The Supreme Court on Monday made it tougher for investors to join together to sue corporations for securities fraud, a decision that could curb the number of multimillion-dollar legal settlements companies pay out each year.
But the unanimous ruling was only a modest step. It stopped short of tossing out a quarter-century-old legal theory that might have ended securities class-action lawsuits altogether. Only three of the nine justices said they would have gone that far.
Writing for the court, Chief Justice
The change could make it more expensive and time-consuming for plaintiffs at the early stages of litigation. That gives corporations a better chance to mount a defense and could discourage lawyers from bringing weaker securities cases.
The ruling is a partial victory for
Halliburton attorney Aaron Streett said he was pleased "that the Supreme Court restored a measure of rationality and balance to securities class actions." The case now goes back to the lower courts, where Halliburton will have another chance to block the investors from joining together as a class.
The decision is a minor win for business groups that complain the growth of such class actions is a drain on corporate profits and a windfall for plaintiff lawyers. Investor groups say the lawsuits help deter corporate fraud and abuse.