Supreme Court to Revisit Investor Class Actions

Pensions & Investments
November 18, 2013

Lawrence Sucharow warns that overruling Basic Inc. vs. Levinson will jeopardize investors' ability to recover losses

The Supreme Court has agreed to revisit the fraud-on-the-market theory in Basic Inc. v. Levinson, 485 U.S. 224 (1988), which investors heavily rely on when bringing securities fraud claims. It was under fire earlier this year in Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. 1184 (2013). There, the Supreme Court ruled in favor of investors, stating that claimants do not need to prove materiality at the class certification stage in order to invoke the presumption and obtain certification.

"It's the future of securities fraud class action that hangs in the balance," said Lawrence Sucharow, chairman of law firm Labaton Sucharow LLP in New York, in an interview. Granting Halliburton's argument for revisiting a 1988 legal ruling that allows for fraud-on-the-market lawsuits "would make it virtually impossible to form a securities fraud class action," said Mr. Sucharow, whose firm represents investors in such lawsuits.

"There's a reason for these laws. If you lived through the financial crisis, you've got to believe that there is fraud."