In Re Halliburton: Be Careful What You Wish For

The business community has been close to unanimous in its belief that if the Supreme Court overturns the 1988 Basic decision when it rules in the Halliburton case, it will be a big win. The major point at issue in Halliburton Co. v. Erica P. John Fund Inc is whether the “fraud-on-the-market” theory, as established in the Basic decision, will be upheld, the presumption being that if it is not, securities class actions as we know them will disappear, litigation costs will go down and insurance rates will drop. McDermott Will & Emery attorneys John A. Sten, Jason C. Moreau and Bridget K. O’Connell say not so fast. Securities class actions as we know them may disappear, but the question then becomes what will appear in their place. The writers compare the strategies of securities plaintiff lawyers to water that “finds its way,” and they predict what those strategies are likely to be if the Supreme Court decides to negate the fraud-on-the-market theory.