to file class-action lawsuits against public companies.
he Supreme Court on Monday is set to hear arguments in a case that could dramatically raise the bar for shareholders seeking to file class-action lawsuits against public companies. The issue is especially timely, because dozens of shareholder class actions stemming from the financial meltdown are now making their way through the courts.
The central issue in the case, Erica P. John v. Halliburton, is how courts should set the threshold for certifying a shareholder class action alleging securities fraud. A group of mutual and pension fund investors sued Halliburton in 2002, alleging that the oilfield services company understated its vulnerability to asbestos-related lawsuits and that it overstated its revenues. Those misstatements, the suit alleged, artificially pumped up Halliburton's stock price.
A federal trial court in Texas threw out the case, ruling that shareholders hadn't proved that their losses were tied to a particular statement made by the company or its officers -- a concept known as loss causation. That decision essentially imposed a new test for plaintiffs to meet at the class-certification stage. An appeals court upheld the ruling. Plaintiffs' and defense lawyers agree that a Supreme Court ruling upholding the lower courts could radically change the dynamic of shareholder lawsuits.
'DEVASTATING EFFECT'
A ruling for the company could have a "devastating effect" on shareholders' ability to survive the class-certification stage, said Arthur Miller, a professor at New York University Law School who also practices law at Milberg LLP, which represents plaintiffs in shareholder cases.
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http://www.reuters.com/article/2011/04/25/us-court-halliburton-idUSTRE73O2Q720110425
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