The US Supreme Court [official website] heard oral arguments [day call, PDF] Wednesday on class certification procedures in stock and securities fraud litigation. In Halliburton Co. v. Erica P. Johnson Fund, Inc. [transcript, PDF] the court will decide whether the Fifth Circuit's ruling [text] is contradictory both to prior Supreme Court precedents and to the Federal Rule of Civil Procedure 23 [text] by requiring plaintiffs in securities fraud cases to show loss causation to obtain class certification, or whether that causation should be brought at trial. The Supreme Court ruling will settle a circuit split between the Fifth Circuit and the Third, Seventh and Second Circuits [opinions, PDF]. In deciding this case, the Supreme Court will determine what role causation of loss plays in the stage of certifying a class during a fraud-on-the-market securities case, which will impact the standard necessary to determine reliance in a class action securities lawsuit.
This is not the Supreme Court's only reflection on class action lawsuits and securities. Last month, the Supreme Court ruled [JURIST report] 7-2 in Chadbourne and Parke LLP v. Troice [opinion, PDF] that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) [text, PDF] did not bar the plaintiffs' state law class action suit. The lawsuit was brought by the victims of the multibillion dollar Ponzi scheme orchestrated by Allen Stanford [BBC profile; JURIST news archive]. In August a federal judge in Florida dismissed [JURIST report] a lawsuit against the Securities and Exchange Commission (SEC) [official website] over the agency's alleged failure to report Stanford's Ponzi scheme to the Securities Investor Protection Corporation (SIPC) [official website]. In June 2012 Stanford was sentenced [JURIST report] to 110 years in prison for his Ponzi scheme. The trial against Stanford began after a federal judge ruled in 2011 that he was competent to stand trial, overruling a previous determination [JURIST reports] that his anti-anxiety and anti-depression medications rendered him unable to meaningfully contribute to his defense.