	Introduction

On June 23, 2014, the Supreme Court decided a much-anticipated case in the area of federal securities law. Class certification is important in the securities area, and lawsuits are often brought to challenge the class of plaintiffs attempting to be certified. In addition, the amount of money involved in a class action securities lawsuit may be significant. Proponents and opponents of securities class actions have actively argued their points. Proponents believe that certification requirements must be kept to a minimum because investors should be able easily to pursue companies that have committed fraud. They also argue that the only people who benefit from securities class actions are the attorneys who receive large legal fees. The Halliburton cases illustrate the importance of class certification. The history of the cases leading to the second Supreme Court Halliburton decision is lengthy, spanning more than a decade. Thus far, the courts have dealt only with the issue of class certification; they have not yet had the opportunity to address the merits of the plaintiffs' arguments. There have been three rounds of decisions in the Federal District Court for the Northern District of Texas and two rounds in the U.S. Court of Appeals for the Fifth Circuit and the U.S. Supreme Court. The Federal District Court for the Northern District of Texas has issued a third decision on class certification after the Supreme Court's remand. Rule 23 of the Federal Rules of Civil Procedure (FRCP) sets out requirements that class actions must meet. In the area of securities fraud class action certification, Basic v. Levinson discussed the predominance requirement. The fraud-on-the-market theory is based on the belief that, in an efficient, well-developed securities market, all material information about a company is available to the public and this information is reflected in the stock price. In an unpublished opinion, the Federal District Court for the Northern District of Texas declined to certify the class to bring the lawsuit on the basis that the plaintiffs had not proved reliance (one of the necessary elements for proving a Section 10(b) claim, as mentioned above) on material misstatements made by Halliburton. The Supreme Court concluded by stating that the Court of Appeals erred when it required the Erica P. John Fund to prove loss causation at the certification stage. The Court refused to address any other questions which Halliburton might have, such as the presumption of reliance under the fraud-on-the-market theory or how and when the presumption might be rebutted. Fifth Circuit Decision—II

Halliburton appealed to the Fifth Circuit, and in April 2013 the Fifth Circuit in Erica P. John Fund, Inc. v. Halliburton Co. affirmed the district court's decision to certify the class. The Court decided, with respect to the first question stated at the beginning of this report, not to overrule the presumption of reliance provided by the fraud-on-the-market theory but that, with respect to the second question, defendants in a class action may attempt to rebut the presumption of reliance at the class certification stage by introducing evidence that the alleged misrepresentations did not distort the market price of its stock. However, based on its analysis of the Supreme Court's Halliburton II decision, which, according to the district court, clarified that securities fraud defendants may rebut the Basic presumption at the class certification stage, the district court found that the burdens of production and persuasion to show lack of price impact were on Halliburton, the defendants. Halliburton II was clearly not the end of the Erica P. John Fund v. Halliburton saga. The federal district court decision has fleshed out some of the particulars of the Supreme Court's Halliburton II decision. It approved the use of event studies by both parties to attempt to determine whether alleged misstatements cause a drop in share price. However, this case is not the end of the class certif. tion challenges, as the fifth Circuit has granted Halliburton leave to appeal. If the class is finally certified, the courts may then face the merits of the case.
On June 23, 2014, the U.S. Supreme Court decided a much-anticipated case in the area of federal securities law: Halliburton Co. v. Erica P. John Fund, Inc. The history of the case spans more than a decade, through three rounds in federal district court and two rounds in the court of appeals and the Supreme Court. All of the cases so far have dealt with the issue of class certification for securities fraud plaintiffs. The merits of the case have not yet been considered.
Class certification is important in the area of securities law because the merits of the case cannot be considered until after the class of plaintiffs has been certified. A class of many plaintiffs suing a company for fraud that has allegedly resulted in investment losses may be a formidable plaintiff, and a significant amount of money may be involved. So much money may be involved in these lawsuits that proponents and opponents have been very vocal. Proponents of such suits believe that certification requirements should be kept to a minimum to protect investors and the marketplace. Opponents of minimum certification requirements have argued that class action suits are often frivolous and are brought to pressure companies to settle rather than incur large litigation costs. They also argue that plaintiffs' attorneys, who may receive large legal fees, are the only ones who benefit from class actions.
The Halliburton cases illustrate the importance of class certification. There have been two rounds of decisions in the Federal District Court for the Northern District of Texas, the U.S. Court of Appeals for the Fifth Circuit, and the U.S. Supreme Court.
The Erica P. John Fund accused Halliburton of violating federal securities fraud statutes by making material misstatements with respect to its liabilities, revenues, and cost savings. In the first round of cases, the Federal District Court for the Northern District of Texas declined to certify the class on the basis that the plaintiffs had not proved reliance on material misstatements made by Halliburton. The U.S. Court of Appeals for the Fifth Circuit refused to certify the class on the basis that the class had not shown loss causation at the class certification stage. The Supreme Court reversed, holding that the proving of loss causation at the class certification stage is not required. The Court refused to address any other questions which Halliburton might have, such as the presumption of reliance under the "fraud-on-the-market theory" (a theory recognized in the Supreme Court case Basic v. Levinson—that, in an efficient, well-developed securities market, all material information is available to the public and this information is reflected in the stock price, resulting in presumptive reliance by plaintiffs on the material misstatements).
In the second round, the district court certified the class, believing that the class certification requirements of Rule 23 of the Federal Rules of Civil Procedure had been met. The Fifth Circuit affirmed certification and concluded that Halliburton could not introduce evidence that its alleged misrepresentations had no impact on the stock price. The Supreme Court held that price impact evidence could be introduced at the class certification stage to rebut the presumption that the shareholders had relied on the alleged misstatements. However, the Court refused to overrule Basic v. Levinson's presumption of reliance provided by the fraud-on-the-market theory.
Halliburton II was clearly not the end of the Erica P. John Fund v. Halliburton saga. A third round in federal district court fleshed out some of the particulars of the Supreme Court's Halliburton II decision. It approved the use of event studies by both parties to attempt to determine whether alleged misstatements caused a drop in share price. However, even this case is not the end of the class certification challenges because the Fifth Circuit has granted Halliburton leave to appeal. If the class is finally certified, the courts may then face the merits of the case.