Stock manipulation suits made easier

WASHINGTON, June 6 (UPI) -- The U.S. Supreme Court unanimously made it easier Monday to file a class action suit alleging loss through fraudulent stock manipulation.

The case involves the Erica P. John Fund Inc. and the Halliburton Co. The fund filed a class action suit in federal court alleging Halliburton deliberately made false statements about the scope of its potential liability in asbestos litigation, its expected revenue from construction contracts and the benefits of its merger with another company.

The fund contends Halliburton later made a number of corrective disclosures that caused its stock price to drop and as a result investors lost money.

A federal judge ruled the suit could not proceed because the precedent in the Fifth U.S. Circuit required plaintiffs to prove "loss causation" -- that the defendant's deceptive conduct caused the investors' claimed economic loss -- to obtain class certification. The judge concluded the fund had failed to satisfy that requirement.

The U.S. Court of Appeals for the Fifth Circuit -- which has headquarters in New Orleans -- agreed with the judge in denying the class certification.

However, in an opinion written by Chief Justice John Roberts, the Supreme Court unanimously ruled that fraud plaintiffs did not need to prove "loss causation" in order to obtain class certification.

The opinion throws out the lower-court ruling and sends the case back down for a new ruling based on the Supreme Court opinion.