Supreme Court to Review “Fraud on the Market” Presumption of Reliance in Securities Class Actions

21 November 2013
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  • On November 15, 2013, the U.S. Supreme Court agreed to consider two questions that have the potential to transform the landscape of private securities litigation.
  • In granting a writ of certiorari in Halliburton Co. v. Erica P. John Fund, the Court agreed to review: (i) whether the “fraud on the market” presumption of reliance that is at the core of securities class action practice should be overruled or substantially modified; and (ii) whether, in a class action, a defendant may rebut the presumption and defeat class certification by introducing evidence that the alleged misrepresentations did not distort the market price of the defendant’s stock.
  • This much watched case is a potential game-changer for securities litigation: if the Court overrules or substantially limits the “fraud on the market” presumption, plaintiffs will find it much more challenging to obtain class certification in securities fraud cases.