Litigation Alert: Supreme Court Rejects Fifth Circuit’s Requirement That Plaintiffs in a Securities Fraud Litigation Prove Loss Causation in Order to Obtain Class Certification
6/9/2011
This week the Supreme Court held that securities fraud plaintiffs do not need to prove loss causation in order to obtain class certification. Prior to Erica P. John Fund v. Halliburton Co, the Fifth Circuit imposed an exceedingly high burden on plaintiffs at the class certification stage, requiring a plaintiff to prove that the defendant’s conduct caused an economic loss. The decision rejected the Fifth Circuit’s practice and supported the Second, Third, and Seventh Circuits’ holdings that proof of loss causation is not a prerequisite to invoking the fraud-on-the-market presumption of reliance. Analysis of this decision and its implications are detailed in this alert.
