The Supreme Court’s June 23, 2014 decision in Halliburton Co. v. Erica P. John Fund, Inc. was one of this term’s most highly anticipated rulings, involving a request that the Court overrule a landmark precedent from 25 years ago that enabled federal securities claims to be pursued as a class actions, and launched the multi-billion dollar securities class action industry. Although the Court rejected calls to do away with the presumption of reliance adopted in its 1989 Basic v. Levinson decision that made it much easier to pursue securities claims as class actions, the Court confirmed in Halliburton that Defendants have the opportunity to rebut that presumption before class certification is granted.
Appellant Halliburton Company asked the Court to overrule Basic’s legal fiction that permitted courts to presume classwide reliance on alleged public material misrepresentations, thereby enabling lawsuits alleging fraud under the federal securities laws to be certified as class actions despite the preponderance of individualized reliance issues that would otherwise render such cases unfit for class treatment. The Court’s grant of certiorari in November 2013 spawned a torrent of prognostication and debate about the potential end of federal securities class action litigation in this country. Following oral argument this past March, there was even some question whether at least a minority of the Justices might take the opportunity to raise even broader questions concerning the continued viability of an implied private right of action under SEC Rule 10b-5 and Section 10(b) of the Securities Exchange Act of 1934—pursuant to which the vast bulk of federal securities fraud class action lawsuits are brought.
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