaintiffs] proffer, then, would prove too much while doing too little. Prove too much, because it would obviate the need for plaintiffs in manipulative conduct cases to prove reliance; do too little, because it does not complete the causal connection between a plaintiff's transaction in securities and a defendant's manipulation. Therefore, I would reject the invitation to recognize this new presumption of reliance."

The Davis Polk team who worked on the case included partner James H.R. Windels, counsel Catheryn O'Rourke and David B. Toscano, associates Michael J. Russano, Ian R. Rooney and Brett M. McMahon, summer associate Brad Ehrlichman, and legal assistants Melanie Chan and Moriah E. Condos. All members of the Davis Polk litigation team are based in the New York office.