The Supreme Court Adopts Middle Ground in Challenge to Legal Theory Key to Class Action Securities Litigations
Yesterday, in Halliburton Co. v. Erica P. John Fund (13-317), the Supreme Court held that investors may continue to invoke a rebuttable presumption that they relied on an alleged misrepresentation when they purchased securities in an efficient market. However, the Court also ruled that defendants may rebut the presumption of reliance at the class certification stage by showing the alleged misrepresentation did not actually impact the stock price. The Supreme Court’s “middle ground” approach will likely result in district courts conducting more evidentiary hearings at the class certification stage, with district court judges carefully evaluating the evidence of price impact (or lack thereof) and declining to certify those cases where the court finds the alleged misrepresentation did not distort the market price of the stock.