Parties to pending securities fraud class actions may adjust litigation strategies, even before the Court revisits Basic’s presumption of investor reliance.

On Friday, November 15, 2013, the Supreme Court granted certiorari in Halliburton v. Erica P. John Fund, Inc., to address two issues: (1) whether the Court should overturn or modify the “fraud-­on-­the-­ market” presumption of reliance established by Basic Inc. v. Levinson, and (2) whether defendants may rebut that presumption at the class certification stage. Recent commentary haspredictably seized on the first question, but the implications of the second should not be overlooked.

Basic v. Levinson: The Fraud-­on-­the-­Market Doctrine

Class certification under Rule 23(b)(3) requires a showing that questions of law or fact common to the class predominate over individual questions. In cases brought under Section 1 (b) of the Securities Exchange Act of 1934, plaintiffs seeking class certification must prove that the elements of their claim, namely: “(1) a material misrepresentation or omission by the defendant;; (2) scienter;; (3) a connection between the misrepresentation or omission and the purchase or sale of a security;; (4) reliance upon the misrepresentation or omission;; (5) economic loss;; and (6) loss causation” can be established on a classwide basis with common proof.