The Supreme Court issued three important decisions, continuing its recent activity in the securities field. First, in Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. —, 131 S. Ct. 2179, 180 L. Ed. 2d 24 (June 6, 2011), the Supreme Court rejected the Fifth Circuit’s requirement that loss causation be established at the class certification stage in order to invoke the fraud-on-the-market theory of reliance. According to the opinion authored by Chief Justice Roberts, “[l]oss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-the-market theory.” 131 S. Ct. at 2186.

Second, in Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. —, 131 S. Ct. 2296, 180 L. Ed. 2d 166 (June 13, 2011), the Supreme Court built on its decisions in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S. Ct. 1439, 128 L. Ed. 2d 119 (1994), and Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 128 S. Ct. 761, 169 L. Ed. 2d 627 (Jan. 21, 2008), holding that a mutual fund investment adviser and parent company could not be held civilly liable under Rule 10b-5 for alleged misstatements in a mutual fund prospectus because the adviser did not make the statements. The Supreme Court observed—in a timely statement as we roll toward a presidential election—“[e]ven when a speechwriter drafts a speech, the content is entirely within the control of the person who delivers it. And it is the speaker who takes credit—or blame for what is ultimately said.” 131 S. Ct. at 2302.

Please see full alert below for more information.