On July 25—13 months after the U.S. Supreme Court’s landmark opinion in Halliburton v. Erica P. John Fund (Halliburton II), 134 S. Ct. 2398 (2014)—the U.S. District Court for the Northern District of Texas, on remand, issued its much-anticipated revised decision on the motion of lead plaintiff Erica P. John Fund Inc. for class certification in this 14-year-old securities fraud case. In Halliburton II, the Supreme Court held that, contrary to the opinions of the district court and the U.S. Court of Appeals for the Fifth Circuit below, at the class certification stage, a defendant may rebut the fraud-on-the-market presumption of reliance permitted under Basic v. Levinson, 485 U.S. 224 (1988), by demonstrating that an alleged misrepresentation had no impact on the corporate defendant’s stock price.

After considering the parties’ supplemental expert reports and legal briefs and holding an evidentiary hearing on the price impact issue, U.S. District Judge Barbara M.G. Lynn of the Northern District of Texas held that Halliburton Co. had successfully rebutted the presumption of reliance with respect to five out of six alleged corrective disclosures but that it had failed to show the sixth disclosure did not have an impact on the company’s stock price. Accordingly, the district court in Erica P. John Fund v. Halliburton, No. 3:02-cv-1152, 2015 U.S. Dist. LEXIS 97464, at *95-96 (N.D. Tex. July 25, 2015), granted the fund’s motion for class certification as to the sixth disclosure: Halliburton’s Dec. 7, 2001, announcement that a Baltimore jury had returned a $30 million verdict in an asbestos lawsuit against one of its subsidiaries. The court’s detailed opinion provides parties and district courts in other securities fraud cases with useful guidance for litigating the price impact issue at the class certification stage.

Demonstrating Lack of Price Impact: Background

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