June 24, 2014

SCOTUS: Halliburton Doesn’t Overturn Basic (But Defendants Can Rebut Reliance Presumption)

Yesterday, the Supreme Court delivered the long-awaited opinion in Halliburton v. Erica P. John Fund. We have started posting the hordes of memos in our “Securities Litigation” Practice Area, but here’s analysis from Skadden:

The Supreme Court of the United States today in Halliburton Co. v. Erica P. John Fund upheld the fraud-on-the-market presumption of reliance first recognized by the Court in Basic v. Levinson, but gave defendants a new tool for challenging class certification in fraud-on-the-market cases. The Court held that defendants may introduce evidence of lack of price impact at the class certification stage in order to rebut the presumption of market efficiency. Justice Roberts delivered the opinion of the Court, joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan. Justice Thomas filed an opinion concurring in the judgment, in which Justices Scalia and Alito joined.

Basic opened the door to securities class action litigation by holding that plaintiffs are entitled to a class-wide presumption of reliance if the securities at issue were traded in an efficient market, and thus the alleged misrepresentations were analyzed by the market and reflected by the market price. In the absence of the presumption of reliance, plaintiffs would be required to demonstrate “eyeball reliance” on each alleged misrepresentation on an investor-by-investor basis, effectively precluding class treatment.

The Court today upheld the fraud-on-the-market presumption of reliance, but held that defendants must be afforded an opportunity before class certification to defeat the presumption through evidence that an alleged misrepresentation did not actually affect the market price of the stock. Defendants may seek to defeat the Basic presumption through direct, as well as indirect, price impact evidence. Thus, the Court vacated the Fifth Circuit’s decision that evidence of price impact could not be introduced at the class certification stage and remanded for further proceedings. The decision today gives defendants a potentially powerful new tool for challenging the use of Basic’s presumption of reliance at the class certification stage.

And here’s analysis from this Reuters article, as well as the “D&O Diary Blog,” “D&O Discourse Blog” and

State Law: May A Director Resign By Telling Another Director “I Quit”?

Here’s an interesting blog by Allen Matkins’ Keith Bishop about “May A Director Resign By Telling Another Director “I Quit”?” (and also see Keith’s follow-up blog). It’s about a new Delaware Supreme Court decision – Biolase v. Oracle Partners – and it’s interesting to contemplate the facts of that case and whether they pass muster to be considered a director resignation for Form 8-K purposes. Don’t forget my “Director Resignation & Retirement Disclosure Handbook,” which covers those 8-K scenarios…

Here’s an academic debate on the issue of third-parties paying director compensation…

Society of Corporate Secretaries Annual Conference: How to Attend

Like last year, I will be taking “selfies” with 10 new folks I meet at this year’s annual conference in Boston for the Society of Corporate Secretaries. And it’s a good reminder to view this 2-minute video with my tips about how to get the most out of attending a conference:

– Broc Romanek