WASHINGTON — The Supreme Court on Monday made it tougher for investors to join together to sue corporations for securities fraud, a decision that could curb the number of multimillion-dollar legal settlements companies pay out each year.
Writing for the court, Chief Justice John Roberts said companies should have a chance in the early stages of a lawsuit to show that any alleged fraud was not responsible for a drop in the company’s stock price.
The change could make it more expensive and time-consuming for plaintiffs at the early stages of litigation. That gives corporations a better chance to mount a defense and could discourage lawyers from bringing weaker securities cases.
The ruling is a partial victory for Halliburton, which is trying to block a class-action lawsuit claiming the energy-services company inflated its stock price. A group of investors claims it lost money when Halliburton’s stock price dropped after revelations the company misrepresented revenues, understated its liability in asbestos litigation and overstated the benefits of a merger. The case now goes back to the lower courts, where Halliburton will have another chance to block the investors from joining together as a class.
- Pursuit of big-money contract comes at a cost for Seahawks QB Russell Wilson
- Paying the bill for U.S. Open at Chambers Bay
- Seattle man charged with vehicular homicide in cyclist’s death
- As Puget Sound sweats, few air conditioners are cooling us down
- ‘Historic’ tuition cut sets state apart from rest of U.S.
Most Read Stories
The decision is a minor win for business groups that complain the growth of such class actions is a drain on corporate profits and a windfall for plaintiff lawyers. Investor groups say the lawsuits help deter corporate fraud and abuse.
But the justices rejected Halliburton’s broader request to overturn the court’s 1988 decision in Basic v. Levinson, a case that sparked a surge in securities class-action lawsuits against publicly traded companies.