In Halliburton, Supreme Court Affirms Basic but Grants Defendants

Last week, in Halliburton Co. v. Erica P. John Fund, Inc., the Supreme Court declined to overrule its 1988 decision in Basic Inc. v. Levinson, which adopted the “fraud on the market” theory to create a rebuttable presumption of reliance for purposes of Section 10(b) fraud class actions. Nevertheless, the Supreme Court gave securities defendants a new tool for challenging class certification, holding that defendants can defeat class certification if they can show that the challenged misstatements had no “price impact.” Thus, those cases in which defendants can successfully employ this defense may no longer survive beyond the class certification stage.