On March 5, 2014, the Supreme Court heard oral argument in Halliburton Co. v. Erica P. John Fund, Inc. This case presents two questions. The first is whether the Supreme Court should overrule or modify its decision in Basic Inc. v. Levinson, to the extent that it recognizes a presumption of classwide reliance derived from the “fraud-on-the market theory,” which posits that a company’s material misrepresentation regarding a security traded in the open market that affects the price of the security is presumed to have been relied on by a plaintiff who purchased the security and suffered a loss; and second 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.
To discuss the case, we have Jeffrey B. Wall, Special Counsel, Sullivan & Cromwell LLP.