SCOTUScast 11-11-14 featuring George Conway
On November 3, 2014, the Supreme Court heard oral argument in Omnicare v. Laborers District Council Construction Industry Pension Fund. This case concerns Section 11 of the Securities Act of 1933, which authorizes suit by a purchaser of securities issued under a registration statement filed with the Securities and Exchange Commission--if the registration statement “contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein not misleading.”
The question here is whether a Section 11 plaintiff may plead that a statement of opinion was “untrue” merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or whether the plaintiff also must allege that the statement was subjectively false – requiring allegations that the speaker’s genuinely held opinion was different from the one expressed – as the Second, Third, and Ninth Circuits have held.
To discuss the case, we have George Conway, who is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. Corporations, Securities & Antitrust and Litigation Practice Groups Podcast
On Monday, June 23, 2014 the Supreme Court issued a 9-0 decision in the highly anticipated securities fraud case Halliburton v. Erica P. John Fund. The case offered the Court an opportunity to revisit its 1988 decision in Basic v. Levinson, in which it adopted the “fraud on the market” doctrine. Fraud on the market is critical to modern securities fraud class action lawsuits -- the doctrine assumes that any misrepresentations of a security traded in an efficient market will affect that security’s market price and thus affect any shareholders trading in reliance of market price, an assumption that precludes consideration of whether potential class members actually heard and acted on fraudulent statements. The Court declined to overturn Basic; our expert discussed the reasoning and impact of the decision.
SCOTUScast 6-26-14 featuring Adam Pritchard
- George T. Conway III, Partner, Wachtell, Lipton, Rosen & Katz
Adam Pritchard June 26, 2014
On June 23, 2014, the Supreme Court issued its opinion in Halliburton Co. v. Erica P. John Fund, Inc. This case presented two questions. The first is whether the Supreme Court should overrule or modify its decision in Basic Inc. v. Levinson, to the extent that it recognizes a presumption of classwide reliance derived from the “fraud-on-the market theory,” which posits that a company’s material misrepresentation regarding a security traded in the open market that affects the price of the security is presumed to have been relied on by a plaintiff who purchased the security and suffered a loss; and second whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock. Short Video featuring Steven Bradbury
In a unanimous opinion delivered by Chief Justice John Roberts, the Court noted that under section 10(b) of the Securities Exchange Act of 1934 and the SEC’s rule 10(b)(5), investors can recover damages in a private securities fraud action only if they prove that they relied on the defendant's misrepresentation in deciding to buy or sell a company's stock. In Basic, the Court held that investors could satisfy this reliance requirement by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information-including material misstatements. Given that Congress can change the law, Halliburton failed to provide the “special justification” necessary for the Court to overrule its prior decision in a statutory case. For the same reason, class action plaintiffs may rely on the Basic presumption to avoid having to directly prove in the first instance that the misrepresentation affected the stock price at the class certification stage. But nothing in Basic or any other Supreme Court decision prevents defendants from defeating this presumption at the class certification stage through evidence that the misrepresentation did not in fact affect the stock price, and courts should give them the opportunity to do so. The Court vacated and remanded the decision of the Fifth Circuit.
To discuss the case, we have Adam Pritchard, who is the Frances and George Skestos Professor of Law at the University of Michigan School of Law.
On June 23, 2014 Supreme Court released its opinion in Halliburton Co. v. Erica P. John Fund, Inc. At issue in the case was whether the Court should rethink its approach to securities class actions established in Basic Inc. v. Levinson, and, if so, what the new standard should be.
The Court held in a 6-3 decision that the standard in Basic still holds, but clarified that Defendants may introduce evidence of no price impact prior to class certification, to rebut the presumption of reliance permitted under Basic. Chief Justice Roberts delivered the opinion of the Court, in which Kennedy, Ginsburg, Breyer, Sotomayor and Kagan joined. Justices Ginsburg filed a concurring opinion which Justices Breyer and Sotomayor joined.
In an opinion concurring in the judgment, Justice Thomas, joined by Justices Scalia and Alito, argued that Basic should be overturned.
Watch Steven Bradbury, Partner in the Washington, DC office of Dechert LLP, discuss the decision.