For those who believe the U. S. Supreme Court has a hidden agenda of doing away with class action suits, this unanimous decision stands in contrast to that belief.
The Erica P. John Fund, formerly the Archdiocese of Milwaukee Supporting Fund, was the lead plaintiff in an attempted class action against Halliburton that alleged that Halliburton had made misrepresentations which caused its stock to have an inflated price. It alleged that when the misrepresentations were corrected, the stock price fell to the damage of the plaintiffs.
Both the federal district court and the Fifth Circuit Court of Appeals denied class action certification to the plaintiffs. The basis of their denial was that plaintiffs failed to prove loss causation related to the misrepresentation. The Supreme Court, in an opinion written by chief Justice Roberts, held that loss causation was the incorrect standard. Under the “fraud on the market” theory, EPJ Fund, and others, need only prove transaction causation, to maintain suit as a class. The difference is that loss causation requires specific loss to be proven at the class action certification stage, while transaction causation requires only proof that plaintiffs entered into the transaction based on the alleged misrepresentation.
While the legal nits being picked may seem insignificant, the U. S. Supreme Court here had the opportunity to tighten the noose on class action suits by adopting the Fifth Circuit’s reasoning. Instead, it stood by precedent which requires a lesser standard to achieve class action certification.
One other interesting aspect of this case. For those who read my “How to Read a Legal Opinion” , you may remember this line
“…the headnote is not part of the decision. If there are any errors or differences between the synopsis and the actual opinion, only the actual opinion counts.”
This is one of those very rare cases where there is an error in the Syllabus, or synopsis. The Syllabus says:
“The Court does not accept EPJ Fund’s interpretation of the Court of Appeals’ opinion.”
It was actually Halliburton’s interpretation that the Court did not accept, as Chief Justice Roberts makes clear in his opinion.
“We do not accept Halliburton’s wishful interpretation of the Court of Appeals’ opinion.”
All emphasis added.
Contributor, aka tidbits. Retired attorney in complex litigation, death penalty defense and constitutional law. Former Nat’l Board Chair: Alzheimer’s Association. Served on multiple political campaigns, including two for U.S. Senator Mark O. Hatfield (R-OR). Contributing author to three legal books and multiple legal publications.