By Karen M. Leser-Grenon, Esquire
Following a unanimous decision by the United States Supreme Court, which held that plaintiff did not have to prove loss causation prior to class certification under Federal Rule of Civil Procedure 23, the U.S. District Court for the Northern District of Texas granted plaintiff’s motion to certify the class on January 27, 2012. In an attempt at yet another bite of the apple, Halliburton (“Halliburton” or “Company” or “Defendant”) now seeks permission to appeal this decision to the U.S. Court of Appeals for the Fifth Circuit (“Appellate Court” or “Fifth Circuit”) in a petition filed in February 2012. Lead Plaintiff, Erica P. John Fund, opposes Halliburton’s petition.
The original case was brought on behalf of purchasers of Halliburton stock from June 3, 1999 through December 7, 2001 and alleges violations of the Securities and Exchange Act of 1934, 15 U.S.C. § 78a, et seq. Specifically, the case alleges that Halliburton and certain of its officers misled investors about Halliburton’s financial condition, the benefits of its acquisition of Dresser, Inc., the Company’s exposure to asbestos liability, and its future business and prospects. The District Court denied class certification and the Appellate Court affirmed the denial of class certification on the sole basis that plaintiff had not established loss causation. Then, in June 2011, the U.S. Supreme Court reversed the Fifth Circuit’s ruling and held that a plaintiff does not need to prove loss causation to invoke the fraud-on-the-market presumption.
Halliburton now argues that the Supreme Court reserved the question of “whether Halliburton had permissibly rebutted the presumption of class-wide reliance at the class-certification stage by showing that the alleged misrepresentations did not distort the market price.” Lead Plaintiff argues that the Supreme Court only held that plaintiffs do not have to establish loss causation and only arguments that Halliburton preserved could be considered on remand by the Appellate Court. Because Halliburton did not argue this at the District Court level, Lead Plaintiff argues that it is waived and cannot be considered by the Appellate Court. Defendant further argues in its petition that the District Court abused its discretion in denying Defendant’s request to supplement the record. Again, Lead Plaintiff argues that Defendant should have supplemented the record back in 2008 when the class certification motion was originally argued. Halliburton also argues that the January 2012 decision granting class certification is a threat to Halliburton, in that the decision causes “intense settlement pressure.” Lead Plaintiff argues that there is no support provided for Halliburton’s contention and also notes that Chief Justice Robert of the Supreme Court rejected this same argument. Finally, Halliburton argues that the District Court incorrectly concluded that plaintiff “did not point to any stock price increases resulting from positive misrepresentations.” Lead Plaintiff argues that the Court should reject this argument because it did not claim that the misrepresentations caused the stock prices to rise. Instead, Lead Plaintiff claims that the misrepresentations kept the stock price from falling. Then, the stock price fell on the date of the corrective disclosure.