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Litigation and Corporations, Securities & Antitrust Practice Groups Teleforum
Shareholders of Halliburton filed a class action lawsuit arguing that Halliburton falsified its financial statements and misrepresented projected earnings, invoking a “fraud on the market” theory to demonstrate class reliance on Halliburton’s statements. The “fraud on the market” theory assumes that investors have relied on any material misstatements when they purchase a security. The federal district court certified the class and did not allow Halliburton to introduce evidence that the statements did not affect its stock prices. The U.S. Court of Appeals for the Fifth Circuit affirmed. Will the Supreme Court continue to recognize the fraud on the market theory? If so, will the Court allow introduction of evidence that a defendant’s statements did not affect the price of its stock to rebut the presumption of reliance?
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Shareholders of Halliburton filed a class action lawsuit arguing that Halliburton falsified its financial statements and misrepresented projected earnings, invoking a “fraud on the market” theory to demonstrate class reliance on Halliburton’s statements. The “fraud on the market” theory assumes that investors have relied on any material misstatements when they purchase a security. The federal district court certified the class and did not allow Halliburton to introduce evidence that the statements did not affect its stock prices. The U.S. Court of Appeals for the Fifth Circuit affirmed. Will the Supreme Court continue to recognize the fraud on the market theory? If so, will the Court allow introduction of evidence that a defendant’s statements did not affect the price of its stock to rebut the presumption of reliance?
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