Saturday, May 3, 2014
I previously posted about my experience in drafting my first exam, for my Securities Litigation class. Well, the exam period just ended - now it's time to grade.
[More below the cut]
Short version: yes, it will be just as difficult as everyone warned me it would be.
The good news is, I’ve skimmed through most of the exams, and so far, it does appear there will be a reasonable curve – some of the exams display a better understanding of the material than others. And that was really my biggest concern.
Nonetheless, assigning precise grades will be difficult because the exams are organized and reasoned so differently. The exam was structured as an 8-hour take home, which means the students were basically writing a series of essays. The students approached the questions very differently, and that makes them difficult to score. I have an answer key with “points” for each issue correctly identified and discussed, but a lot of students broke up their answers – part of an issue is discussed in one place on the exam, and then the rest of the discussion appears somewhere else -- which makes scoring trickier.
Part of the difficulty, I think, is the peculiarly complex nature of an average securities class action.
First, there is a lot of “element bleed.” Facts that demonstrate falsity may also demonstrate scienter; facts that are evidence of loss causation may also evidence materiality. And different claims – Section 11, 10(b), 12, 14 – all have very similar, but not-quite-identical, elements.
Second, there is a complicated temporal element to a 10(b) case. Usually, the alleged fraud begins at Time One with a particular false statement. Over time, the defendants make more allegedly false statements – all organized around a common theme, but varying in slight ways. Meanwhile, the truth – whatever is going on behind the scenes – changes as well. Problems may get worse. Problems of which the CEO was originally unaware may be brought to the CEO’s attention. The plaintiffs’ evidence of the problems may be better at Time Two than Time One. As a result, falsity, materiality, and scienter are moving targets both as a substantive matter and as a matter of proper pleading.
At the same time, new facts may be made public. The truth may begin to “leak out,” via rumors or other informal channels. The company may disclose some problems, but not others. This also affects the materiality/falsity analysis, and affects the analysis of loss causation, with the case being stronger/weaker during different periods of time.
In class, I spent a little time on this issue, drawing a timeline on the whiteboard and walking through how the facts might unfold. When I teach the class again, I plan to explore this point in more detail.
For the purposes of this year’s exam, I gave the students some fairly specific instructions about organizing their analysis to help guide them through these problems. Most of them adhered to the instructions to some degree, but there is enough variation to make grading a challenge.
One thing I do find puzzling, though, is the number of students who spent time on things that were not asked - and were in fact explicitly not asked. For example, the facts say that the plaintiffs alleged Claims X, Y, and Z, and the student is asked to evaluate the claims in various ways. For whatever reason, many students included prolonged discussions of what would happen if the plaintiff brought Claims A, B, and C. Essentially, as far as I'm concerned, those are dead words - the students won't lose points for discussing them, but the discussion won't help their overall score.
Well, those are the initial thoughts I have as I dive in. Wish me luck….