Halliburton II: It All Depends on What Defendants Need to Show to Establish No Impact on Price

45 Pages Posted: 28 Aug 2014 Last revised: 26 Sep 2014

See all articles by Merritt B. Fox

Merritt B. Fox

Columbia University - Law School

Date Written: September 10, 2014


Rule 10b-5 private damages actions cannot proceed on a class basis unless the plaintiffs are entitled to the fraud-on-the-market presumption of reliance. In Halliburton II, the Supreme Court provides defendants in such actions with an opportunity, before class certification, to rebut the fraud-on-the-market presumption through evidence that the misstatement had no effect on the issuer’s share price. It left unspecified, however, the standard by which the sufficiency of this evidence should be judged.

This Article explores the two most plausible approaches that the courts might take to setting this standard. One approach would be for the courts to impose the same statistical burden on defendants seeking to show there was no price effect as is currently imposed on plaintiffs to show that there was a price effect when the plaintiffs later need to demonstrate loss causation. The other approach would be to decide that defendants can rebut the presumption of reliance simply by persuading the court that the plaintiffs will not be able meet their statistical burden. If the courts choose the first approach, Halliburton II is unlikely to have much effect on the cases that are brought or on their resolution by settlement or adjudication. If they choose the second approach, the decision’s effect will be more substantial. The Article concludes with a brief discussion of some of the considerations that should be relevant to courts in their choice between the two approaches.

Suggested Citation

Fox, Merritt B., Halliburton II: It All Depends on What Defendants Need to Show to Establish No Impact on Price (September 10, 2014). Business Lawyer, Forthcoming, Columbia Law and Economics Working Paper No. 488, Available at SSRN: https://ssrn.com/abstract=2488055 or http://dx.doi.org/10.2139/ssrn.2488055

Merritt B. Fox (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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