Halliburton Co. v. Erica P. John Fund, Inc.
Holding
Investors can recover damages in a private securities fraud action only if they prove that they relied on the defendant's misrepresentation in deciding to buy or sell a company's stock. In Basic Inc. v. Levinson, the Supreme Court held that investors could satisfy this reliance requirement by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information-including material misstatements. Halliburton has failed to provide the "special justification" necessary to overrule that presumption. However, even if plaintiffs do not need to directly prove that the misrepresentation affected the stock price to invoke the Basic presumption, defendants can defeat the presumption at the class certification stage through evidence that the misrepresentation did not in fact affect the stock price.
Judgment
Vacated and remanded, 9-0, in an opinion by John Roberts on Jun 23, 1914.
Issue: (1) Whether this Court should overrule or substantially modify the holding of”Basic Inc. v. Levinson, to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the-market theory; and (2) whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.
Recommended Citation: Halliburton Co. v. Erica P. John Fund, Inc., SCOTUSblog, https://www.scotusblog.com/cases/halliburton-co-v-erica-p-john-fund-inc/