Second Circuit's Clarifying Opinion in Denial of IPO Class Action Certification

The Second Circuit recently issued a "clarification" in denying a rehearing of the In re IPO Sec. Litig. case, where it reversed the district court's certificaton of the class because it found that individual issues of reliance and knowledge precluded a finding that common issues predominated.  In the petition for rehearing, plaintiffs argued that the purchasers in the aftermarket could establish reliance based on fraud on the market and would have no knowledge of the alleged fraud.  Yes, but, "whatever [this argument's] merit," said the Second Circuit in response, the broad class certified by the district court included both initial purchasers in the IPO as well as purchasers in the after market.  In addition, in a footnote, it clarified its reference to the section 11 claims to make clear that section 11 does not require the plaintiff to allege reliance.  (Thanks to Maggie Sachs for calling this to my attention.)