![handle is hein.journals/txjbus47 and id is 1 raw text is:
DOES HALLIBURTONHALLOw DEFENDANTS TO PROVE A LACK
OF CORRECTIVENESS To DEFEAT CLASS CERTIFICATION?
Roger B. Greenberg' & Zach Wolfe2
In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton IT), the U.S. Supreme Court
held that defendants in federal securities fraud cases may defeat class certification by proving a
lack of price impact at the class certification stage.3 This holding gave defendants in such
cases a significant new opportunity to defeat class certification. But lower courts so far have
not given Halliburton II the robust application that Halliburton and other corporate defendants
may have hoped for.
The Halliburton case itself shows the limited impact Halliburton II has had to date. On
remand from Halliburton II, the district court held that Halliburton proved a lack of price
impact for all alleged misrepresentations and corrective disclosures except one: an
announcement of an adverse jury verdict in an asbestos case. Therefore, the district court
granted class certification, but only as to that single misrepresentation.6 The Fifth Circuit
granted Halliburton leave to appeal this decision, and the Fifth Circuit heard oral argument on
August 31, 2016.
The issue in the pending appeal before the Fifth Circuit is narrow but important: When a
defendant in a securities fraud class action attempts to rebut the Basic presumption by proving
a lack of price impact, is the correctiveness of the alleged corrective disclosure an issue the
district court should consider? The plaintiffs in Halliburton argue that correctiveness is a
class-wide merits issue like materiality, loss causation, and falsity of the alleged
misrepresentation. At the class certification stage, plaintiffs argue, the court should assume the
correctiveness of the alleged corrective disclosure, focusing only on whether the corrective
disclosure caused a price impact.
Halliburton, on the other hand, argues that correctiveness is necessarily part of the price
impact issue. Correctiveness may be a class-wide issue, Halliburton argues, but so is price
impact, and the whole point of Halliburton II was to allow defendants to attempt to rebut price
impact at the class certification stage. If the Fifth Circuit agrees, it will be one step towards the
more expansive application of Halliburton II that corporate defendants hoped for.
1 Sponsel Miller Greenberg P.L.L.C., Houston, Texas.
2 Fleckman & McGlynn, P.L.L.C., The Woodlands, Texas.
3 Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2417 (2014) [Halliburton II]; Basic Inc. v.
Levinson, 485 U.S. 224 (1988).
For the background to Halliburton II and a detailed discussion of the opinion, see our previous article in this
journal at Vol. 46, No. 1.
5 Erica P. John Fund, Inc. v. Halliburton Co., 309 F.R.D. 251, 256, 279-80 (N.D. Tex. 2015) [EPJFII].
6 Id. at 280.
Erica P. John Fund, Inc. v. Halliburton Co., No. 15-90038, 2015 WL 10714013, at *1 (5th Cir. Nov. 4, 2015).
8 Merriam-Webster tells us correctiveness is not a word, but it communicates the concept at issue here so
conveniently that we will give ourselves permission to use it.](ViewImageLocal?handle=hein.journals/txjbus47&div=1&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most