The U.S. Supreme Court issued three decisions in securities fraud cases this term. Plaintiffs’ lawyers scored victories in the first two cases. They could not get the hat trick, however, as the justices’ third opinion in this area limited the scope of private causes of action.
In their first two decisions, the justices made it tougher to dismiss securities fraud cases at the pleadings stage. Matrixx Initiatives Inc. v. Siracusano , decided in March, emphasized that there was no bright-line rule for “materiality” of false statements or omissions under Rule 10b-5, and that a plaintiff’s burden of pleading scienter was not especially onerous. Plaintiffs’ lawyers notched another victory on June 6 in Erica B. John v. Halliburton , which held unanimously that plaintiffs did not need to establish “loss causation” at the class-certification stage if their complaint relied on a fraud-on-the-market theory.
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