Halliburton Co. has reached a $100 million settlement to end a more than 14-year-old securities class action pending in Texas federal court. The suit was brought over claims from investors that the energy giant misled them about the company’s asbestos liability. The settlement, reached in principle in December, puts an appeal of a class certification order on hold, pending the lower court’s approval of the settlement. In a statement, Halliburton said it will have to pay about $54 million of the settlement fund, with the rest covered by its insurer. The long-running class action is now over claims Halliburton artificially inflated its stock price by issuing misstatements about its financial liability for asbestos claims. However, Halliburton has said there’s no evidence the statements at issue had an actual impact on its stock price.
U.S. District Judge Barbara M. Lynn in July 2015 granted in part the investors’ motion for class certification, finding that Halliburton had not met its burden of showing that a Dec. 7, 2001, announcement from the company did not affect its stock price. That statement announced that a Baltimore jury found that a Halliburton subsidiary, Dresser, was liable for $30 million following a trial in an asbestos lawsuit. The company’s shares dropped about 40 percent soon thereafter. The case started in 2002 and has gone up to the U.S. Supreme Court on two occasions.
In its first time at the high court, the justices overturned a Fifth Circuit ruling that the class action could not be certified because the investors had failed to prove affirmatively that their losses had been caused by Halliburton’s alleged misrepresentations. The Supreme Court ruled there was no such requirement. The Texas district court then certified the class, rejecting Halliburton’s effort to use price impact evidence to negate the investors’ presumed reliance on the statements. The Fifth Circuit affirmed that decision, leading to another high court battle which ended with the Supreme Court declining to overturn its landmark Basic v. Levinson decision but finding that securities Defendants may rebut the fraud-on-the-market presumption of reliance before the class certification stage by showing a lack of price impact.
The Supreme Court found that Halliburton did not show a “special justification” to overturn Basic, which in 1988 established the fraud-on-the-market presumption of reliance that rests on the principle that public, material information about a publicly traded company affects the price of the company’s stock and that investors thereby rely on that information when they purchase securities. However, the justices found that Defendants should be allowed to rebut that presumption of reliance before class certification by showing evidence that an alleged misrepresentation did not affect the stock’s price.
Erica P. John Fund is represented by David Boies, Carl E. Goldfarb, Sigrid McCawley, David Nelson, Eli Glasser, Sashi Bach and Thomas McCawley of Boies Schiller & Flexner LLP, E. Lawrence Vincent of The Law Office of Joe H. Staley Jr. PC, and Kim E. Miller, Lewis S. Kahn, Michael Swick and Neil Rothstein of Kahn Swick & Foti LLC. The case is Erica P. John Fund Inc. v. Halliburton Co., in the U.S. District Court for the Northern District of Texas.