Class Action for Affecting Share Prices In California

Mirkin v. Wasserman (1993), 5 Cal. 4th 1082, involved a complaint framed as a class action, also for misrepresentations affecting share prices. It is a case where the complaint was dismissed after a demurrer made on the ground that the reliance element was not sufficiently pleaded was sustained. The Supreme Court in Mirkin refused to upset the balance between the statutory remedy established by the Corporate Securities Law and the common law remedy of a fraud cause of action. The former indulged a presumption of reliance, thus reducing the plaintiff's burden of proof; the latter offered a longer statute of limitation and the opportunity to recover punitive damages. ( Mirkin v. Wasserman, supra, 5 Cal. 4th 1082, 1090-1091, 1101-1105; see Bowden v. Robinson, supra, 67 Cal. App. 3d 705, 714-715.) By seeking to import the fraud-on-the-market theory and its presumption of reliance from the statutory cause of action into common law fraud, the plaintiff in Mirkin was seeking to have the best of both worlds. A crucial factor in appreciating the court's refusal to blur the lines between the two remedies is that both operated in the area of stock sales. There is no statutory remedy for the harm plaintiff alleges he suffered from not selling his stock. He is willing to proceed with his common law remedy and "'the formidable task of proving common law fraud.'" (Mirkin v. Wasserman, supra, at p. 1102, quoting Bowden v. Robinson, supra, at p. 714.)