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Halliburton Co.

Implores Supreme Court to Rethink Securities Legislation December 2013


TaxTrendsWeekly.com

TaxTrendsWeekly.com

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The Oil company Halliburton Co has asked the US Supreme Court to review an important case, Erica P. John Fund v. Halliburton - To clarify, Erica P. John Fund is among the oil titans shareholders. The EPJ years-old litigation with Halliburton comes from the notion that Halliburton fudged very important information concerning Halliburtons operations to shareholders; for instance, they are now being accused of exaggerating revenue and reducing liabilities. More importantly, the Fund woould like to have its legal offensive against the defense recognized as a class action suit - a lawsuit that is carried out on behalf of a group of people who have been offended by the same injury. A CAL allows Erica P. John Fund to litigate on behalf of all shareholders of Halliburton stock, which would certainly increase the capital on the table in the suit. The NY Times recently included an excellent analysis of the question that the Supreme Court will have to decide in the Halliburton case, if it agrees to hear the case. The New York Times publication illustrates how most lawsuits like the one involving Halliburton and EPJ revolve around the notion of reliance, meaning that the litigation - or in EPJs case, the shareholders behaved in reliance on the organizations (potentially) illegal activities. Historically, the US Supreme Court has a expansive interpretations of reliance. To show reliance, a shareholder need not read a prospectus and the fraudulent statements it contains. Rather, the court views any allegedly criminal statement(s) made by

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a corporation that is also publicly acknowledged that has any bearing on the financial value of the company and is incorporated into the total price of the the corporations securities. Courts typically justify this decision on the grounds that markets price securities using all available market information, an idea that is widely accepted in finance. Nevertheless, although most shareholders/investors do not critically analyze financial statements and prospectuses released by the companies in whom they invest; plaintiffs involved with the class action suit can still demonstrate reliance as long as they can prove that they have acquired securities with the business. As an increasing number of shareholders come forward and are capable of showing their reliance, these suits become easier to take to court. In its request to the Supreme Court to re-open the case, Halliburton suggested that it will argue that the current definition of reliance is too loose. It will suggest that the Supreme Court should define reliance as something more involved than simply purchasing securities; for example, they could start by requiring shareholders to read a fraudulent prospectus or financial statement. Such a contention will probably see some strong support from the business community. As the NYT article illustrates, 12 in an unrelated case, four members of the Court stated that they would be willing to overrule the former, loose interpretation of reliance. If the Halliburton case eventually reaches court, the obvious question will be about whether Halliburton can muster a much-needed fifth vote from the Court.

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Political, Finance and Investment News from Journalists across the Web