Nick Even in Corporate Counsel: Will 'Fraud on the Market' Survive Halliburton II?


In each term of the U.S. Supreme Court, there are a few cases that have the potential to bring sweeping change to the established legal landscape. One of the marquee cases of the current term—at least for those interested in securities litigation—is Halliburton Co. v. Erica P. John Fund Inc., which has the potential to alter the lucrative world of securities fraud class actions in major ways.

The case, also known as Halliburton II (the first Halliburton case from 2011 involved loss causation in class actions) and slated for oral arguments March 5, may endanger the Supreme Court’s earlier ruling in the 1988 Basic v. Levinson, which legitimized the “fraud on the market” presumption. This rule states that an efficient market reflects all of the information shareholders need about a publicly traded company in order to make decisions—meaning that plaintiffs do not have to prove their reliance on misstatements by the company to bring the class action. The Basic decision allowed plaintiffs in securities fraud cases to establish classwide reliance far more easily than in the past.

"Halliburton II is part of a continuing stream of cases that reflect the court's interest in class action issues, both within securities and outside," Nicholas Even, a partner at Haynes and Boone, LLP and the chair of the firm’s Securities and Shareholder Litigation Practice and coauthor of the firm's annual review of securities litigation, told

Excerpted from Corporate Counsel, February 27, 2014. To view full article, click here.

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