Since 2007, there have been two primary approaches for determining whether plaintiffs in securities fraud class actions can invoke, at the class certification stage, a presumption of reliance on the alleged misrepresentation or omission at issue: (1) the Fifth Circuit’s approach, which required plaintiffs to prove loss causation — that the misstatements or omissions alleged by plaintiffs actually caused their loss — in order to trigger the presumption; and (2) the approach of courts in nearly every other circuit, which did not require proof of loss causation.
In its June 6 opinion in Erica P. John Fund Inc. v. Halliburton Co. , the U.S. Supreme Court resolved this circuit split, holding that the 5th Circuit’s approach contravened prior Supreme Court precedent and that plaintiffs in federal securities fraud class actions do not need to prove loss causation in order to obtain class certification.
The Lower Courts’ Decisions in ‘Halliburton’
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