Court grants two cases (UPDATED)
on Nov 15, 2013 at 1:27 pm
The Supreme Court agreed on Friday to reconsider a 1988 decision that has been the key to investors’ right to sue when they lose money because of securities fraud — the ruling in Basic Inc. v. Levinson. That is the main issue in Halliburton Co. v. Erica P. John Fund, Inc. — a case that was before the Court two years ago.
In a second granted case, Plumhoff v. Rickard, the Court will try to clarify further when police act unconstitutionally by pursuing a suspect in a high-speed chase that results in death or injury. (UPDATE: The Court took no action Friday on a plea to block the new abortion control law in Texas.)
The Court’s decision in the Basic Inc. case a quarter-century ago laid down the rule that a group of investors who claim that they lost money because of distorted information about a stock need not show that they had actually relied upon the misinformation. The Court, relying upon a theory that an efficient stock exchange will reflect all of the information that there is about a given security, said that investors could be presumed to have relied upon the distortions without specific proof that they had done so. The presumption could be rebutted, though. The shortcut that investors are allowed to take is known to lawyers and judges as the “fraud-on-the-market” presumption.
Basic Inc. was a four-to-two decision, with only six Justices taking part. The only two current Justices then on the Court — Justices Anthony M. Kennedy and Antonin Scalia — did not take part in that ruling. Four of the current Justices, though, have said that, at some point, they would be willing to reconsider the Basic Inc. precedent.
Halliburton Co., locked for years in a lawsuit over investors’ claims that the company put out seriously misleading information that affected the company’s stock price, argued in the new case that the Basic Inc. decision was based upon a flawed economic theory. The company contended that the presumption of “reliance” was especially misplaced when investors sue in a class-action lawsuit, because it enables them to proceed as a class even without proving that their own losses could be traced to distorted information.
The investors and funds who sued Halliburton in the case urged the Supreme Court to leave the Basic Inc. decision intact, saying it was “the foundation for modern, private securities litigation.” A group of former Securities and Exchange Commission members and law professors went even further, saying in an amicus brief that the 1988 decision is “the most powerful engine of civil liability ever established in American law.”
In asking the Court to hear the case, Halliburton’s first plea was to overrule outright the 1988 ruling. It also said that, if the Court were not willing to go that far, it at least should require the suing investors to prove that the distorted information did, in fact, have an impact on the market price of a stock.
In granting review, the Court did not limit its consideration to either question, so presumably it at least will consider the broader plea to cast aside the prior ruling.
The Court released its new grants on Friday afternoon, rather than waiting until Monday, because it is seeking to add more cases to its argument calendar for the February sitting. It did not expedite the briefing schedule in either case, however.
The second case the Justices said they would hear is something of a sequel to a 2007 decision, Scott v. Harris. In that ruling, the Court decided that police did not use unconstitutionally excessive force when an officer rammed a car fleeing in a high-speed chase, in order to get the vehicle to stop. The ramming in that case resulted in crippling injuries to the fleeing motorist.
The new case grew out of a police chase along the border of Arkansas and Tennessee in July 2004. A West Memphis, Arkansas, police officer made a traffic stop of a car driven by Donald Rickard. Riding with him as a passenger was a woman, Kelly Allen. When the officer approached the car, and asked about a dent in the car, the driver answered. Asked by the officer to step out of the car, Rickard instead sped off.
He then led that policeman and other officers through a high-speed chase over a bridge into Memphis, Tennessee, and through the streets of Memphis. Ultimately, the pursuing officers fired three shots into the passenger side of the vehicle, and then a dozen more shots as the vehicle eluded them further. The shots killed both Rickard and his passenger.
Rickard’s minor daughter, through her mother, sued the officers involved in the incident. The officers claimed qualified legal immunity to the lawsuit, but both a federal district court and the Sixth Circuit rejected the claim.
Six police officers then sought Supreme Court review, seeking to block the lawsuit on an immunity claim.