The U.S. Supreme Court's November 15, 2013 decision granting certiorari in Halliburton Co. and David Lesar v. Erica P. John Fund has captured the imagination of the securities bar and economists alike. At least one commentator went so far as to suggest that “no dispute on the Supreme Court?s 2013-14 docket has attracted more intense interest in corporate litigation circles than Halliburton … and with good reason.” Petitioners invite the Supreme Court to overrule Basic, Inc. v. Levinson, a precedent that has served as a cornerstone of federal securities fraud class action world for the last 25 years. Basic makes it possible to certify a class action asserting claims under Section 10(b) of the Securities Exchange Act of 1934 – the federal securities fraud catchall provision – in cases involving affirmative misrepresentations without having to show that plaintiffs individually relied on the alleged misrepresentations. Overruling that decision could have a substantial effect on securities class action practice. Although the end of an era, overruling Basic might not necessarily bring an end to federal securities fraud class actions. There are a variety of different means by which investors might be able to prosecute Section 10(b) claims based on affirmative misrepresentations on an aggregate basis. And, in any event, reversal of Basic is far from a foregone conclusion.
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