Publications

Letter From America: Should Legal Fiction Be Redefined or Rejected?

Signet Magazine
02.01.13

The noted American legal philosopher Lon Fuller once suggested that “a fiction is intended to escape the consequences of an existing, specific rule of law”. I think that is right, but I think the matter can be even more complicated. Specifically, courts often resort to multiple, nested fictions in deciding cases and, moreover, those fictions may themselves be the result of or required by pre-existing fictions. Put in more common parlance, one falsehood may father a thousand others. To explore this concept, I propose that we adopt a loose, literary definition of “fiction” (i.e., under this construct, a fiction need not be wholly false) and consider how things work in claims of securities fraud in the class-actions context.

In the leading case of Basic, Inc. v. Levinson, the United States Supreme Court faced the problem that fraud-based claims require a showing of “reliance” and that this typically must be done on an individual basis (which would make a class action impossible). To slip the individual reliance knot, the court invoked the fraud-on-themarket theory (i.e., the principle that the “reliance” requirement can be dispensed with in the case of efficient capital markets). In adopting the theory, the court tacitly agreed with the District Court, which had “found that the presumption of reliance created by the fraud-on-the-market theory provided “a practical resolution to the problem of balancing the substantive requirement of proof of reliance in securities cases against the procedural requisites of [Federal Rule of Civil Procedure] 23.” Interestingly, though, the court seemed to hint that the theory might have no solid foundation: “Our task, of course, is not to assess the general validity of the theory…”

With the stage thus dressed, the court set out to justify its resort to this construct. First, it catalogued the salutary uses of presumptions in law: “Presumptions typically serve to assist courts in managing circumstances in which direct proof, for one reason or another, is rendered difficult”. Fuller would probably concede this point, but in his estimation, a “conclusive presumption attributes to the facts ‘an arbitrary effect beyond their natural tendency to produce belief’”. It “attaches to any given possibility a degree of certainty to which it normally has no right. It knowingly gives an insufficient proof the value of a sufficient one”. A conclusive presumption is thus fictional, even though its application in any given case may square with truth. With respect to rebuttable presumptions,Fuller observes that: “Some rebuttable presumptions have, in the course of time, gathered about them rules declaring what is sufficient to overcome them. So soon as you have begun to limit and classify those things which will rebut a presumption you are importing into the facts ‘an arbitrary effect’ beyond their natural tendency to produce belief.” Accordingly, then, “[n]o presumption can be wholly non-fictitious which is not ‘freely’ rebuttable”.

Read More.

 

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

Search Tips:

You may use the wildcard symbol (*) as a root expander.  A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.

Entering two terms together in a search field will behave as though an "OR" is being used.  For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.

Operators

AND and OR may be used in a search.  Note: they must be capitalized, e.g., "Project AND Finance." 

The + and - sign operators may be used.  The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".

To perform an exact phrase search, surround your search phrase with quotation marks.  For example, "Project Finance".

Searches are not case sensitive.

back to top