High court to hear Halliburton appeal

The Supreme Court decided Friday to hear an appeal from Halliburton that could make it more difficult for shareholders to sue companies for engaging in fraud to prop up stock prices.

The high court agreed to hear the company’s attempt to stop legal action from shareholders who bought stock between June 1999 and December 2001.

Their lawsuit argues that Halliburton deliberately understated the company’s liability in asbestos litigation, inflated how much money its construction and engineering units would bring in, and overstated the benefits of a merger with Dresser Industries. When Halliburton made corrective disclosures, the stock price dropped, causing investors to lose money, the lawsuit says.

This is the second time the case has been to the Supreme Court. The U.S. Court of Appeals for the 5th Circuit, based in New Orleans, originally refused to let the lawsuit go forward as a class action. But the Supreme Court said in 2011 that that ruling was incorrect, and the lawsuit was certified as a class-action suit by the lower courts.

Now Halliburton’s attorneys want the Supreme Court to throw out its 1988 decision in
Basic v. Levinson, which the shareholders’ attorneys call “the cornerstone for modern private securities litigation.” That decision says shareholders do not have to prove that they relied on a company’s misrepresentation in order to obtain class certification, meaning that judges can assume that misrepresentations by corporations were taken into account by shareholders when they bought the stock.

Halliburton attorneys said that should be overruled or modified to say plaintiffs must prove that the alleged misrepresentations distorted the stock’s market price. A decision upholding that theory would make it harder for shareholders to band together in class-action lawsuits to sue corporations in securities cases.

— Associated Press

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