The Supreme Court has heard some long-winded arguments this week in a case involving Halliburton Co. that has attracted a great deal of attention. The court seems to be open to the possibility of making it more difficult for investors to join together to sue corporations for securities fraud, but maybe not as difficult as companies that have to defend such lawsuits would like.
In 1988, the Court said it was enough that investors alleging fraud rely on the integrity of stock prices, which in well-developed markets should be a reflection of public information. That legal doctrine, known as "fraud on the market," has provided a basis for allowing investors to pool their claims into one class-action lawsuit. Investors have to prove that a company's statements are misleading, but if the court abandons its precedent, investors could have difficultly bringing class actions at all.