Securities – misrepresentation — presumption of reliance

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U.S. Supreme Court

Civil

Securities – misrepresentation — presumption of reliance

The presumption of reliance on a misrepresentation in Basic Inc. v. Levinson, 485 U. S. 224, remains binding precedent.

Halliburton also contends that Basic rested on two premises that have been undermined by developments in economic theory. First, it argues that the Basic Court espoused “a robust view of market efficiency” that is no longer tenable in light of empirical evidence ostensibly showing that material, public information often is not quickly incorporated into stock prices. The Court in Basic acknowledged, however, the debate among economists about the efficiency of capital markets and refused to endorse “any particular theory of how quickly and completely publicly available information is reflected in market price.” 485 U. S., at 248, n. 28. The Court instead based the presumption of reliance on the fairly modest premise that “market professionals generally consider most publicly announced material statements about companies, thereby affecting stock market prices.” Id., at 247, n. 24. Moreover, in making the presumption rebuttable, Basic recognized that market efficiency is a matter of degree and accordingly made it a matter of proof. Halliburton has not identified the kind of fundamental shift in economic theory that could justify overruling a precedent on the ground that it misunderstood, or has since been overtaken by, economic realities.

718 F. 3d 423, vacated and remanded.

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

Roberts, C.J.; Ginsburg, J., concurring; Thomas, J., concurring.