U.S. High Court Seeks Middle Ground on Shareholder Suits

U.S. Supreme Court justices sought out a middle ground as they heard a case testing the legal rules that have fostered thousands of class-action shareholder lawsuits over the past quarter century.

Hearing arguments today in Washington, the justices considered a bid by Halliburton Co. (HAL) to overturn a 1988 decision that forms the legal basis for 80 percent of the group securities suits filed each year.

Justice Anthony Kennedy, a potential swing vote, repeatedly asked about a brief, filed by a group of law professors, that urges the court to give defendants more tools to block shareholder lawsuits without abolishing class actions altogether. Chief Justice John Roberts asked similar questions.

Securities-fraud litigation has thrived in recent years even as Congress has tried to rein it in. More than 4,000 class-action suits have been filed since 1996, producing almost $80 billion in settlements, according to Nera Economic Consulting, a unit of insurance broker Marsh & McClennan Cos.

Accords involving Enron Corp. and WorldCom Inc. alone totaled more than $13 billion, and Bank of America Corp. last year agreed to pay $2.4 billion to settle investor claims over its Merrill Lynch & Co. acquisition. Pfizer Inc. (PFE), Vivendi SA and Amgen Inc. (AMGN) are among the companies with pending lawsuits that could be affected by the high court case.

The court will rule by July in the case, Halliburton v. Erica P. John Fund, 13-317.

To contact the reporters on this story: Greg Stohr in Washington at gstohr@bloomberg.net; Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.