WASHINGTON — The Supreme Court on Wednesday seemed open to the possibility of making it harder for investors to join together to sue corporations for securities fraud — but maybe not as hard as companies that have to defend such lawsuits would prefer.
Any change in the standard for green-lighting class-action lawsuits could have a chilling effect on shareholders who bring the cases, which have generated an estimated $73 billion in settlements since 1997. Investor groups say class actions help curb corporate abuse and market fraud, while opponents contend they extort money from companies and create a windfall for plaintiff’s lawyers.
During arguments in a closely watched case against Halliburton Co., most justices appeared unwilling to completely overturn a quarter-century-old decision that has helped investors launch class-action cases based on the effect misleading statements have on a company’s stock price. But other justices suggested a middle ground that would force investors to show earlier in a case that the alleged fraud actually caused a stock’s price to drop.
Halliburton is trying to block a class-action lawsuit claiming the energy services company misrepresented revenues, understated its liability in asbestos litigation, and overstated the benefits of a merger.
The justices are expected to make a ruling before summer.