The U.S. District Court for the Central District of California dismissed a novel putative securities fraud class action claim asserted under English law against Barclays on behalf of purchasers of Barclays ordinary shares traded on the London Stock Exchange. The decision in Merritt v. Barclays PLC is the first in the country to reject an attempt by the plaintiffs’ bar to litigate English law securities claims in the United States as a class action and has major significance for English issuers of securities.
Under English securities law, misstatement claims require proof of reliance. If each plaintiff must prove reliance, individualized issues would predominate, which precludes certification of a class in the United States. The plaintiff tried to evade the English law reliance requirement by recasting a misstatement claim as a claim that Barclays dishonestly delayed disclosing that its alleged misstatements were false, which does not require proof of reliance under English law.
In its July 29 ruling, the court rejected that theory because it would “render the misleading statements provision, and its reliance element, superfluous, contrary to basic principles of English statutory interpretation.”
Because of substantive and procedural differences between U.S. and English law—including the U.S.’s opt-out class procedure and the absence of a loser-pays rule—if the court allowed the plaintiff to proceed in a U.S. court on a dishonest delay claim, claimants would have a powerful incentive to bring English law securities claims in U.S. federal courts. The Merritt decision provides a powerful defense against these actions.
The S&C team representing Barclays includes Jeff Scott, Matt Porpora, Adam Paris, Stephen Clarke, Jacob Cohen, Jason Barnes, Sabrina Solow and Tyler Andrews.