## Facts

- Aqua Vie Beverage Corporation (AVBC) was formed in 1991 through acquisition of a public shell and merger with a Hawaii beverage business; operations moved to Idaho.
- AVBC hired a CFO and retained Deloitte & Touche as its accounting firm; AVBC stock traded over-the-counter.
- AVBC announced manufacturing and distribution arrangements for a spring water product, and publications described AVBC as a speculative but promising investment; the stock price rose.
- Albert Binder purchased 3,000 shares in September 1991 at $4.00 per share; the bid price peaked about a month later.
- After production began in 1992, AVBC encountered product shelf-life problems, including reported discoloration after bottling; AVBC attempted reformulation but continued to face quality issues.
- AVBC repurchased product from its distributor, failed to raise additional capital, and failed to develop a workable distribution network; Binder sold in December 1993 for under $1 per share.
- In 1994, Binder sued under federal and state securities laws individually and as a putative class representative, alleging misrepresentations and omissions regarding AVBC’s product, finances, and prospects.
- The district court decertified the class, declined supplemental jurisdiction over state-law class claims, and entered summary judgment (with Rule 54(b) final judgment) for certain AVBC officers/directors and Deloitte on Binder’s individual federal claims.

## Issues

1. Whether the class was entitled to a presumption of reliance under *Affiliated Ute* based on alleged omissions.
2. Whether the class was entitled to a fraud-on-the-market presumption of reliance under *Basic* given AVBC’s over-the-counter trading market.
3. Whether, absent a reliance presumption, the district court properly decertified the class under Rule 23(b)(3) predominance.
4. Whether summary judgment was proper for certain officers/directors and Deloitte on Binder’s individual federal securities claims.

## Decision

- The Ninth Circuit affirmed the decertification of the class.
- The court held the class was not entitled to the *Affiliated Ute* presumption because the claims were not primarily omission-based and were driven largely by affirmative statements.
- The court held the class was not entitled to the fraud-on-the-market presumption because AVBC’s thinly traded over-the-counter market lacked sufficient indicia of efficiency.
- The court affirmed summary judgment for the specified officers/directors and Deloitte on Binder’s individual federal claims for failure to produce evidence creating a triable issue as to their liability.

## Legal Principles

- *Affiliated Ute* presumes reliance only in cases that are primarily about nondisclosure; the presumption does not apply merely because omissions are alleged alongside affirmative misstatements.
- Fraud-on-the-market reliance under *Basic* requires an efficient market; thin, speculative over-the-counter trading without adequate efficiency indicators does not support the presumption.
- Without a classwide reliance presumption in a Rule 10b-5 case, individualized reliance may predominate and defeat Rule 23(b)(3) certification.
- On summary judgment in securities-fraud claims, the plaintiff must present evidence sufficient to create a genuine dispute as to each defendant’s actionable statements or omissions and other required elements of liability.

## Conclusion

The Ninth Circuit upheld decertification of an investor class and summary judgment on individual claims where the allegations were not primarily omissions, the over-the-counter market for the stock was not shown to be efficient, and individualized proof of reliance and defendant-specific liability would dominate the litigation.


Binder v. Gillespie, 184 F.3d 1059 (9th Cir. 1999)