Supreme Court Decides Non-ERISA Stock Case

Although we are still awaiting the Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court has issued a non-ERISA stock case that may have an impact on ERISA stock cases.

In yesterday’s decision, Halliburton v. Erica P. John Fund, the Supreme Court examined the “presumption of reliance”, which applies in securities fraud cases. Plaintiffs in securities fraud cases must show that they relied on a company’s alleged material misrepresentation when deciding to buy or sell the company’s stock. Under the “presumption of reliance”, investors who buy or sell stock at the market price are considered to have relied on the company’s misrepresentation. In order to use the presumption of reliance, an investor has to show that: (1) the company’s alleged misrepresentations were publicly known, (2) the alleged misrepresentations were material, (3) the stock traded in an efficient market, and (4) the investors traded the stock between the time the alleged misrepresentations were made and the truth was revealed.

ERIC members and trial members can read more here.

The Court's decision is available here.