Chief U.S. District Judge Barbara M.G. Lynn, a Texas federal judge, has granted preliminary approval of a $100 million securities class action settlement against Halliburton Co. over its asbestos liability disclosures. The judge scheduled a settlement fairness hearing to take place in her courtroom on July 31. It will be determined whether the terms and conditions are “fair, reasonable, and adequate to the class,” and whether they should be approved by the court. Judge Lynn also set a deadline of Aug. 12 for any class members wishing to participate in the settlement to submit a claim form. Her order stated:
At or after the settlement fairness hearing, the court will determine whether the plan of allocation proposed by class counsel, any application for attorneys’ fees or reimbursement of expenses, and any lead plaintiff incentive award shall be approved.
The settlement, which energy giant Halliburton revealed late last year, puts an end to one of the oldest securities fraud class actions still hanging around in U.S. courts. The Erica P. John Fund, a Milwaukee charitable organization that held Halliburton stock, and others had first sued in 2002 after Halliburton’s disclosure of a $30 million verdict stemming from asbestos liabilities sent the company’s stock price tumbling.
Years of infighting among investors and class counsel followed, and Boies Schiller took over in 2007. The long-running class action alleged Halliburton had artificially inflated its stock price by issuing misstatements about its financial liability for asbestos claims. Halliburton said there was no evidence the statements at issue had an actual impact on its stock price.
Judge Lynn, in July 2015, granted in part the investors’ motion for class certification, finding that Halliburton did not meet its burden of showing that a Dec. 7, 2011, announcement from the company did not affect its stock price. It was disclosed that a Baltimore jury found that a Halliburton subsidiary, Dresser Industries, was liable for $30 million following a trial in an asbestos lawsuit. Thereafter Halliburton’s shares fell about 40 percent. In the case’s first time at the high court, the justices overturned a Fifth Circuit ruling that the class action could not be certified because the investors did not affirmatively prove their losses were caused by Halliburton’s alleged misrepresentations.
The U.S. 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 justices 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 presumption 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.
The justices found, however, that the energy company 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 and Carl E. Goldfarb of Boies Schiller Flexner LLP 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. (case number 3:02-cv-01152) in the U.S. District Court for the Northern District of Texas.
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