Halliburton Co. v. Erica P. John Fund, Inc. (13-317)

argument 13-317

Halliburton Co. v. Erica P. John Fund, Inc.

Supreme Court of the United States 1h 0m 6 speakers 8 chapters transcribed 6 days ago official recording ↗

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Why do the petitioners argue that BASIC should be overruled?

John G. Roberts 0:01

We'll hear argument this morning in case 13-317, Halliburton Company versus the Erica P. John Fund. Mr. Street.

Ted B. Weeden 0:09

Mr. Chief Justice, and may it please the Court. Basic v. Levinson should be overruled because it was wrong when it was decided and it is even more clearly erroneous today. Basic substituted economic theory for the bedrock common law requirement of actual reliance that Congress embraced in the most analogous express cause of action. Basic's judicially created presumption preserves an unjustified exemption from Rule 23 that benefits only securities plaintiffs. BASIC has proven unworkable, has been undermined by later developments, and has proven to have harmful consequences for investors and companies alike. The most direct course is to overrule BASIC altogether and require a showing of actual reliance.

Unknown 1:00

I believe that in BASIC, Justice Blackmun said that There is this economic theory, but also the motivation for the Exchange Act and probability and common sense would lead to this presumption, this rebuttable presumption. So he wasn't relying strictly on an economic theory. I think two or three times in an opinion, he tries to make that claim.

Ted B. Weeden 1:34

Yes, Justice Ginsburg, but the Court in Basic recognized that Section 18A was the proper analog, but then it immediately turned to its own notions of public policy and the best way to further congressional policy instead of asking what sort of reliance does Section 18A require?

Unknown 1:54

But where is that, that it says that 18A is the — I

Ted B. Weeden 1:58

believe it's on page 245 where the Court says, we acknowledge the argument that Section 18A is the proper analog and we accept that there is a reliance requirement under 10B, but the Court then jumps to creating a presumption of reliance rather than asking what sort of reliance Section 18A requires, which has always been understood to be actual eyeball reliance.

Anthony M. Kennedy 2:23

Mr. Street, that argument, of course, is just an argument that basic was wrong in not focusing on Section 18. And that's contestable. One could say, actually, they were right not to focus on Section 18. Section 9 is the closer analog. But let's put that aside. Are you just saying basic is wrong, or are you saying that something has changed since basic? Because usually that's what we look for. when we decide whether to reverse a case, something that makes the question fundamentally different now than when we decided it. And that's especially so in a case like this one where Congress has had every opportunity and has declined every opportunity to change basic itself. So what has changed in your view?

Ted B. Weeden 3:09

MR. We are saying both that it was wrong when decided and that certain things have changed, at least three things, Your Honor. First of all, this Court has fundamentally changed its approach to interpreting the Section 10b cause of action. It's consistently construed it narrowly, and basic stands out like a sore thumb among that jurisprudence. Second, this Court has consistently held in Comcast and Walmart that there cannot be presumptions of class-wide issues. Instead, class-wide issues must be proved in fact. The Court addressed plaintiff's experts in those cases who purported to establish class-wide methodologies and the Court tested those with rigor to determine whether they proved in fact that there were class-wide issues.

Ted B. Weeden 3:48

And we're asking this Court to give the basic presumption, the same rigor that this Court gave the expert reports in Comcast and Walmart, at the very least because those expert reports only generated one class action, and this is underlined.

Anthony M. Kennedy 4:01

What is your third question?

Ted B. Weeden 4:02

Pardon?

Anthony M. Kennedy 4:03

You said three. What is your third?

Ted B. Weeden 4:04

Yes, and my third is that the economics have changed. The economic premise is a basic, in particular, the premise that investors rely in common on the integrity of the market price. The government and the fund do not even contend. They don't even contest that that's the case anymore. Many investors, such as hedge fund, rapid-fire volatility traders, and index fund investors, sophisticated value investors, they have investment strategies that do not rely on the integrity of the market price whatsoever.