On June 6, 2011, the United States Supreme Court issued its much anticipated opinion in Erica P. John Fund, Inc. v. Halliburton Co., resolving a conflict among the circuits on whether plaintiffs alleging securities fraud must prove “loss causation”— i.e., that the investment losses sought to be recovered were caused by the market’s discovery of the “truth” allegedly obscured or concealed by the “fraud” — in order to obtain class certification. See 563 U.S. ___, No. 09-1403, Slip. Op. (June 6, 2011). In a unanimous opinion authored by Chief Justice Roberts, the Court issued a narrow ruling that securities fraud plaintiffs do not bear the burden to prove loss causation as a prerequisite to class certification.

As discussed herein, that much of the Court’s opinion was not unexpected. Perhaps the greater significance of the Halliburton opinion lies in the matters the Court declined to decide. In practice, the holding should have limited impact outside of the Fifth Circuit, the only circuit that had required proof of loss causation as a prerequisite to class certification. Importantly, the Court’s opinion leaves intact case law in other circuits permitting defendants to challenge class certification on grounds related to the lack of price impact associated with the alleged misrepresentation.