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Milne, Sandy --- "Capital Markets Law: Recent Developments In The United States" [2018] WAStuLawRw 5; (2018) 2 Western Australian Student Law Review 60


Sandy Milne[*]

Securities Class Actions—United States Law—Fraud-on-the-market——Halliburton Cases—Company Law—Securities Law

This article explores the evolving role of ‘the fraud-on-the-market’ doctrine in securities class actions in the United States, in light of the recent high-profile developments in the ‘Halliburton’ series of cases. The amendments to the ‘fraud-on-the-market’ doctrine are likely to have a significant impact on the doctrine’s operation as a staple weapon at the class certification stage in securities fraud litigation in the United States. This article evaluates recent decisions on topic and considers the ramifications of those decisions for securities class actions.


Since 1988, a salient feature of securities class action litigation in the United States of America has been the ‘fraud-on-the-market’ doctrine. Stemming from the Supreme Court of the United States’ embrace of the doctrine in Basic v Levinson (‘Basic’),[1] the concept of ‘fraud-on-the-market’ is a rebuttable presumption of ‘reliance’ by shareholders on the company’s misrepresentations (‘Basic doctrine’). ‘Reliance’ is one element of a stock fraud action brought under Rule 10b-5 of the Securities and Exchange Commission Rules and Regulations (1993) (‘SEC’).[2]

The Basic doctrine was seen as a necessary response to the evolution of secondary market trading onto electronic platforms. In Basic, the Court recognised that electronic platforms differed markedly ‘from the face-to-face transactions contemplated by early fraud cases’.[3] The relaxation of the ‘reliance’ requirement led to a dramatic boon for plaintiffs in securities litigation, with over 4 200 class suits filed in the United States between 1995 and 2015.[4]

In Halliburton v Erica P John Fund (‘Halliburton II’),[5] the spotlight once again fell on the ‘fraud-on-the-market’ doctrine. The Supreme Court considered whether a securities class action against oil field service company Halliburton was correctly denied class certification by the Fifth Circuit. In its decision, the Court considered whether to ‘overrule or substantially modify’ the Basic doctrine ‘to the extent that it recognises a presumption of class-wide reliance derived from the fraud-on-the-market theory’[6] and to streamline an increasingly complex and self-contradictory area of law.

The Basic doctrine was ultimately reaffirmed in Halliburton II, although it was modified in some respects. This article will evaluate the position reached by the Supreme Court in Halliburton II, and the potentially restrictive effect that the decision may have on the volume of securities litigation against American corporations.


In the United States, procedural mechanisms for bringing class actions have been in place since 1938, and in their modern form since 1966.[7] Rule 23 of the Federal Rules of Civil Procedure (2018) sets the parameters of the class certification procedure, which allows one or more members of a class to ‘sue or be sued on behalf of all representative members’.[8] Of particular relevance in Basic was r 23b-3, which, inter alia, provides that class certification is appropriate in matters where ‘questions of law or fact common to members predominate over other issues’.[9] Rule 10b-5 of the SEC is created under authority delegated to it by s 10b of the Securities Exchange Act 1934 (‘SEA’). However, neither r 10b-5 nor s 10b explicitly gives rise to a private right of action, or delimits the action’s scope and elements; that task has been left to the common law. At the time Basic was decided, those elements (and respective authorities cited by the Court) were:

(1) that the defendant made public misrepresentations;[10]

(2) that the misrepresentations were material;[11]

(3) that the shares were traded on an efficient market;[12]

(4) that the misrepresentations would induce a reasonable, relying investor to misjudge the value of the shares;[13] and

(5) that the plaintiff traded the shares between the time the misrepresentations were made and the time the truth was revealed.[14]

The ratio in Basic involves only one of these common law elements operating predominantly: that of ‘reliance’. Prior to Basic, the Court reformulated the element of reliance in Affiliated Ute Citizens v United States.[15] In that case, it was held that demonstrating a material omission on the part of the company is enough to prove reliance for the purposes of class certification.[16] However, that approach was relaxed in Basic—in which reliance (assumed under the ‘fraud-on-the-market’ doctrine) operates as an inherently common feature to the plaintiffs’ claims, drawing them together without need for an assessment on materiality.[17] Without this presumption, reliance would need to be demonstrated at an individual level, meaning it is likely that ‘individual issues ... would then predominate over common ones’.[18] Basic was a watershed moment in securities litigation in the United States, leading to a dramatic increase in securities class actions,[19] and allowed everyday investors to recover against corporations where costs associated with the individual pursuit of litigation could exponentially exceed the money lost on the disputed stock drop.

The Basic doctrine must be understood in light of the historical context from which the relevant Acts[20] emerged, and the interpretative principles consequently applied to it. In response to the ‘Black Tuesday’ stock market crash of 1929, Congress explored a number of legislative avenues to restore investor confidence. Ultimately, this took the form of the Securities Act 1933 and the SEA. The purpose of the SEA is to ‘ensure the maintenance of fair and honest markets’.[21] Thus, in Securities and Exchange Commission v Capital Gains Research Bureau[22] (‘Capital Gains’), the Court saw fit to take a broad and permissive interpretation of the Act. The majority in Capital Gains held that a ‘fundamental purpose, common to these statutes, was to substitute a philosophy of full disclosure for the philosophy of caveat emptor’.[23] Having accepted that the purpose of the SEA was to improve shareholder rights through facilitating such disclosure,[24] it seems natural that the Court in Basic would prefer an interpretation in line with this purpose.

Against this background, it is arguable that the development of the Basic doctrine emerged as a correction to a historical imbalance of shareholder and issuer rights. Proponents of this view may argue that this theory is suitable in modern marketplaces, and that actually having to prove reliance on an individual basis is so impractical as to effectively bar everyday investors from pursuing all but the most flagrant of alleged offences.

However, some may argue, as the defendant in Halliburton II did, that this delicate balance has shifted disproportionately toward the shareholder, and that nowadays the ‘fraud-on-the-market’ doctrine over-insulates shareholders from risk.[25] Even prior to Basic, Clark J noted that the adoption of such a doctrine could convert r 10b-5 of the SEC into a ‘scheme of investor’s insurance’ if left unchecked.[26]

Critics of the ‘fraud-on-the-market’ doctrine often posit that the presumption of reliance has led to an increase in frivolous lawsuits. While there is little available data in the immediate wake of Basic, the Stanford Securities Class Action Clearinghouse has indeed shown a general linear increase in the number of actions brought before Federal courts from 1996 to the time of writing.[27] This trend could support the position Halliburton took in Basic, advocating for a restrictive reformulation of the presumption of reliance. However, research suggests that those pushing corporate interests exaggerate such a position,[28] and that there is a strong correlation between case merits and the actual filing of class action claims.[29] This is especially so in the wake of the Private Securities Litigation Reform Act 1995 (‘PSLRA’), which, amongst other things, provides for sanctions against plaintiffs who bring vexatious claims.[30]


There is no shortage of commentary suggesting that Basic failed to provide a clear procedural mechanism for the application of the ‘fraud-on-the-market’ doctrine it created.[31] In particular, courts were given very little direction as to the roles that loss causation would play when the presumption of reliance was invoked. This is best illustrated by conflicting Circuit court decisions on the matter. For example, in Oscar Private Equity Investments v Allegiance Telecom Inc,[32] the Fifth Circuit held that the plaintiff was required to demonstrate loss causation to invoke the presumption at class certification stage. In 2010, the Seventh Circuit disagreed with that decision, holding that market efficiency and proof of a transaction taking place within the appropriate time period were sufficient to invoke the presumption of reliance.[33] Finally, the Second[34] and Third Circuits[35] adopted a different stance altogether: proving a lack of loss was considered a possible defence to the presumption of reliance at the class certification stage.

The pre-Halliburton environment was ripe for clarification. One commentator compared the situation to buying a second-hand car with an assurance that the engine works.[36] If it subsequently does not, has the purchaser automatically suffered a loss by relying on the dealer’s price?[37] Is testimony from a mechanic to the effect that the car was deliberately overvalued sufficient to demonstrate loss, or must the purchaser sell it and realise that loss in order to obtain a remedy?[38]

In one of the precursor cases to Halliburton II, the Erica P. John Fund (then known as the Archdiocese of Milwaukee Supporting Fund) was denied class certification by the District Court of Northern Texas, and subsequently the Fifth Circuit, on loss causation grounds.[39] On appeal, the Supreme Court reversed the lower Courts’ decision, holding it was not necessary to do so at the class certification stage.[40] The case was remanded to the original District Court, who subsequently certified the class, rejecting Halliburton’s price impact arguments. Inspiring a sense of déjà vu in observers, Halliburton once again appealed to the Supreme Court. The appeal decision would become known as ‘Halliburton II’.


In Halliburton II, Halliburton’s arguments were largely geared towards the now defunct economic theory underpinning the ‘fraud-on-the-market’ presumption.[41] In particular, the underlying premise of the ‘efficient market hypothesis’—that, given freely available and accurate sharing of price-sensitive information, share prices are taken to reflect that value—was called into question.[42] To this end, Halliburton cited a number of examples where investors definitively traded based on an assumption that price does not efficiently reflect value.[43] For example, ‘value investors’ who concern themselves with IPOs.[44] Similarly, in 1989, a Federal Court recognised the complexity of applying the ‘fraud-on-the-market’ doctrine to ‘undeveloped, inefficient markets’ but failed to redress these issues definitively.[45] In this vein, Halliburton also contended that the fundamental reasoning behind the presumption was in conflict with Congress’ intent in passing the SEA, and was at odds with the Court’s recent decision in Amgen Inc v Connecticut Retirement Plans (2013)[46] (‘Amgen’). As an alternative to overruling Basic, Halliburton suggested two solutions: requiring plaintiffs to prove price impact; or to allow defendants to rebut the presumption of reliance with evidence of a lack of price impact at the class certification stage.[47]

Ultimately, the Supreme Court in Halliburton II rejected Halliburton’s arguments that the ‘fraud-on-the-market’ doctrine should be overturned, choosing to maintain the status quo Basic doctrine.[48] The majority reasoned that this was due to the failure of Halliburton to demonstrate the ‘special justification’ necessary to support a departure from stare decisis.[49] However, this attracted criticism by academics and judges alike, amidst growing concerns that the theory ‘may rest on a faulty economic theory’.[50]In concurring with the majority judgment, Thomas J suggested a number of precedents to justify overturning Basic on its ‘muddled logic and armchair economics’.[51]Academics were also quick to criticise the Court’s apparent failure to engage the merits argument, and the alleged lack of economic rationale behind the doctrine.[52]

In refusing to accept any of Halliburton’s arguments relating to Basic, the Court cited a number of additional factors that supported its reluctance to overturn Basic.[53]One such factor was policy considerations. Roberts CJ noted that Congress has, in the past, made substantive procedural reforms to r 10b-5 class actions, at times creating regulatory schemes that interact with, rather than replace, the framework established by the common law.[54] One example of this is the PSLRA, which has been called ‘a political compromise ... which preserves the foundation of the ‘fraud-on-the-market’ class action, while making it harder for plaintiffs to bring, plead and prove a successful claim’.[55]More recently, Congress also passed the Securities Litigation Uniform Standards Act 1998, which had much the same effect. This led Roberts CJ to opine that Halliburton’s concerns were ‘more appropriately addressed to Congress’. This should come as no surprise to Halliburton, with the Court having conflated the upholding of the current securities litigation system with congressional sovereignty before in Amgen.[56] Although not explicitly mentioned in Halliburton II, it must also be realised that securities fraud suits act as an ‘essential supplement’[57] to criminal actions undertaken by the Securities Exchange Commission and the Department of Justice; and that restructuring of the kind advocated by Halliburton might have a considerable ancillary impact on these institutions.

While the Court refused to overrule Basic, two key changes were made to the substantive law.[58] The first was made with regard to the role played by loss causation.[59]As mentioned, a difference in opinions had evolved between the Circuit courts in this regard, with Halliburton II being brought by appeal from the Fifth Court. Under Circuit court precedent, loss causation had to be affirmatively demonstrated in order to invoke the presumption of reliance.[60] The majority in Hallliburton II held that the Fifth Circuit was wrong, and loss causation should not operate as a precondition to ‘fraud-on-the-market’ reliance.[61] The second key change relates to what has come to be known as ‘price impact’.[62]

To invoke fraud-on-the-market reliance, four conditions must be satisfied.[63] It has been noted that the first three of these—(1) that the alleged misrepresentations were publicly known, (2) that they were material in nature, and (3) that the market was efficient[64]—together could be compared to considering the overall impact of the misrepresentation on the stock price. Prior to being brought before the Supreme Court, the Fifth Circuit had reiterated the District Court’s view that ‘price impact’ evidence, though relevant, could only be used to refute the claims at trial.[65] However, Halliburton suggested that it would be more effective for the Court to fuse these into one test (considering whether the statement affected price) which could be applied at the class certification stage.[66] Halliburton also suggested that such a test should be placed on plaintiffs as a positive requirement.[67] The Court rejected that argument, on the grounds that the whole premise of Basic was to entitle a plaintiff demonstrating these elements to the presumption of price impact.[68] While the Court declined to modify the Basic doctrine in line with Halliburton’s suggestions, they did allow evidence of a lack of price impact to be adduced as a defence to class certification.[69] This was a significant departure from the previous position in Basic, and is likely to afford defendants an important opportunity to resist lawsuits.[70]


A Basic upheld

Halliburton II had a profound impact on the landscape of securities class actions. The significance of introducing ‘price-impact’ evidence to the merits stage is not to be underestimated; it allows corporate defendants the chance to mount a robust defence far earlier in the proceedings than was previously possible. An opposing ruling, however, would have had a far more drastic effect. It is widely accepted that overhauling the ‘fraud-on-the-market’ presumption of reliance would dismantle the security class action bar as we know it today. In Robert CJ’s words: ‘[i]f every plaintiff had to prove direct reliance on the defendant’s misrepresentation, “individual issues then would ... overwhelm the common ones,” making certification under r 23b-3 inappropriate’.[71]

Indeed, this links back to policy concerns expressed by the Court as to the dangers of overturning the Basic precedent depended on by so many plaintiffs.[72] The length, complexity, and associated costs of bringing securities action against a large corporation are likely to preclude the vast majority of shareholders from proceeding to seek compensation without class certification.[73] How many retail investors can be expected to understand the nuances of securities law, or to engage an expensive attorney over a comparatively small loss?

While the majority of the Supreme Court refrained from making such drastic changes to the law, much has been made of the reluctance of certain members of the bench to abide by the Basic presumption.[74] In their dissent in Halliburton II, Thomas, Scalia, and Alito JJ vehemently challenged the underpinnings of the fraud-on-the-market presumption.[75] This has consequently led to suggestions in the literature that it could be overturned in the not-too-distant future by a differently constituted bench.[76] In this respect, another ancillary effect of Halliburton II has been the reactivation of debate surrounding the economic theory underpinning the ‘fraud-on-the-market’ doctrine, and the balance of rights between shareholders and issuers.[77]

B Price impact defence

In 2016, the Eighth Circuit considered the first appellate case in which the ‘price impact’ component of Halliburton II successfully prevented a class from gaining certification.[78] In IBEW Local 98 Pension Fund v Best Buy Co Inc (‘Best Buy’) the price impact of an impugned misstatement was settled by reference to a number of expert economist analyses, known as ‘event studies’.[79] Event studies are a form of statistical analysis, commonly used to gauge whether a change in share value can be causally attributed to a particular statement (ie, to demonstrate ‘price impact’) in complex securities transactions. In fact, their use was venerated in an amicus brief submitted to the Supreme Court in Halliburton II.[80] In this amicus, Pritchard and Henderson stated that an event study is the ‘gold standard’ in the area, inextricably linked with any assessment of price impact.[81] Integration of the ‘price impact’ defence into the class certification stage, therefore, is likely to change the class certification stage into a labor-intensive ‘battle of the experts,’ such as seen in Best Buy.[82]

Aside from adding a layer of complexity to an already laborious process, there are those who suggest that these ‘battle[s] of the experts’ will yield little fruit.[83] According to Fisch, Gelbach and Klick,[84] these studies were developed for use in an impartial academic setting.[85] They contain a number of weaknesses which could be explored in an adversarial courtroom.[86] For example, the authors highlighted that event studies are only suited to measuring stock price responses to unexpected information.[87] A fraudulent statement made confirming prior misstatements would have no price impact, as was recognised in Greenberg v Crossroads Systems, Inc.[88] A defendant looking to refute price impact could potentially defeat claims at the class certification stage, even though he or she made misleading statements that kept market prices artificially inflated.

Fisch, Gelbach and Klick also point to the fact that these studies were developed to track the impact of a single isolated statement, and ‘have limited capacity to identify the relative contribution of each piece of information or the degree to which the effects of multiple disclosures may offset each other.’[89] The relevance of this can be seen in the Halliburton series,[90] with the only alleged misstatement out of six that received certification being made in a two-pronged disclosure on 7 December 2001.[91] One part of the disclosure was a corrective statement and the other was a further negative statement.[92] At first instance, the District Court held it was impossible to discern which statement was more likely to have caused the ‘price impact,’ leading the District Court to deny class certification.[93]

This weakness, and others similar to it,[94] supports the argument that increased reliance on these studies[95] (a corollary of the new price impact defence under Halliburton II) could give corporations a chance to muddy the water through confusing or biased expert testimony.

While it is widely accepted that these studies should form an integral part of the class certification stage, it is not clear whether or not courts in the United States are aware of these limitations. For example, during oral argument in Halliburton II, Alito J asked Halliburton’s counsel ‘how accurately can they [event studies] distinguish between the effect on price of the facts contained in a disclosure and an irrational reaction by the market, at least temporarily, to the facts contained in the disclosure?’[96] Contrary to counsel’s subsequent answer, the settled answer is that event studies do not reflect rationality.[97]

‘Fraud-on-the-market’ theory states that material statements will necessarily have a ‘price impact’.[98] However, this assumption—as adopted by courts in the United States—is likely to overlook a number of situations where interplay between contrasting statements could effectively mask price impact. Logically, it can be concluded that this defence could be used to prevent valid claims from being certified; and should be afforded caution.

Adding a layer of complexity at the class certification stage is associated with increased costs of bringing a claim. In the wake of Halliburton II, this is perhaps the only conclusion agreed upon by experts.[99]

C Reduced pressure on the defendant to settle

Critics of the ‘fraud-on-the-market’ doctrine come from various quarters, including corporate, judicial, and academic.[100] However, they share a common view that, in the wake of Basic, courts have become swamped with vexatious claims.

Prior to Halliburton II, the data demonstrates that class certification was effectively a rubber stamp, with over 98 per cent of applications being granted between 2002 and 2010.[101] According to a recent study cited by the Supreme Court,[102] this figure was down to roughly 89 per cent for the 2016 financial year. However, Miller suggests that such a view overlooks the role settlements play in the litigation process.[103] Miller argues that, in the previous model, deferring evaluation of price impact to trial put undue pressure on the defendant to settle, regardless of the merits of the claim.

Prior to Halliburton II, in most situations the more cost-effective choice for defendants would be to settle even meritless claims, to avoid costly litigation. Transferring price impact to the forefront of the proceedings, however, allows issuers the opportunity to dismiss proceedings before they even begin. This led some commentators, in the wake of Halliburton II, to envisage a settlement environment in which the in terrorem effect of rubber stamp class certification was reduced (along, logically, with settlement size).[104] However, studies have actually recorded a marked increase in the size of settlements in the intervening years, suggesting that Halliburton’s impact may not be as significant in this regard as previously thought.[105]

D Further confusion: differing ‘price impact’ from ‘materiality’

In Amgen, the Court stated with clarity that arguments of materiality were to play no part in the class certification stage.[106] In Halliburton II, the Supreme Court adopted price impact as an integral part of that process. Naturally, some observers have expressed skepticism as to the delineation made by the Supreme Court between the two doctrines. According to Ferrell, anything considered ‘material’—pursuant to the appropriate test in Northway[107]—would also by definition affect market price, if that price is assumed to reflect all pertinent public information.[108] The only explanation offered in the majority in Halliburton II in distinguishing Halliburton II from Amgen, is that ‘materiality is a discrete issue that can be resolved in isolation from the other prerequisites’[109] and thus ‘can be wholly confined to the merits stage...Price impact is different’.[110] Some scholars have suggested that such a distinction is self-contradictory, since proof that a misstatement did not cause a change in price is precisely the sort of immaterial evidence that Amgen prohibits.[111] Reconciling this will likely be the biggest challenge faced by lower courts in applying Halliburton II.[112]


Some commentators have suggested that Halliburton II is likely to have little effect on r 10b-5 litigation. Ginsburg J, for example, wrote a one-paragraph concurrence on the case, suggesting that the Court’s judgment ‘should impose no heavy toll on securities-fraud plaintiffs with tenable claims’. Despite Halliburton II being handed down in 2014, we have yet to see any dire consequences on the securities litigation industry. The National Economic Research Associates Economic Consulting annual report for 2015 shows that the securities class action industry has well and truly survived Halliburton II, 2015 being one of the most litigious years on record.[113]

However, there is evidence to support Miller’s belief that the case is making ‘subtle and significant’ impacts in the area. These assertions are grounded in both logic and empirical evidence. Since Halliburton II, we have seen class certification become more like a ‘mini-trial,’ characterised by event studies that can muddy over a corporation’s misdealings in certain situations. This is a test ripe for corruption by corporate interests, and as seen in Halliburton II, it can indeed be used to distort legitimate claims. For this reason, we cannot assume a reduction in certification to be positive. Several key indicators suggest that fewer classes are being certified in the wake of Halliburton II.[114]

In line with these arguments, the ‘price-impact’ component of Halliburton may not be an entirely appropriate vessel for change. While the increase in frivolous lawsuits post-Halliburton II is reflected in both data and empirical evidence,[115] the Supreme Court was arguably correct to hold onto the ‘fraud-on-the-market’ doctrine. The criticisms of Thomas, Scalia, and Alito JJ in their dissent in Halliburton II reflect an overly-strict an adherence to market principles. The Supreme Court in Basic recognised that statements affect prices in general. Simply put: investors who trade at the market price can ‘thus be injured by misrepresentations even if they have not personally heard of them’.[116] This claim is based on common sense, rather than strict analysis of market efficiency. Although Halliburton II is a win for proponents of shareholder interests, the coming years may indeed show it to be a bittersweet one. In the current environment, the evidence suggests that the ruling is having a material and restrictive effect on securities litigation.[117] Although overlooked, it is likely that these effects will continue to crystallise over the coming years.

[*] Sandy Milne is a 3rd year Bachelor of Laws student at Curtin University.

[1] Basic Inc v Levinson, [1988] USSC 36; 485 US 224 (1988) (‘Basic’).

[2] 17 CFR 240.

[3] Basic Inc v Levinson, [1988] USSC 36; 485 US 224, 243–4 (1988).

[4] Mukesh Bajaj et al, ‘Economic Consequences: The Real Costs of U.S. Securities Class Action Litigation’ (United States Chamber Institute for Legal Reform, 2014) 2.

[5] Halliburton v Erica P John Fund, 573 US (2014).

[6] Petition for a Writ of Certiorari, Halliburton II, 134 S Ct 2398 (No 13–317).

[7] Michael Duffy, ‘Fraud on the Market: Judicial Approaches to Causation and Loss from Securities Nondisclosure in the United States, Canada and Australia’ [2005] MelbULawRw 20; (2005) 29(3) Melbourne University Law Review 621,624.

[8] Federal Rules of Civil Procedure (2018) r 23a.

[9] Federal Rules of Civil Procedure (2018) r 23b-3.

[10] Blackie v Barrack, 524 F 2d 906 (9th Cir, 1975).

[11] Ibid.

[12] Halliburton v Erica P John Fund, 573 US 128 (2014).

[13] Schlanger v Four-Phase Systems, 555 F Supp 535 (SDNY, 1984).

[14] Blackie v Barrack, 524 F 2d 906 (9th Cir, 1975).

[15] [1972] USSC 127; 406 US 128 (1972).

[16] Affiliated Ute Citizens v United States, [1972] USSC 127; 406 US 128, 130 (1972).

[17] Basic v Levinson, [1988] USSC 36; 485 US 224, 988 (1988).

[18] Ibid 989.

[19] Anne Small and Donald Verilli Jr, ‘Brief for the United States as Amici Curiae in Support of Respondents’, Submission in Halliburton v Erica P John Fund 573 US (2014) 10.

[20] Securities Exchange Act of 1934 (1934); Securities Act of 1933 (1933).

[21] Securities Exchange Act of 1934, 15 USC § 78b (1934).

[22] [1963] USSC 204; 375 US 180 (1963)

[23] Securities and Exchange Commission v Capital Gains Research Bureau, [1963] USSC 204; 375 US 180, 186 (1963).

[24] Ibid.

[25] James Spindler, ‘We Have a Consensus on Fraud-on-the-Market Theory – And It’s Wrong,’ (University of Texas Law and Economics Research Paper No E562, University of Texas School of Law) 13.

[26] Shores v Sklar, [1981] USCA5 789; 647 F 2d 462 (5th Cir, 1981).

[27] Cornerstone Research Economic and Financial Consulting and Expert Testimony, ‘Securities Class Action Filings 2017 Midyear Assessment’ (2017) 5.

[28] Joel Seligman, ‘The Merits Do Matter: A Comment on Professor Grundfest's 'Disimplying Private Rights of Action Under the Federal Securities Laws: The Commission's Authority' (1994) 108(2) Harvard Law Review 438, 448.

[29] Donald Langevoort, ‘Basic at Twenty: Rethinking Fraud-on-the-Market,’ (Georgetown Law and Economics Paper No 1026316, Georgetown School of Economics) 27; Stephen Choi, ‘The Evidence on Securities Class Actions’ (2004) 57 Vanderbilt Law Review 1465.

[30] 15 USC § 27.

[31] Nicole Mueller et al, ‘Halliburton II: Supreme Court Upholds the Fraud on the Market Presumption, But Gives Securities Defendants a Fighting Chance at Defeating Class Certification’ (7 July 2014) <> Langevoort, above n 29, 1, 13, 27.

[32] Oscar Private Equity Investments v Allegiance Telecom Inc, [2007] USCA5 174; 487 F3d 261 (5th Cir, 2007).

[33] Schleicher v Wendt, 529 F Supp 2d 959 (SD Ind, 2007).

[34] In re Salomon Analyst Metromedia Litigation, 373 F Supp 2d 235 (SDNY, 2005).

[35] In Re DVI Inc Securities Litigation, 249 FRD 196 (ED Pa, 2008).

[36] Jacob Kantrow, ‘Dura Pharmaceuticals, Inc. v Broudo: Not Really a Loss Causation Case’ (2006) 67 Louisiana Law Review 258, 258.

[37] Ibid.

[38] Ibid.

[39] Archdiocese of Milwaukee Supporting Fund Inc v Halliburton, 597 F 3d 330 (5th Cir, 2010).

[40] Erica P John Fund Inc v Halliburton, 563 US 804 (2011).

[41] Halliburton v Erica P John Fund, 573 US 11 (2014).

[42] Ibid.

[43] Ibid.

[44] Ibid 3.

[45] Ross v Bank South, 837 F 2d 980 (11th Cir, 1988).

[46] 133 SCt 1184 (2013).

[47] Halliburton v Erica P John Fund, 573 US 3 (2014).

[48] Ibid 23.

[49] Dickerson v United States, [2000] USSC 59; 530 US 428, 443 (2000).

[50] Halliburton v Erica P John Fund, 573 US11 (2014).

[51] Ibid 4.

[52] Harvard Law Review, ‘Class Actions – Presumption of Reliance Under SEC Rule 10B–5 – Halliburton Co v Erica P John Fund Inc’ (2014) 128 Harvard Law Review 291; Jill Fisch, ‘The Trouble with Basic; Price Distortion After Halliburton’ (2013) 90 Washington Law Review 285, 896.

[53] Halliburton v Erica P John Fund, 573 US 8 (2014).

[54] Ibid.

[55] Food and Drug Administration v Brown & Williamson Tobacco Corp, [2000] USSC 24; 529 US 120, 155–6, 158 (2000).

[56] Amgen v Connecticut Retirement Plans, 133 SCt 1184 (2013).

[57]Tellabs Inc v Makor Issues & Rights Ltd, 551 US 308, 313 (2007).

[58] Halliburton v Erica P John Fund, 573 US 1 (2014).

[59] Ibid.

[60] Ibid.

[61] Ibid.

[62] ‘Price impact’ refers to the correlation between the alleged misrepresentations and share market price. This may manifest as an artificially inflated share price (causing the investor to buy at an overvalued figure) or a corrective disclosure (causing a subsequent drop in value).

[63] Matrixx Initiatives Inc v Siracusano, 131 SCt 1309, 1317 (2011).

[64] Ibid.

[65] Halliburton v Erica P John Fund, 573 US 2 (2014).

[66] Transcript of Oral Argument, Halliburton v Erica P John Fund, (Supreme Court of the United States, 09/1403, Justice Alito, 25 April 2014) 6.

[67] Ibid.

[68] Halliburton v Erica P John Fund, 573 US 4 (2014).

[69] Ibid.

[70] Charles Murdock, ‘Halliburton, Basic, and Fraud-on-the-Market Theory: The Need for a New Market’ (2015) 60 Villanova Law Review 203.

[71] Halliburton v Erica P John Fund, 573 US 2 (2014).

[72] Ibid 16.

[73] Spindler, above n 25, 32.

[74] Harvard Law Review, above n 52, 296.

[75] Halliburton v Erica P John Fund, 573 US 1 (2014).

[76] Harvard Law Review, above n 52, 296.

[77] Ibid.

[78] IBEW Local 98 Pension Fund v Best Buy Co Inc, No 14-3178 (8th Cir, 2016).

[79] Ibid 6.

[80] Adam Pritchard and Todd Henderson, ‘Brief of Law Professors as Amici Curiae in Support of Petitioners’, Submission in Halliburton v Erica P John Fund 573 US (2014).

[81] Ibid 24.

[82] IBEW Local 98 Pension Fund v Best Buy Co Inc, No 14-3178 (8th Cir, 2016).

[83] American Bar Association, ‘Price Impact: The Battle of Experts and the Burden of Proof after Halliburton II’ (9 September 2015), <> .

[84] Jill Fisch, Jonah Gelbach and Jonathan Klick, ‘The Logic and Limits of Event Studies in Securities Fraud Litigation’ [2018] Texas Law Review (forthcoming).

[85] Ibid 4.

[86] Ibid 37.

[87] Ibid 8.

[88] Greenberg v Crossroads Systems Inc, [2004] USCA5 92; 364 F 3d 657, 665–6 (5th Cir, 2004).

[89] Fisch, Gelbach and Klick, above n 84, 5.

[90] Erica P John Fund Inc v Halliburton, 563 US 804 (2011); Halliburton v Erica P John Fund 573 US (2014); Archdiocese of Milwaukee Supporting Fund Inc v Halliburton, 597 F 3d 330 (5th Cir, 2010).

[91] Archdiocese of Milwaukee Supporting Fund Inc v Halliburton, 597 F 3d 330 (5th Cir, 2010).

[92] Ibid 20.

[93] Ibid.

[94] See also the event study’s inability to discern impact where false statements confirm a prior misstatement; Fisch, Gelbach and Klick, above n 84, 5.

[95] Ibid 1.

[96] Transcript of Proceedings, Halliburton v Erica P John Fund, 573 US (2014) 24.

[97] Fisch, Gelbach and Klick, above n 84, 10.

[98] Basic Inc v Levinson, [1988] USSC 36; 485 US 224, 228 (1988).

[99] ‘Federal Jurisdiction and Procedure’ (2015) 128 Harvard Law Review 291, 292.

[100] Mueller et al, above n 31; Langevoort, above n 29, 1, 13, 27.

[101] Cornerstone Research Economic and Financial Consulting and Expert Testimony, ‘Securities Class Action Settlements 2014 Review and Analysis’ Securities Class Action Clearinghouse’ 5 <> .

[102] Stefan Boettrich and Svetlana Starykh, ‘Recent Trends in Securities Class Action Litigation: 2016 Full-Year Review’ (NERA Economic Consulting, 2016). See also California Public Employees’ Retirement System v ANZ Securities Inc, 582 US, 4 (2017).

[103] Jonathan Macey and Geoffrey Miller, ‘The Plaintiffs’ Attorney’s Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform’ (1991) 58 University of Chicago Law Review 1.

[104] Victor Schwartz and Christopher Appel, ‘Rebutting the Fraud-on-the-Market Presumption in Securities Class Actions: Halliburton II Opens the Door’ (2016) 5(1) Michigan Business and Entrepreneurial Law Review 33.

[105] Boettrich and Starykh, above n 102, 6.

[106] Amgen Inc v Connecticut Retirement Plans and Trust Funds, 133 S Ct 1184 (2013).

[107] TSC Industries Inc v Northway Inc, [1976] USSC 119; 426 US 438 (1976)..

[108] Allen Ferrell, ‘Price Impact, Materiality and Halliburton II’ (2015) 93 Washington University Law Review 2, 3.

[109] Halliburton v Erica P John Fund, 573 US 22 (2014).

[110] Ibid.

[111] Leah Neupert, ‘A Court's Guide on How to Gut Precedent by Relying on it: Halliburton II's Puzzling Effect on Securities-Fraud Class Actions,’ (2015) 76 Louisiana Law Review 1, 5.

[112] Wendy Gerwick Couture, ‘Answering Halliburton II's Unanswered Question: Burdens of Production and Persuasion on Price Impact at Class Certification’ (2015) 43 Securities Regulation Law Journal 1, 3.

[113] Boettrich and Starykh, above n 102, 1.

[114] Ibid 22.

[115] Ibid.

[116] Jonathan Adler, ‘Prof Charles Korsmo on the Supreme Court’s Halliburton Decision,’ Washington Herald, 24 June 2014, <> .

[117] The number of cases receiving certification has fallen to 89 per cent in 2016. See Boettrich and Starykh, above n 102, 22.

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