The Fraud-on-the-Market Method of Proving Securities Fraud: Indispensable Theory, or Device to Induce Settlements?

Transcription

1 The Fraud-on-the-Market Method of Proving Securities Fraud: Indispensable Theory, or Device to Induce Settlements? Larry Bumgardner, Graziadio School of Business and Management, Pepperdine University, USA ABSTRACT The future vitality or perhaps even availability of class action shareholder suits alleging securities fraud may depend on an upcoming U.S. Supreme Court ruling. That is because the court, for the second consecutive term, has heard a case that could result in limiting or even rejecting the fraud-onthe-market theory of proving securities fraud. Although the justices 2013 decision ended up turning primarily on procedural grounds, this year s case, Halliburton v. Erica P. John Fund, presents a more direct and frontal challenge to the fraud-on-the-market theory as a whole. 1 The legal presumption created by the fraud-on-the-market theory involves both law and economics two subjects notorious for prompting conflicting views. Thus it is not surprising that the concept has been subject to extensive debate ever since it was adopted by the Supreme Court more than a quarter-century ago. What is beyond debate, however, is that this disputed theory has become a crucial building block for a plethora of class action shareholder suits against public companies in the United States. That is why both public companies and plaintiffs lawyers are eagerly anticipating the upcoming ruling in Halliburton. INTRODUCTION When a public company suffers a sharp and unexpected decline in its stock price, it becomes vulnerable to shareholder suits alleging securities fraud. Seeking to recoup at least a portion of their lost stock value, current and former shareholders will often allege that the public company provided incorrect information about some aspect of its business, or that it had failed to reveal all of the information that would have been important to shareholders. Section 10(b) of the Securities Exchange Act of 1934 and the corresponding Rule 10b-5, prohibiting material misstatements or omissions in relation to a security, provide the legal foundation for these claims. 2 These shareholder suits against public companies have become so prevalent that they are often called strike suits. Class action lawyers will quickly strike deep-pocketed public companies after their stock price has plunged, often hoping for a relatively fast and easy settlement. Depending on the facts of the case, there could be many thousands of shareholders included in the class of plaintiffs. That means that the damages that could be awarded to a successful class action might easily reach multimillions of dollars, should the case ever reach a jury trial. Knowing that there is great risk in allowing any class action to go to trial, most defendant public companies feel that it is almost imperative to settle these claims early in the process, regardless of the underlying merits of the case. As a result, whether a shareholder suit is initially certified as a class action has become the key legal battleground in these cases. Once the class has been approved by a court, the class action plaintiffs have gained great leverage over the company, and a settlement of the underlying The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue 121

2 case is very likely to follow. Limiting the company s risk by settling for a known and certain amount is an understandable business decision. However, it is highly frustrating to a company to incur significant settlement costs if the firm did not actually mislead its shareholders or otherwise violate securities laws. Thus public companies would like a way to reduce the availability of these class actions suits. CLASS ACTIONS To prevail in a securities fraud suit, the shareholders must prove that any such material misstatement caused their loss, and that they relied on the misstatement. In a suit brought by just one shareholder, proving the reliance element might not be too challenging a requirement. However, the small amount of potential recovery for most individual shareholders, especially compared to the high cost of bringing the lawsuit, effectively precludes most shareholders from bringing these claims on a case-bycase basis. A class action suit, however, enables a large number of shareholders to sue collectively for relatively small amounts each. That can resolve the cost issue for individual shareholders, but it creates a dilemma for plaintiffs attorneys in convincing a court to allow a case to proceed as a class action. For a group of plaintiffs to be certified as a class action, Federal Rule of Civil Procedure 23 requires that questions of law or fact common to class members predominate over any questions affecting only individual members. 3 Strictly applying that commonality requirement to a potential class action involving perhaps thousands of different shareholders could make it next to impossible to certify a shareholder class action alleging securities fraud. That is because the many shareholders in a class action would have bought or sold their shares at various times, and for different reasons, meaning the reliance issue could vary greatly from case to case. As the Supreme Court explained in its seminal 1988 case, Basic v. Levinson: Requiring proof of individualized reliance from each member of the proposed plaintiff class effectively would have prevented respondents from proceeding with a class action, since individual issues then would have overwhelmed the common ones. The District Court found that the presumption of reliance created by the fraud-on-the-market theory provided a practical resolution to the problem of balancing the substantive requirement of proof of reliance in securities cases against the procedural requisites of [Federal Rule of Civil Procedure] ADOPTING THE THEORY To address this problem, the Supreme Court formally adopted the fraud-on-the-market theory, a concept that had been developing in the lower courts for a number of years. In Basic, the court established a rebuttable presumption of reliance by all class members premised on the overall efficiency of the public stock market. This principle, the Basic ruling stated, is based on the hypothesis that, in an open and developed securities market, the price of a company s stock is determined by the available material information regarding the company and its business. 5 As a result, the majority opinion continued, misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements. 6 To explain the economic rationale behind this newly endorsed theory, Justice Harry Blackmun s majority opinion in Basic quoted from a 1980 lower court ruling: 122 The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue

3 With the presence of a market, the market is interposed between seller and buyer and, ideally, transmits information to the investor in the processed form of a market price. Thus, the market is performing a substantial part of the evaluation process performed by the investor in a face-to-face transaction. The market is acting as the unpaid agent of the investor, informing him that given all the information available to it, the value of the stock is worth the market price. 7 The Basic decision added that an investor buying at the market price does so in reliance on the integrity of that price. Because most publicly available information is reflected in market price, an investor s reliance on any public material misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5 action. 8 By adopting this fraud-on-the-market presumption, Basic greatly facilitated the development of these class action shareholder suits. CRITICISM OF BASIC RULING Even though Basic has been the governing precedent since 1988, it has been under frequent attack during that time, and especially in recent years. One of the factors making it vulnerable to challenge is that only six justices participated in the original ruling (the bare minimum for a U.S. Supreme Court quorum), ultimately allowing a four-person majority to decide the outcome. Only Justices Blackmun, William Brennan, Thurgood Marshall, and John Paul Stevens all part of the court s more liberal bloc of that era agreed to the Basic ruling in full. Justices Byron White and Sandra Day O Connor concurred on a different part of the majority opinion (relating to the meaning of materiality for securities fraud in the setting of preliminary merger discussions), but strongly dissented from the fraud-on-the-market aspect of the ruling. The dissent, written by White and joined by O Connor, warned that the court s adoption of the relatively new theory may have many adverse, unintended effects as it is applied and interpreted in the years to come. 9 Noting the potential for courts to misapply this theory, Justice White added: Confusion and contradiction in court rulings are inevitable when traditional legal analysis is replaced with economic theorization by the federal courts. 10 Chief Justice William Rehnquist and Justices Antonin Scalia and Anthony Kennedy were the three members of the 1988 court who did not participate in Basic. As a result, the most conservative and business-friendly justices of that era did not have an opportunity to opine on this important doctrine affecting public companies. Another line of attack focuses on Basic s underlying economic theory of efficient stock markets by questioning whether the markets truly are efficient. The debate on that issue continues, and arguably with greater disagreement than in Especially considering changes in market conditions since then, such as the rise of day traders and more recently high frequency trading, some argue that markets today have varying levels of efficiency. Perhaps an even more significant reason for the criticism of Basic is the practical impact that the fraud-on-the-market theory has had on the prevalence of class action shareholder suits. The number of these class actions ballooned in the years immediately following Basic. Professor Donald Langevoort, a noted scholar of corporations and securities law, analyzed Basic s impact two decades later, writing in 2009: Tens of billions of dollars have changed hands in settlements of 10b-5 lawsuits in the last twenty years as a result of Basic. 11 Several former commissioners of the U.S. Securities and Exchange Commission and law professors have more recently noted similar results. In a friend of the court brief filed in the latest fraud-on-the- The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue 123

4 market case before the Supreme Court, these securities law experts tallied the financial impact of such cases. They wrote: The dollar amounts are breathtaking: more than 3,050 private class-action securities-fraud lawsuits were filed between 1997 and 2012, generating settlements amounting to $73.1 billion and yielding tens of billions in fees for plaintiffs and defense counsel. 12 These professors and former SEC officials noted that litigation brought under Section 10(b), and Basic s reliance-eliminating presumption, accounts for the lion s share of these amounts. 13 Undoubtedly, volatile stock markets of the past decade and a half, prompted in part by the dot-com and subprime mortgage crashes, have provided a fertile ground for these class action shareholder suits. However, one might also conclude that the Basic dissent of Justice White was prophetic in stating: And who will pay the judgments won in such actions? I suspect that all too often the majority s rule will lead to large judgments, payable in the last analysis by innocent investors for the benefit of speculators and their lawyers. Yet such a bitter harvest is likely to be reaped from the seeds sewn by the Court s decision today (citations omitted). 14 AMGEN CASE In 2013, the Supreme Court had an opportunity at least to curtail the fraud-on-the-market theory in a class action shareholder suit brought against Amgen Inc., the biotechnology company. The shareholders alleged that Amgen officials had made material misstatements by downplaying the significance of Food and Drug Administration concerns about the safety of two of Amgen s high-revenue products. As usual in these cases, Amgen first contested certification of the class of shareholders based on the fraud-on-the-market theory. However, a federal district judge certified the class, saying that Amgen s various objections to the plaintiffs use of the fraud-on-the-market theory should be considered later in the proceedings, and not at the class certification stage. 15 On appeal to the Ninth Circuit Court of Appeals, Amgen contended that the plaintiffs needed to prove the materiality of the alleged misstatements before the class could be certified under the fraud-onthe-market theory. Moreover, Amgen sought an opportunity to rebut the plaintiffs allegation of materiality while still at the class certification stage. In a rather brief ruling, the Ninth Circuit, on a 3-0 vote, affirmed the trial court s decision to certify the class action. 16 The Supreme Court then agreed to hear the case. In a 6-3 decision, the Supreme Court in February 2013 affirmed the Ninth Circuit ruling in Amgen v. Connecticut Retirement Plans and Trust Funds. 17 Justice Ruth Bader Ginsburg wrote the majority opinion, which was joined by Chief Justice John Roberts, Justices Stephen Breyer, Sonia Sotomayor, Elena Kagan, and finally Samuel Alito, who wrote a separate concurrence. The three dissenters were Justices Scalia, Kennedy, and Clarence Thomas. Scalia and Kennedy are the only justices still on the bench who were members of the court when Basic was decided in 1988, but neither participated in that earlier case. Ginsburg s majority opinion in Amgen focused on the details of the federal rules governing class actions, rather than more broadly addressing the fraud-on-the-market theory as a legal principle. Ginsburg acknowledged that the plaintiffs ultimately would have to prove materiality to win the case on the merits. However, the court held that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue

5 Ginsburg s opinion quoted directly from Basic, and in seemingly approving fashion. The majority also rejected Amgen s policy argument that the pressure placed on public companies to settle once a class action has been certified supported the need for requiring materiality to be proved at the class certification stage. She noted that Congress had responded to similar policy arguments in the past by other means, such as by enacting the Private Securities Litigation Reform Act of 1995, 19 and by effectively rejecting arguments to do away entirely with the fraud-on-the-market presumption of reliance. Alito s brief concurring opinion showed signs of disagreement with the rationale of the majority, though he agreed on the end result. He qualified his concurrence by writing that it came with the understanding that the petitioners did not ask us to revisit Basic s fraud-on-the-market presumption. 20 Alito continued by referencing that Justice Thomas dissent indicated that more recent evidence suggests that the presumption may rest on a faulty economic premise. In light of this development, reconsideration of the Basic presumption may be appropriate. 21 DISSENTING VOICES In his pointed dissent in Amgen, Justice Scalia began by stating that the fraud-on-the-market rule had been invented by the Court in Basic. 22 Further, he argued for interpreting the rule established by Basic differently than the Amgen majority had, writing: All of the elements of that rule, including materiality, must be established if and when it is relied upon to justify certification. 23 Thus Scalia agreed with Amgen s contention that materiality must also be proved at the class certification stage in a fraudon-the-market case. In addition, Scalia joined Alito in signaling willingness to revisit the Basic decision itself, concluding that the new Amgen holding does not merely accept what some consider the regrettable consequences of the four-justice opinion in Basic; it expands those consequences from the arguably regrettable to the unquestionably disastrous. 24 Justice Thomas wrote the primary Amgen dissent, which was joined in full by Kennedy and in part by Scalia. In a footnote, Thomas also expressed concern about the original decision to adopt the fraudon-the-market presumption, citing the issues that had been raised by White s dissent in Basic. Justice White s concerns remain valid today, Thomas wrote, but the Court has not been asked to revisit Basic s fraud-on-the-market presumption. I thus limit my dissent to demonstrating that the Court is not following Basic s dictates. 25 That did not stop Thomas from later displaying strong skepticism about the rule, calling it a judicially invented doctrine based on an economic theory adopted to ease the burden on plaintiffs bringing claims under an implied cause of action. 26 However, lacking the opportunity to overturn Basic in this case, Thomas instead agreed that materiality should be proved at the certification stage. That would have the effect of limiting the power of the fraud-on-the-market rule. Analyzing cases that led to the original Basic ruling, Thomas concluded: Materiality, therefore, must be demonstrated to prove fraud on the market, and until materiality of an alleged misstatement is shown there is no reason to believe that all market participants have relied equally on it. Otherwise individualized questions of reliance remain. This history confirms that materiality must be proved at the time that the theory is invoked i.e., at certification. 27 In summary, the three dissenters in Amgen as well as the concurring Alito all demonstrated some level of discomfort with the original Basic decision. That helps explain why the court took the somewhat unusual step of agreeing to hear another case on the same legal issue so soon after deciding Amgen. The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue 125

6 CASE AGAINST HALLIBURTON The 2014 Halliburton case is actually a return engagement, as the Supreme Court in 2011 overturned a lower court decision that went in Halliburton s favor. 28 The facts in the Halliburton case date back to 1999, and the proposed class action of shareholders would include those who bought Halliburton Co. stock between June 1999 and December The Halliburton shareholders allege that the company and one of its executives made material misstatements relating to Halliburton s business prospects and its potential asbestos liabilities, and that the subsequent corrections of those misstatements caused the stock price to decline. The lead plaintiff in the proposed class action is the Erica P. John Fund, a Catholic charity that was previously called the Archdiocese of Milwaukee Supporting Fund. Following the typical pattern for companies facing these class action suits, Halliburton has fought vigorously to block certification of the class under the fraud-on-the-market theory. In the long-running suit s prior trip to the Supreme Court, the justices in 2011 unanimously ruled in Erica P. John Fund v. Halliburton that another element of a securities fraud cause of action loss causation did not have to be proved at the class certification stage. 29 As explained in the opinion by Chief Justice Roberts, loss causation for shareholders means that the defendant s deceptive conduct caused their claimed economic loss. 30 That is to be distinguished from transaction causation, relating to whether the misstatement actually prompted a shareholder s decision to buy or sell. Transaction causation is the reliance element established by the fraud-on-the-market presumption. In 2011, the Supreme Court summarily disposed of the Fifth Circuit Court of Appeals ruling that loss causation would have to be proved at the class certification stage. In a terse and succinct opinion, Roberts wrote: The Court of Appeals requirement is not justified by Basic or its logic. To begin with, we have never before mentioned loss causation as a precondition for invoking Basic s rebuttable presumption of reliance. The term loss causation does not even appear in our Basic opinion. Loss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-themarket theory. 31 Interestingly, the unanimous decision in this earlier Erica P. John Fund ruling displayed no obvious signs of doubt or discord about the underlying fraud-on-the-market theory. However, that might be attributed to the fact that the justices prime purpose in 2011 was to resolve a conflict between the federal circuit courts on whether the element of loss causation was a prerequisite to certifying a class action under Basic. They were able to resolve that conflict without having to address the more difficult question of the continuing vitality of Basic. ISSUES BEFORE THE COURT IN 2014 The 2014 case may not offer such a tidy solution. On remand of the Erica P. John ruling, the trial court then certified a class action under the fraud-on-the-market theory, and the Fifth Circuit Court of Appeals affirmed the decision. 32 Specifically, Halliburton had urged the Fifth Circuit to conclude that the plaintiffs needed to prove price impact of the misstatement at the class certification stage. The Fifth Circuit in April 2013 responded that price impact actually related to several different aspects of a securities fraud claim, including materiality. Relying extensively on the rationale of the Supreme Court decision issued two months earlier in Amgen, the Fifth Circuit ruled that price impact fraud-on-themarket rebuttal evidence should not be addressed at class certification The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue

7 That left Halliburton little choice but to challenge the fraud-on-the-market theory itself in its appeal to the Supreme Court. The petition for certiorari, which was granted by the court, raised only two issues: 1. Whether this Court should overrule or substantially modify the holding of Basic Inc. v. Levinson to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the-market theory. 2. Whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock. 34 Halliburton was even more direct in its argument supporting its petition to the court, stating: Basic v. Levinson should be overruled. The Basic majority erred by substituting economic theory for law and bad economic theory at that. 35 Halliburton also contended that market efficiency, the concept on which the fraud-on-the-market theory is premised, has been rejected as an economic theory. As a result, Halliburton asserted that Basic s presumption is ripe for reconsideration. 36 Thus Halliburton at least opened the door to having the justices consider and address the underlying economic theory, as well as the legal principles involved. ORAL ARGUMENT The case was argued before the justices on March 5, Attempting to discern the likely outcome of a Supreme Court ruling based on the justices questions and comments at oral argument is an inherently risky proposition. However, because the comments by several of the justices were generally consistent with what they had formally written only a year earlier in the Amgen opinion, the oral argument for Halliburton may provide more reliable guidance than it does for some cases. If so, the result could prove somewhat anti-climatic, at least for any observers seeking a landmark ruling on securities law. Rather than a sweeping decision either overturning Basic or leaving it fully intact, it appears that the court may seek out a middle ground between the two warring sides. 37 Considering both the tone of the oral argument and the recent Amgen decision, it appears that three of the more conservative justices (Scalia, Thomas, and Alito) might be inclined to overrule Basic, or at least to place strict limits on the use of the fraud-on-the-market theory. However, those three justices are unlikely to find the fourth and fifth votes needed to constitute a majority opinion to that effect. On the other hand, the four more liberal justices (Ginsburg, Breyer, Sotomayor, and Kagan) seem to support continued use of the fraud-on-the-market presumption established by Basic, though it is at least possible that some of those justices would be open to making minor changes in how it is applied. However, they likely lack a fifth vote needed to make that view prevail. Thus the outcome may hinge on the view of the two remaining justices, Roberts and Kennedy. Kennedy in particular seemed to be seeking out a compromise position, and consensus-building is often a trait of chief justices like Roberts. Both asked questions about a proposal made in a friend-of-the-court brief filed by two professors from prestigious American law schools. Their proposal would shift the focus on the crucial reliance issue to whether the alleged fraud regarding a stock would clearly affect that particular stock s price not on the broader question of the efficiency of the markets as a whole. 38 One possible method of determining that would be an event study an analysis to judge whether the particular misstatement or omission alleged by the shareholders had a statistically significant effect on that company s stock price. If so, it could then be presumed that the market and all class members commonly relied on that company s artificially inflated or deflated stock price. In advocating for this The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue 127

8 approach, the law professors in their court filing stated: Such an approach conforms Basic to current finance theory and research, and by limiting the over- and underinclusive of the current approach, it offers better prospects for allowing meritorious class actions to continue while preventing baseless ones. 39 At least in theory, this event study requirement would give public companies facing these suits more grounds to challenge certification of a class, without completely precluding the availability of collective shareholder suits. While Scalia, Thomas, and Alito probably would want to go further in limiting Basic, they might grudgingly accept this partial victory to provide some relief from the threat of fraud-on-the-market cases. Their three votes, along with Roberts and Kennedy, could provide a majority for that view. In addition, one or two of the more liberal justices, despite seeming inclined to leave the fraud-on-the-market theory in place, might also be open to this tweaking of the Basic rules to provide a more level playing field for class action shareholder suits. Of course, it remains possible that the court could go in an entirely different direction than anything currently anticipated. Still another possibility is that the justices might not reach any true consensus, and would instead provide a splintered or narrow ruling that decides the Halliburton case alone, but leaves the broader issues relating to the fraud-on-the-market theory unresolved. One of the few predictable points about the Supreme Court is its occasional unpredictability. CONCLUSION There is little doubt that the current usage of the fraud-on-the-market theory has flaws, as it has become too easy in many courts to get a shareholder class action certified. That preliminary decision then places strong pressure on companies to enter settlements for perhaps sizable amounts, regardless of whether there was any clear wrongdoing. Moreover, the ease of the current system could encourage abusive claims against companies, as some dubious securities fraud claims could be filed just to induce quick settlements. Should the fraud-on-the-market theory survive this most recent challenge unscathed, as it did last year in Amgen, that could solidify the doctrine s standing in class action shareholder suits for many years to come. On the other hand, completely eliminating the current fraud-on-the-market theory could make it far too difficult for shareholders to recover even in clear and undisputed cases of securities fraud. It would be too expensive or even futile for individual shareholders to bring cases, and it would become next to impossible to certify a class action of shareholders due to the procedural hurdle of proving reliance as a class. Absent a realistic threat of class action suits alleging securities fraud, public companies might then have less incentive to be as vigilant in guarding against any material misstatements or omissions. Should that be the end result of the court s decision in Halliburton, eliminating the fraud-on-the-market presumption might have the ironic and unintended effect of increasing the amount of actual fraud on the market. With neither of these possibilities appearing to be desirable outcomes, a middle ground approach might be the most appropriate solution. By requiring an event study or making some other revision to the current rules, the Supreme Court could make it more difficult to use the fraud-on-the-market presumption in class action shareholder suits. Splitting the difference between the two more extreme views might seem like an undesirable result to combatants on both sides, but a more subtle change to the system would allow for testing that revised approach in a variety of cases in the lower courts. Should that revision not solve the problem for one side or the other, then the court could address the issue again in a later term. This more incremental approach to revising a well-established legal doctrine has less potential for damage, and might even offer better prospects for success. 128 The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue

9 ENDNOTES 1 Halliburton Co. v. Erica P. John Fund, Inc., No , S. Ct., cert. granted, 134 S. Ct. 636 (2013) U.S.C. 78(j); 17 C.F.R b-5. 3 FED. R. CIV. P. 23(b). 4 Basic Inc. v. Levinson, 485 U.S. 224, 242 (1988). 5 Id. at Id. 7 In re LTV Securities Litigation, 88 F.R.D. 134, 143 (ND Tex. 1980). 8 Basic, at Id. at 251 (White, J., dissenting). 10 Id. at 252 (White, J., dissenting). 11 Donald C. Langevoort, Basic at Twenty: Rethinking Fraud on the Market, 2009 WIS. L. REV. 151, at Brief for Former SEC Commissioners and Officials and Law Professors as Amici Curiae Supporting Petitioners, Halliburton (U.S. filed Jan. 6, 2014), at 9, available at Commissioners-and-Officials-Merits-Amicus-Brief-Halliburton-v.-Erica-P.-John-Fund-U.S.-Supreme-Court.pdf. 13 Id. 14 Basic, at 262 (White, J., dissenting). 15 Conn. Ret. Plans & Trust Funds v. Amgen Inc., 2009 U.S. Dist. LEXIS (C.D. Cal. 2009). 16 Conn. Ret. Plans & Trust Funds v. Amgen Inc., 660 F.3d 1170 (9th Cir. 2011). 17 Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct (2013). 18 Id. at Private Securities Litigation Reform Act of 1995, Pub. L. No , 109 Stat. 737 (codified in various sections of 15 U.S.C.). 20 Amgen, at 1204 (Alito, J., concurring). 21 Id. (Alito, J., concurring). 22 Id. (Scalia, J., dissenting). Apparently picking up on Scalia s statement that the fraud-on-the-market rule had been invented by the Court, Justice Ginsburg s majority opinion responded that Scalia s interpretation of the class certification requirement in fraud-on-the-market cases is Justice Scalia s invention. Id. at Id. at 1205 (Scalia, J., dissenting). 24 Id. at 1206 (Scalia, J., dissenting). 25 Id. at 1208 n.4 (Thomas, J., dissenting). 26 Id. at 1213 (Thomas, J., dissenting). 27 Id. at 1216 (Thomas, J., dissenting). 28 Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct (2011). 29 Id. 30 Id. at Id. at Erica P. John Fund, Inc. v. Halliburton Co., 718 F.3d 423 (5th Cir. 2013). 33 Id. at Petition for Writ of Certiorari, Halliburton (U.S. filed Sept. 13, 2013), available at 35 Id. at Id. 37 Robert Barnes, Court treads middle in shareholder case, WASH. POST, Mar. 6, 2014, at A12. See also Brent Kendall, Justices Weigh Precedent on Securities Suits, WALL ST. J., Mar. 6, 2014, at B3. 38 Brief of Law Professors As Amici Curiae In Support of Petitioners, Halliburton (U.S. filed Jan. 6, 2014), available at 39 Id. at 37. The Journal of Global Business Management Volume 10 * Number 1 * April 2014 issue 129