Between today and Tuesday, the Conglomerate will be hosting a roundtable on the Erica P. John Fund v. Halliburton case that will be argued before the Supreme Court this coming Monday. The question in the case revolves around whether the 5th Circuit erred in requiring that plaintiffs in a securities fraud case must prove loss causation as a condition to certifying a class. The following is a more elaborate formulation of the questions (taken from the Supreme Court web site and cut-and-pasted from a brief in the case) in the case:
1. Whether the Fifth Circuit correctly held, in direct conflict with the Second Circuit and district courts in seven other circuits and in conflict with the principles of Basic v. Levinson, 485 U.S. 224 (1988), that plaintiffs in securities fraud actions must satisfy not only the requirements set forth in Basic to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery.
2. Whether the Fifth Circuit improperly considered the merits of the underlying litigation, in violation of both Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and Federal Rule of Civil Procedure 23, when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption even though reliance and loss causation are separate and distinct elements of security fraud actions and even though proof of loss causation is common to all class members.
The case is important for any number of reasons. Among them, if the Fifth Circuit rule is upheld, it could make class certification much, much more difficult for plaintiffs. Second, the case will involve revisiting Basic and the fraud-on-the-market presumption. Here the Court could make a limited review of Basic and make a narrow decision in this case, or it could be much more aggressive and go out of its way to consider more deeply one of the most important cases in securities litigation in the last three decades. Finally, the case involves class certification in a term when the 800 pound gorilla class action case of Wal-Mart v. Dukes has already been argued before the Court but not decided.
We are delighted that a number of guests will be joining some of us regular bloggers in previewing the case and perhaps even reading the tea leaves or oral argument. As only fitting with a securities case, we should disclose that I, together with some of our guests and other law professors, wrote a brief for petitioner in the case. You can download all the briefs in the case here (scroll down to “Erica P. John Fund...”).
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