In a one-page Order Wednesday, Judge Swain stayed a securities class action accusing AIG of concealing its exposure to subprime securities pending a ruling from the Supreme Court in Halliburton Co. v. Erica P. John Fund, Inc., a case challenging the presumption of classwide reliance on the price of securities that are traded in efficient markets. The Halliburton case is scheduled for argument in March and a ruling is expected by July. The lead plaintiff argued that other courts have rejected stays pending the Halliburton ruling, but the defendants responded that, unlike in those other cases, fact discovery was already complete. The defendants also argued that Halliburton is a potential “game changer” for securities litigation:
Lead Plaintiff’s contention that the significance of Halliburton . .. is “speculative” and mere “conjecture” is hard to take at face value given the centrality of the fraud-on-the-market presumption and the fact that its continued existence (or how it is to be applied at class certification if it survives) is directly before the Supreme Court, generating great interest from the media, commentators and amici. As the Court is likely aware, Basic [the case establishing the presumption] was decided by a bare quorum of the Court and none of the four justices who constituted the quorum are still on the Court. It also used economic and policy-based reasoning that was questioned by Justices O’Connor and White in their dissent in part at the time and that has since been significantly undermined.
Our prior post on the AIG case is here. More on the Halliburton case can be found at SCOTUSBlog.