WASHINGTON (Legal Newsline) -- Business groups are urging the U.S. Supreme Court to review a case that, they argue, challenges a key precedent in securities class action cases.
On Thursday, the U.S. Chamber of Commerce and the National Association for Manufacturers filed an amicus brief in support of the petitioners in Halliburton Co. v. Erica P. John Fund Inc.
In the case at hand, Halliburton allegedly made misrepresentations concerning its accounting practices, the projected efficiencies of a merger and its projected asbestos liability.
The plaintiffs claim that Halliburton's stock dropped in price when the truth regarding these alleged misrepresentations was revealed, and sued as a putative class in 2002.
In their brief, the Chamber and NAM noted they have a "keen interest" in the case because private securities class action litigation puts a burden on American businesses and adversely affects access to capital markets.
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"We hope that the U.S. Supreme Court will take up this important case that would help to address the scourge of securities class action lawsuits that siphon productive capital out of the manufacturing economy while enriching a narrow group of trial lawyers," NAM Senior Vice President and General Counsel Linda Kelly said in a statement.
"Private securities class action litigation imposes a significant cost burden on manufacturers, impairing their ability to grow and create jobs by diverting financial resources toward legal fees and settlements, often with no net benefit to shareholders."
The case involves the "fraud on the market" theory of liability in securities class actions.
The theory has greatly facilitated securities class actions and has contributed to their exponential growth since the late 1980s, the business groups argue.
DRI -- The Voice of the Defense Bar also filed an amicus brief in support of the petitioners last week.
"To ensure consistency in class-action jurisprudence and to give securities-fraud defendants a realistic opportunity to test the propriety of class certification, this Court should grant Halliburton's petition and make clear that a defendant can seek to rebut the presumption of reliance at any time -- including at the class-certification stage -- with evidence that the alleged misrepresentations did not affect the stock price," the defense bar wrote in its brief, filed Friday.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.