Close X
Attorney Spotlight

How does Jordana Nelson's prior experience as a general counsel inform her work with firm clients? Read more>


Close X


Search our Experience

Experience Spotlight

The M&A Advisor Winner 2017The M&A Advisor announced the winners of the 16th Annual M&A Advisor Awards on Monday, November 13 at the 2017 M&A Advisor Awards. Bass, Berry & Sims was named a winner in the two categories related to the following deals:

M&A Deal of the Year (from $1B-$5B) – Acquisition of CLARCOR Inc. by Parker Hannifin Corporation

Corporate/Strategic Deal of the Year (over $1B) – Acquisition of BNC Bancorp by Pinnacle Financial Partners

Close X

Thought Leadership

Enter your search terms in the relevant box(es) below to search for specific Thought Leadership.
To see a recent listing of Thought Leadership, click the blue Search button below.

Thought Leadership Spotlight

Regulation A+

It seems that lately there has been a noticeable uptick in Regulation A+ activity, including several recent Reg A+ securities offerings where the stock now successfully trades on national exchanges. In light of this activity, we have published a set of FAQs about Regulation A+ securities offerings to help companies better understand this "mini-IPO" offering process, as well as pros and cons compared to a traditional underwritten IPO.

Read now

Supreme Court Preserves Fraud-on-the-Market Theory In Halliburton


June 25, 2014

On June 23, 2014, the U.S. Supreme Court released its decision in Halliburton v. Erica P. John Fund, No. 13-317. The decision was easily one of the most eagerly anticipated of the Court's current term and involved fundamental questions about the viability of securities fraud class action litigation that had many in the plaintiffs' bar holding their breath about the future of that practice area.

At issue was the so-called "fraud-on-the-market" presumption of reliance created by the Court in Basic v. Levinson some 25 years ago, which allows plaintiffs to obtain certification of securities fraud class actions without having to demonstrate individual reliance on an alleged misrepresentation by each member of the putative class. This plaintiff-friendly presumption rests on the "efficient market" theory – that is, that the share price of a publicly traded security reflects all publicly available information about that security, including alleged misrepresentations. A showing of individual reliance, therefore, is unnecessary if the alleged misrepresentation was public since the average shareholder relies on a company's share price when buying or selling shares. The loss of the "fraud-on-the market" presumption would have made it much harder, if not impossible, for plaintiffs to pursue claims for securities fraud under § 10(b) of the 1934 Act and/or Rule 10b-5 as class actions – a major concern for firms specializing in such work.

As many predicted, however, such concerns were overblown. In its unanimous decision, the Supreme Court effectively split the baby: refusing to overturn the "fraud-on-the-market" presumption, while at the same time clarifying that defendants should be allowed to rebut the presumption at the class certification stage using evidence of no price impact. The decision reverses earlier decisions in the case by both the district court and the U.S. Court of Appeals for the Fifth Circuit, which had ruled that defendants are not entitled to introduce evidence at the class certification stage intended to rebut the presumption of reliance.

According to the Supreme Court, this case presented no "special justification" to warrant "overturning a long-settled precedent" established in Basic. Specifically, the Court rejected the argument that Plaintiffs in securities fraud class actions should have to prove reliance on an individual basis, as well as the argument that the "efficient market" theory underlying Basic was no longer valid. The Court also saw no justification to require plaintiffs to affirmatively prove price impact, which the Court said "would radically alter the required showing" of reliance in a 10(b) / 10b-5 action.

The Supreme Court did, however, provide defendants with an important tool by affording them the chance to rebut the presumption of reliance at the all-important class certification stage using evidence that no "price impact" had occurred. Here, the Court seemed to undertake a "fair's fair" analysis – because plaintiffs typically must introduce indirect evidence of price impact to establish entitlement to the presumption (via evidence of market efficiency and the public nature of an alleged misrepresentation), defendants should be allowed to fight back, especially where they may have direct evidence showing no price impact. "Defendants must be afforded an opportunity before class certification to defeat the presumption through evidence that an alleged misrepresentation did not actually affect the market price of the stock." (Emphasis supplied).

Obviously, how defendants will use this new tool and how courts will receive it is still to be determined, but it will likely not change the landscape of securities class actions in dramatic fashion. It should, however, cement class certification as the primary battleground for these actions (following the motion to dismiss stage), as well as give economists and damage experts new work as defendants try to determine whether they can provide evidence to rebut the presumption.  For those cases where such evidence is compelling, this new defense will certainly be dispositive. For others, it will be a non-factor.

Related Professionals

Related Services


Visiting, or interacting with, this website does not constitute an attorney-client relationship. Although we are always interested in hearing from visitors to our website, we cannot accept representation on a new matter from either existing clients or new clients until we know that we do not have a conflict of interest that would prevent us from doing so. Therefore, please do not send us any information about any new matter that may involve a potential legal representation until we have confirmed that a conflict of interest does not exist and we have expressly agreed in writing to the representation. Until there is such an agreement, we will not be deemed to have given you any advice, any information you send may not be deemed privileged and confidential, and we may be able to represent adverse parties.