The U.S. Supreme Court made it easier for some investors topress securities fraud suits, ruling for shareholders who accuseHalliburton Co. of misrepresenting its financial condition whileunder Dick Cheney's leadership.

The justices today unanimously said the shareholders can sue asa group without first establishing that they lost money as a resultof the alleged fraud. The decision set aside a federal appealscourt ruling.

The shareholders, led by the Erica P. John Fund, contend thatHalliburton from 1999 to 2001 falsified earnings reports, playeddown estimated asbestos liability and overstated the benefits of amerger. Cheney, later the U.S. vice president, served as chairmanand chief executive officer of the oilfield services providerduring part of the disputed period.

The high court case concerned the standard that applies at theso-called class certification stage, not at final judgment. TheSupreme Court previously said that, to get class-action status,shareholders must show they made investment decisions in relianceon a company's alleged misstatements. Shareholders can meet thattest by showing the company perpetrated a so-called fraud on themarket.

Chief Justice John Roberts today said that requirement doesn'tmean that investors seeking class-action status must show that theylost money as a result of the alleged fraud.

“The fact that a subsequent loss may have been caused by factorsother than the revelation of a misrepresentation has nothing to dowith whether an investor relied on the misrepresentation in thefirst place,” Roberts wrote in his opinion for the court.

Boies Victory
The Supreme Court ruled in2005 that, to recover damages, shareholders ultimately must show adirect connection between a misrepresentation and a decline instock prices.

Lower courts had been divided on the issue. In the Halliburtoncase, the New
Orleans-based 5th U.S. Circuit Court of Appeals had ruled that theinvestors couldn't sue. That ruling applied in Texas, Louisiana andMississippi.

The shareholders' lawyer, David Boies, contended thatshareholders shouldn't have to show that direct connection at theclass certification stage, when they haven't yet had a chance tomarshal their evidence. The Obama administration backed theshareholders in the case.

The 5th Circuit had imposed “an unusually high proceduralbarrier” on shareholders, said David Webber, a securitiesregulation expert who teaches at Boston University School ofLaw.

Halliburton Confident
Houston-basedHalliburton said in a statement that it will make other argumentsagainst class-action status when the case returns to the appealscourt. The company said it hasn't set aside any money to coverpotential damages “because it does not believe that loss isprobable.”

Halliburton fell $2.24, or 4.5 percent, to $48.04 at 4:15 p.m.in trading on the New York Stock Exchange. Halliburton in 2004agreed to pay $7.5 million to resolve a Securities and ExchangeCommission investigation of the company's financial statements.

Boies called the ruling “a victory for effective enforcement ofpublic securities laws and for individuals and institutions thatare injured by securities fraud.”

The case is Erica P. John Fund v. Halliburton, 09-1403.

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