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U.S. Supreme Court Holds “Loss Causation” Not a Prerequisite to Class Certification in Fraud-on-the-Market Cases
June 7, 2011
In Erica P. John Fund Inc. v. Halliburton Co., No. 09-1403 (June 6, 2011), the Supreme Court of the United States decided that in seeking class certification, a plaintiff in an action under the federal securities laws is not required to prove facts demonstrating loss causation. In so holding, the Supreme Court rejected a contrary rule, adopted only by the Fifth Circuit, that proof of loss causation is a prerequisite to class certification. Halliburton was the Supreme Court's first significant re-examination of the "fraud-on-the-market" theory of reliance adopted in Basic Inc. v. Levinson, 485 U.S. 224 (1988). The Supreme Court, however, decided only the narrow issue of whether loss causation is a prerequisite to class certification.