United States Supreme Court Holds that Securities Fraud Plaintiffs Need Not Establish Loss Causation to Certify a Class


In Erica P. John Fund, Inc. v. Halliburton Co.,No. 09-1403, 2011 WL 2175208 (U.S. June 8, 2011), the United States Supreme Court held that securities fraud plaintiffs need not prove loss causation in order to invoke the presumption of investor reliance at the class certification stage. The Court’s unanimous ruling, which reversed the United States Court of Appeals for the Fifth Circuit, focused narrowly on the need to prove loss causation at the class certification stage and expressly declined to address other issues regarding class certification in securities fraud class actions.

Lead plaintiff Erica P. John Fund, formerly known as the Archdiocese of Milwaukee Supporting Fund, Inc., brought this action against Halliburton and one of its executives under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, alleging that they made various misrepresentations designed to inflate Halliburton’s stock price. The lawsuit contends that investors were damaged when Halliburton later made corrective disclosures that caused the company’s stock price to drop.

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