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From Securities Regulation Daily, August 6, 2014

Class certification vacated to allow evidence of Halliburton price impact

By Jim Hamilton, J.D., LL.M.

In one of the first post-Halliburton rulings, an Eleventh Circuit panel vacated a trial court’s certification of a private securities fraud class action to allow evidence of price impact and how it may have affected the fraud-on-the-market presumption of reliance. In Halliburton v. Erica John Fund, the Supreme Court ruled that evidence of price impact could be introduced at the class certification stage of a securities fraud action to rebut the fraud-on-the-market presumption of reliance. In doing so, Halliburton also endorsed the continuing vitality of the fraud-on-market reliance presumption first announced in the Supreme Court’s 1988 opinion in Basic, Inc. Levinson (Local 703 v. Regions Financial Corp., Aug. 6, 2014, Martin, B.).

The Basic inquiry does not end once the presumption of class-wide reliance has been invoked, noted the appeals court. In Halliburton, the Supreme Court recently held that defendants may introduce price impact evidence both to undermine the plaintiff’s case for market efficiency and to rebut the Basicpresumption once it has been established. The company presented evidence that its stock price did not change in the wake of any of the alleged misrepresentations.

The district court, relying on the state of the law before the Supreme Court’s Halliburton ruling, did not fully consider this evidence.The district court must now reconsider the company’s case for rebutting the presumption of reliance in light of Halliburton. But the district court’s work on remand will be limited in scope, noted the appeals panel. The Supreme Court only said that a company may seek to defeat the Basic presumption with evidence that the misrepresentations did not impact the price.In the panel’s views, Halliburton by no means holds that in every case in which such evidence is presented, the presumption will always be defeated.

But in any event, in remanding, the panel said that the district court is in the best position to review all the facts and conduct the inquiry now required in the wake of the Halliburton ruling.

The case is No. 12-14168.

Attorneys: Joseph David Daley (Robbins Geller Rudman & Dowd LLP) for Local 703, I B of T Grocery and Food Employees Welfare Fund, Employees' Retirement System of the Virgin Islands, and District No. 9, I.A. Of M. & A.W. Pension Trust. Maibeth J. Porter (Maynard Cooper & Gale PC) for Regions Financial Corp.

Companies: Regions Financial Corp.

MainStory: TopStory FraudManipulation AlabamaNews FloridaNews GeorgiaNews

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