Blackie v. Barrack

United States Court of Appeals for the Ninth Circuit · 1975 · Corporations

524 F.2d 891 (9th Cir. 1975)

Updated August 22, 2026

CorporationsSecurities fraudClass actionsRule 10b-5Rule 23Section 10(b)class certificationcommon questions

Facts

The suits arose from Ampex Corporation's financial troubles after it reported a $12 million profit for fiscal 1970 but later disclosed massive losses for fiscal 1972, ultimately reporting a $90 million loss. The company's independent auditors withdrew certification of the 1971 financial statements and declined to certify the 1972 statements because of doubts whether the reported 1972 loss was actually suffered in that year. Named plaintiffs purchased Ampex securities during the 27 months between the 1970 and 1972 annual reports and alleged that annual and interim reports, press releases, and SEC filings misrepresented Ampex's financial condition throughout that period. The district court conditionally certified a class of all purchasers during that period.

Issue

Is an order granting class certification appealable as a final order under 28 U.S.C. § 1291? If the interlocutory appeal is properly before the court, may this Rule 10b-5 action be maintained as a class action under Rule 23(a) and Rule 23(b)(3), despite multiple financial statements, individualized reliance questions, and possible conflicts among purchasers at different times?

Rule

An order granting class certification is not appealable under 28 U.S.C. § 1291 because it is conditional, subject to alteration, and not sufficiently final or collateral under Cohen. In an open-market Rule 10b-5 action alleging a common course of materially misleading financial reporting that inflated stock price, common questions may predominate even though the alleged misrepresentations appear in multiple documents over time, because class members share a common interest in whether the course of conduct was actionable. In that setting, direct individual proof of subjective reliance is not required to establish a prima facie case of causation; proof of purchase and materiality suffices, subject to defendant's opportunity to rebut causation as to particular plaintiffs. Potential conflicts over damages among purchasers at different times do not defeat certification at the outset where those conflicts are peripheral, subclasses remain available, and the representatives are otherwise typical and adequate.

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Investors sued Harbor Signal Systems, a publicly traded manufacturer based in San Diego, alleging a two-year pattern of misleading financial disclosures. The district court in Nevada conditionally certified a Rule 23(b)(3) class and stated that it might later alter the class definition, create subclasses, or decertify if discovery changed the picture. Harbor Signal immediately filed a notice of appeal under 28 U.S.C. § 1291, arguing that class litigation will be enormously expensive.

Is the certification order appealable as a final decision under § 1291?

Explanation. The majority held that an order granting class certification is not appealable under § 1291. Such an order is not sufficiently final because Rule 23(c)(1) makes certification conditional and subject to later modification, subclasses, or decertification. It is also not necessarily collateral to the merits, and ordinary litigation expense is not irreparable harm cognizable under Cohen.