Oil Titan Halliburton Co. Insists US Supreme Court Overrule Current Securities Law
The Oil titan Halliburtron Co has recently requested that the Supreme Court reconsider the 1988 Supreme Court Case, Erica P. John Fund v. Halliburton. To be certain, Erica P. John Fund is a shareholder of the oil giant. The Fund's decades-long litigation with the oil company comes from the notion that Halliburton misrepresented some very crucial information concerning Halliburton's shareholder activities, for instance, overstating revenue and understating perceived liabilities. Because of this, the Fund is attempting to have its action against the defense (Halliburton) in the form of a class action suit: a kind of lawsuit which is enacted on behalf of a particular group of people who have been offended by the same injury. A CAL allows EPJ to litigate on behalf of all Halliburton shareholders, which would quickly increase the money on the table in the litigation.
The Times recently included an excellent analysis of the Halliburton case, should it agree to hear the case. The New York Times publication illustrates how many securities fraud lawsuits involve the idea of €reliance€, which means the litigation - or in this case, shareholders acted in reliance of the allegedly criminal behavior of the company. The Supreme Court has a expansive interpretations of "reliance". In order to prove reliance, a shareholder need not read a prospectus and the fraudulent statements it contains. Rather, courts view any deceptive statement made by a business (and accepted by the public) that has any bearing on its financial value and is included in the total price of the its securities. Courts typically justify this decision on the basis that markets always price securities using all available information, something that is widely accepted in the study of finance. Thus, even though most investors do not crucially review prospectuses and financial statements made publicly available by the companies in whom they invest; plaintiffs can still demonstrate €reliance€ as long as they have bought securities with the corporation. As more shareholders come forward and are capable of proving reliance, CALs become easier to take to court.
In the company's official request to re-open the case, Halliburton hinted that it will likely contest that the current definition of reliance is too expansive. The oil company will claim that the Supreme Court should interpret reliance as something more involved than merely purchasing securities; for example, the court could start by requiring them to review a financial statement or fraudulent prospectus. Such a proposal could definitely get enthusiastic backing from the business community.
As the NY Times article points out, '12 in an unrelated case, four justices suggested that they were willing to overrule the former, loose definition of €reliance.€ If the Supreme Court eventually hears Halliburton's case, the main question will be whether the company can get a much-needed fifth vote on the Court.
The Times recently included an excellent analysis of the Halliburton case, should it agree to hear the case. The New York Times publication illustrates how many securities fraud lawsuits involve the idea of €reliance€, which means the litigation - or in this case, shareholders acted in reliance of the allegedly criminal behavior of the company. The Supreme Court has a expansive interpretations of "reliance". In order to prove reliance, a shareholder need not read a prospectus and the fraudulent statements it contains. Rather, courts view any deceptive statement made by a business (and accepted by the public) that has any bearing on its financial value and is included in the total price of the its securities. Courts typically justify this decision on the basis that markets always price securities using all available information, something that is widely accepted in the study of finance. Thus, even though most investors do not crucially review prospectuses and financial statements made publicly available by the companies in whom they invest; plaintiffs can still demonstrate €reliance€ as long as they have bought securities with the corporation. As more shareholders come forward and are capable of proving reliance, CALs become easier to take to court.
In the company's official request to re-open the case, Halliburton hinted that it will likely contest that the current definition of reliance is too expansive. The oil company will claim that the Supreme Court should interpret reliance as something more involved than merely purchasing securities; for example, the court could start by requiring them to review a financial statement or fraudulent prospectus. Such a proposal could definitely get enthusiastic backing from the business community.
As the NY Times article points out, '12 in an unrelated case, four justices suggested that they were willing to overrule the former, loose definition of €reliance.€ If the Supreme Court eventually hears Halliburton's case, the main question will be whether the company can get a much-needed fifth vote on the Court.
