In its long-awaited decision in Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”), the US Supreme Court upheld the validity of the fraud-on-the-market presumption set forth in Basic Inc. v. Levinson, 485 US 224 (1988), while clarifying that a defendant in a securities fraud class action must be permitted to rebut Basic’s presumption of reliance at the class certification stage with evidence that alleged misrepresentations had no price impact at the time of investment. This ruling confirms the existence of an important defense against class certification in federal securities fraud class actions and raises significant new questions for consideration by the lower courts.

A. Background -

Plaintiff Erica P. John Fund, Inc. (the “EPJ Fund”) brought a putative class action against Halliburton Company and its CEO David Lesar (together, “Halliburton”) alleging that Halliburton violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by making misrepresentations in Halliburton’s SEC filings between June 1999 and December 2001. The EPJ Fund’s attempts to bring a viable suit and certify a class based on the fraud-on-the-market presumption have resulted in more than a decade of litigation and two significant Supreme Court decisions, including Halliburton II, which was issued on June 23, 2014.

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