Today the Supreme Court missed an opportunity to undo one of its worst corporate-law mistakes of modern times, its 1988 decision in Basic, Inc., v. Levinson that lawyers can file class-action suits on behalf of investors without proving class members’ actual reliance on allegedly fraudulent statements, by presuming the price of the stock was affected. (Colleague Andrew Grossman covered the oral argument in Halliburton v. Erica P. John Fund, Inc. in this space in March.)
In the narrower sense, the Court did unanimously grant relief to defendant Halliburton by recognizing its right to offer proof at an earlier stage that its claimed misstatement had not affected the price of its stock. That’s welcome, and shows that the Court recognizes – maybe even unanimously recognizes – that the current class-action mechanism operates unfairly to pressure defendants to settle at the certification stage, and needs procedural overhaul aimed at fixing that.
Good concise analysis. Go read the whole thing.