Halliburton Co. et al. v. Erica P. John Fund, Inc., FKA Archdiocese of Milwaukee Supporting Fund, Inc.

Summarized by:

  • Court: United States Supreme Court
  • Area(s) of Law: Corporations
  • Date Filed: June 23, 2014
  • Case #: 13–317
  • Judge(s)/Court Below: Roberts, C J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined. Ginsburg, J., filed a concurring opinion, in which Breyer and Sotomayor, JJ., joined. Thomas, J., filed an opinion concurring in the judgment, in which Scalia and Alito, JJ., joined.
  • Full Text Opinion

When investors can prove their reliance on a business' misrepresentation in determining whether to buy or sell company stock, investors can recover damages in a private securities fraud action.

Respondent filed a class action lawsuit alleging Petitioners made misrepresentations to inflate Petitioner's own stock price, in violation of section 10(b) of Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. Loss causation is a casual connection between a defendants' alleged misrepresentations and the plaintiffs' economic losses. Basic v. Levinson held "investors could satisfy the reliance requirement by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information—including material misrepresentations."

The question is whether the exclusion of evidence that links a party to price impact limits a parties ability to present its case of economic loss due to misrepresentation. The Court held that defendants should be given an opportunity to rebut the presumption of reliance before the impact of prices, as long as it occurs at the merit stages of a case. The District Court initially denied Respondent's class certification motion, and the Fifth Circuit Affirmed. The Court vacated the judgment, concluding that plaintiffs in securities fraud cases do not need to prove loss causation at the class certification stage to invoke the presumption of reliance.

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