Earlier this month, the Supreme Court granted certiorari in Erica P. John Fund Inc. v. Halliburton Co.,1 after first requesting the solicitor general to express the views of the United States.2 The solicitor general recommended that certiorari be granted, because the circuits are divided on the issue of whether loss causation must be resolved at the class certification stage of a securities class action. In so doing, the solicitor general hinted that its view was that the Second Circuit’s standard, which it described as “intermediate” between the polar standards in the Fifth and Seventh circuits, was nonetheless incorrect.3 If loss causation must be demonstrated at class certification (or if defendants can rebut loss causation at this stage and thereby deny class certification), the balance of advantage in securities litigation tilts towards defendants. Conversely, if the Court buys the solicitor general’s position, it may overrule a Second Circuit line of cases, which today allow defendants to contest loss causation at class certification.4
Also this term, the Supreme Court will hand down its decision in Matrixx Initiatives Inc. v. Siracusano,5 in which defendants asked the Court to rule that a possible link between their product (a cold drug called “Zicam Cold Remedy”) and a medical condition known as anosmia (which involves loss of the sense of smell) could only be material if there was a statistically significant relationship between the two. At oral argument this month, the Court seemed unpersuaded that the materiality of a possibly defective product depended upon a showing of statistical significance. But Justice Scalia raised the troubling issue (to him anyway) of Satanism: Must a company disclose, he asked, that its logo’s use of a suspected Satanic symbol was causing a consumer boycott? This hellish issue is further discussed below.
