The Halliburton Odyssey

One of the very first posts on this blog, way back in May 2003, was about the Halliburton securities class action settlement. Who knew what was to come? The judge recused himself, the settlement was eventually rejected, the lead plaintiff switched counsel, and the court declined to certify a class.

Now, nearly eight years after the case was originally filed, the U.S. Court of Appeals for the Fifth Circuit has issued an opinion affirming the denial of class certification. In The Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 2010 WL 481407 (5th Cir. Feb. 12, 2010), the court considered whether the plaintiffs had adequately demonstrated the existence of loss causation. Based on Fifth Circuit precedent, the plaintiffs were required to show “(1) that an alleged corrective disclosure causing the decrease in price is related to the false, non-confirmatory positive statement made earlier, and (2) that it is more probable than not that it was this related corrective disclosure, and not any other unrelated negative statement, that caused the stock price decline.”

The court found that the plaintiffs had failed to meet this standard based on the corrective disclosures they identified. The corrective disclosures either failed to indicate that any prior statements were misleading or the plaintiffs’ expert was unable to adequately demonstrate that a particular corrective disclosure, as opposed to other negative news about the company, more probably affected the stock price.

Holding: Denial of class certification affirmed.

Quote of note: “Plaintiff asks us to draw an inference that the June 28, 2001 press release corrected prior allegedly false estimates of asbestos reserves merely because those reserves changed. But a company is allowed to be proven wrong in its estimates, and we can discern no indication from the June 28, 2001 press release that Halliburton’s prior asbestos reserve estimates were misleading or deceptive.”

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