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Fund Still Seeks Class Standing Against Halliburton

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Investors in a securities fraud lawsuit against Halliburton and former CEO David Lesar have been seeking class certification. Initially, a federal judge in Texas refused to certify the class action based on the Fund not proving “loss causation”, however the Supreme Court took up the appeal and said the trial court improperly denied the class certification based on the loss-causation theory.

Chief Justice John Roberts wrote for the court,

“To begin, we have never before mentioned loss causation as a precondition for invoking Basic‘s rebuttable presumption of reliance. The term ‘loss causation’ does not even appear in our Basic opinion. And for good reason: Loss causation addresses a matter different from whether an investor relied on a misrepresentation, presumptively or otherwise, when buying or selling a stock.”
He continued, “According to that theory, ‘the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.

According to the Court of Appeals, however, an inability to prove loss causation would prevent a plaintiff from invoking the rebuttable presumption of reliance. Such a rule contravenes Basic‘s fundamental premise – that an investor presumptively relies on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The fact that a subsequent loss may have been caused by factors other than the revelation of a misrepresentation has nothing to do with whether an investor relied on the misrepresentation in the first place, either directly or presumptively through the fraud-on-the-market theory. Loss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-the-market theory.  The Court of Appeals erred by requiring EPJ Fund to show loss causation as a condition of obtaining class certification.”

Halliburton argued about the use of “loss causation” to reject the certification, but the Court replied “Whatever Halliburton thinks the Court of Appeals meant to say, what it said was loss causation,” The Judge then added,  “We take the Court of Appeals at its word. Based on those words, the decision below cannot stand.”

breakinglawsuitnews.com disclaimer: This article: Fund Still Seeks Class Standing Against Halliburton was posted on Tuesday, June 7th, 2011 at 8:27 pm at breakinglawsuitnews.com and is filed under Fraud Lawsuits.

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