Supreme Court Rules for Shareholders Seeking Class Action Status Against Halliburton
The U.S. Supreme Court has ruled that shareholders suing a company for securities fraud don’t have to prove the defendant’s deceptive conduct caused their losses before obtaining certification of their class action.
Chief Justice John G. Roberts Jr. wrote the unanimous opinion (PDF) in a shareholder suit against the Halliburton Co. that had alleged the company made misleading statements about its asbestos liabilities and expected revenues from construction contracts.
Investors must prove so-called loss causation—a connection between misrepresentations and economic loss—to prevail on the merits, but it’s not a requirement of class certification, Roberts wrote. The decision overturned a ruling by the 5th U.S. Circuit Court of Appeals that found the plaintiffs had to show loss causation before invoking a rebuttable presumption that they had relied on the corporate misrepresentations.
The case is the Erica P. John Fund v. Halliburton Co.