The Impact of the Supreme Court’s Recent Halliburton Decision on Securities Litigation

On June 23, 2014, the Supreme Court issued its long-awaited decision in Halliburton Co. v. Erica P. John Fund, Inc. In Halliburton, the Court declined to overrule Basic v. Levinson, but rather imposed limitations on the “fraud-on-the-market theory,” making it easier for securities class action defendants to defeat class certification.

A. Background -

In order to recover damages for violations of Section 10(b) of the Securities Exchange Act of 1934, plaintiffs must prove, among other things, that they relied on misrepresentations or omissions when they purchased or sold a security.

In Basic, the Supreme Court adopted the “fraud-on-the-market” theory. Recognizing that requiring each plaintiff to show individualized reliance would effectively negate the ability of plaintiffs to pursue securities class actions, the Court held that in certain circumstances, plaintiffs can satisfy the reliance element by invoking a rebuttable presumption of reliance, rather than requiring each plaintiff to prove direct reliance on an alleged misrepresentation. This presumption – the “fraud-on-the-market” theory – is premised on the economic theory that the market price of securities in well developed markets reflects publicly available information and, therefore, alleged misrepresentations are already accounted for in the price of the security and need not be independently proven for each plaintiff.

Please see full Alert below for more Information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Patterson Belknap Webb & Tyler LLP | Attorney Advertising

Written by:


Patterson Belknap Webb & Tyler LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.