SCOTUS Upholds Basic v. Levinson, But Gives Halliburton A Partial Victory

In the latest Supreme Court round of Halliburton Co. v. Erica P. John Fund, Inc., the Court declined Halliburton's invitation to overrule Basic v. Levinson,  but remanded to allow Halliburton, at the class certification stage, to attempt to rebut the presumption that the alleged misrepresentations actually affected the price of the stock.  The Court's final two paragraphs:

More than 25 years ago [in Basic], we held that plaintiffs could satisfy the reliance element of the Rule 10b–5 cause of action by invoking a presumption that a public, material misrepresentation will distort the price of stock traded in an efficient market, and that anyone who purchases the stock at the market price may be considered to have done so in reliance on the misrepresentation. We adhere to that decision and decline to modify the prerequisites for invoking the presumption of reliance. But to maintain the consistency of the presumption with the class certificationrequirements of Federal Rule of Civil Procedure 23, defendants must be afforded an opportunity before class certification to defeat the presumption through evidencethat an alleged misrepresentation did not actually affect the market price of the stock.

Because the courts below denied Halliburton that opportunity, we vacate the judgment of the Court of Appeals for the Fifth Circuit and remand the case for further proceedings consistent with this opinion.

Some coverage of the case:

New York Times

Wall Street Journal