Supreme Court Takes Middle Road in Halliburton Decision
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On June 23, 2014, the Supreme Court of the United States released its long-awaited decision in Halliburton v. Erica P. John Fund, Inc., __ U.S. __. 2014 WL 2807181 (Jun. 23, 2014), a Rule 10b-5 putative securities class action. Instead of abrogating or fully embracing the fraud-on-the market presumption established in the 1988 Basic v. Levinson decision, Chief Justice John Roberts, in an opinion joined by Justices Anthony Kennedy, Ruth Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan took a decidedly middle course. (Justice Clarence Thomas authored a concurrence opinion adopting the result but not the rationale, in which Justices Antonin Scalia and Samuel Alito joined.)
Finding no “special justification,” the majority in concurrence declined to overrule Basic’s presumption of reliance and further declined to modify the prerequisites for invoking the presumption by requiring plaintiffs to prove “price impact” at the class certification stage. Nonetheless, the Court agreed with Halliburton that defendants must be afforded an opportunity to rebut the presumption of reliance before class certification with evidence of a lack of price impact. Consequently, the decision below affirming class certification was vacated and the case remanded. The separate concurrence authored by Justice Thomas concluded that “our subsequent jurisprudence have undermined the foundations of the Basic presumption” such that the case should be overruled and the presumption abolished.
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