Halliburton Co. v. Erica P. John Fund, Inc.

Case Updates

The U.S. Supreme Court ruled that defendants in securities class actions must be afforded an opportunity to rebut the “presumption of reliance” - a judicially-created shortcut making it easier for plaintiffs to certify securities class actions - before class certification by providing evidence of a lack of price impact. However, the Court declined to overrule Basic Inc. v. Levinson.

The U.S. Chamber of Commerce reacted to the with the following statements:

“The Court today took a small first step in a long journey toward reducing the costs of securities class actions for investors. We are disappointed, however, that the Court missed an important opportunity to correct the mistake that Basic has turned out to be for investors. Meritless securities class actions benefit only a few plaintiffs’ lawyers and ultimately cost investors billions,” said Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform. “Congress must now finish this important journey toward shareholder justice by acting to cut back on litigation driven solely by a few plaintiffs’ lawyers.”

“While today’s decision inches toward bringing securities law back in line with the ordinary rules for proving fraud cases, much more can and should be done,” said Lily Claffee, general counsel of the U.S. Chamber and executive vice president of the U.S. Chamber Litigation Center.

In its brief, the U.S. Chamber and other business groups urged the U.S. Supreme Court to overrule or modify the fraud-on-the-market theory endorsed by Basic Inc. v. Levinson, 485 U.S. 224 (1988). This theory allows plaintiffs to establish the reliance element in a securities fraud class action merely by showing that they traded stock around the time of the public misrepresentations. In other words, the Court created a shortcut to make it very easy to certify securities class action. This approach has led to confusion among the lower courts, enabled a wave of class action litigation, and “inflicted tremendous costs on public companies and their shareholders without producing corresponding benefits to investors.”

The Chamber filed this brief jointly with the National Association of Manufacturers.

Steven G. Bradbury and C.B. Buente of Dechert LLP served as co-counsel for the U.S. Chamber of Commerce on behalf of the National Chamber Litigation Center.

The Chamber filed an amicus brief urging the U.S. Supreme Court to review the fraud-on-the-market theory endorsed by Basic Inc. v. Levinson, 485 U.S. 224 (1988). This theory allows plaintiffs to establish the reliance element in a securities fraud class action merely by showing that they traded stock around the time of the public misrepresentations. In other words, the Court created a shortcut to make it very easy to certify securities class action. This approach has led to confusion among the lower courts, enabled a wave of class action litigation, and “inflicted tremendous costs on public companies and their shareholders without producing corresponding benefits to investors.”

The Chamber filed this brief jointly with the National Association of Manufacturers.

Steven G. Bradbury and C.B. Buente of Dechert LLP served as co-counsel for the U.S. Chamber of Commerce on behalf of the National Chamber Litigation Center.