The Roberts Court and Securities Class Actions: Reaffirming Basic Principles

Part II of this Article presents an overview of Roberts Court decisions concerning class litigation...The Article’s primary focus, however, is on a trilogy of Roberts Court decisions concerning class certification in open-market securities fraud cases, where fraudulent statements allegedly manipulated the price of securities traded in the open market: Erica P. John Fund, Inc. v. Halliburton, Co. (“Halliburton I”), Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, and Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”)...Rather than jumping directly into a discussion of the three decisions, which have been extraordinarily good news for investors seeking to prosecute securities-fraud class actions, Part III provides background of the fraud-on-the-market doctrine that Basic embraced, explaining why many thought the decision might be vulnerable to overruling. Part IV discusses Basic in the lower courts and the controversy surrounding empirical evidence generated by efficient markets research that many commentators and courts quite erroneously asserted was the foundation of Basic’s holding. Part V then considers, in turn, the Roberts Court’s trilogy of open-market securities-fraud class-certification decisions. It sets forth how Halliburton I relieved plaintiffs of the burden of proving loss causation to obtain class certification – a requirement that had been a serious stumbling block in the Fifth Circuit. Part VI outlines the favorable impact that Halliburton II has for plaintiffs asserting open-market securities-fraud claims. It explains how Halliburton II (1) overturns existing lower-court decisions employing rigid notions of market efficiency; (2) upends precedents assuming that the market instantaneously incorporates all information; (3) undermines decisions withholding the fraud-on-the-market presumption in cases involving initial public offerings; (4) undermines decisions demanding that plaintiffs produce event studies; and (5) reverses the burdens on the parties in cases involving so-called “confounding factors.” Part VII offers a brief summary and conclusion