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Supreme Court ruling could affect future securities class actions

Organizations in Las Vegas and across the nation may be affected by the U.S. Supreme Court’s recent decision to hear a securities class action case. This civil appeals matter stems from supposed impropriety by Halliburton Co., an oilfield services company.

According to court documents, Halliburton’s stocks were falsely inflated, supposedly as a result of the company exaggerating the positive effects of a merger, as well as division profits. Additionally, allegations indicate that the company failed to adequately represent asbestos liabilities for which it was responsible. Investors claim that their stocks began to fall when Halliburton disclosed the discrepancies.

Over more than a decade, Halliburton shareholders have been fighting for a conclusion to this matter; however, the company has continued to exercise its right to appeal lower court decisions. Halliburton alleges that the suit should not move forward because the stock prices were never affected by the company’s supposed misdeeds.

In the past, the court standard was that investors were not obligated to prove that suspected fraud directly contributed to their shortfall. As a result, the courts heard hundreds of securities class action cases each year. However, in the Halliburton matter the U.S. Supreme Court recently ruled that they will accept Halliburton’s defense and require the shareholders to prove that their investment decisions were made as a result of the company’s misrepresentations.

Many are claiming that this is a wise move by the court to change the foundation of securities class action litigation. The U.S. Chamber of Commerce, former U.S. Securities and Exchange Commission members and the National Association of Manufacturers all support the court’s ruling to hear the case.

While the outcome of this matter is still unknown, it helps highlight the importance of turning to the appellate courts when faced with civil matters you believe in.

Source: Reuters, “U.S. justices to hear Halliburton securities class action,” Lawrence Hurley and Jonathan Stempel, Nov. 15, 2013

John P. Aldrich
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