In Halliburton v. Erica P. John Fund, the U.S. Supreme Court tackled two securities fraud class action issues: Whether the Basic v. Levinson, 485 U.S. 224 (1988), presumption of reliance on misrepresentation instead of actual reliance on misrepresentation should be overruled and whether defendants can rebut the presumption of reliance by showing lack of price impact at the class certification stage.
Securities class action cases are lucrative due in part to the judicially created “fraud-on-the-market” theory. This theory emanates from Basic’s holding that “the market price of shares traded on well-developed markets reflects all publicly available information and hence any material misrepresentations.”
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