David Boies (Photo by Diego M. Radzinschi)
David Boies has only argued about a half-dozen cases at the U.S. Supreme Court. Still, for most Americans who know his name, the Boies, Schiller & Flexner partner will always be associated with two defining high court battles—Bush v. Gore and the fight over same sex marriage.
On the other hand, it’s safe to say that most Americans will never hear of Halliburton Co. v. Erica P. John Fund, which Boies argued back in March. But for corporations, or anyone whose bread is buttered litigating securities class actions, Halliburton was the big news at the Supreme Court this week.
Halliburton gave the justices an opportunity to upend securities class actions by rejecting a legal doctrine that underpins most cases. Halliburton and its lawyers at Baker Botts, led by Aaron Streett, had set their sights on the so-called fraud-on-the-market presumption, which allows securities plaintiffs to skip proving that individual investors relied on misleading company statements.
The fraud-on-the-market theory was enshrined by the Supreme Court’s 1998 ruling in Basic v. Levinson, which concluded that efficient markets telescope all available information—including material misstatements under the securities laws—into a stock’s price. But the efficient markets hypothesis has since come under fire, and Halliburton and its industry allies argued that Basic used a flawed economic theory to create an unfair legal reality. Basic, they argued, gives securities plaintiffs a shortcut to class certification that coerces defendants into settling frivolous suits.
Boies urged the Supreme Court not to jettison the fraud-on-the-market presumption, arguing that lawmakers have had more than a decade and a half to overturn Basic via legislation. Instead, Boies told the court, Congress has used the decision as a departure point when imposing new rules on securities class actions.
On June 23, the Supreme Court ruled unanimously that Basic is here to stay. In a move that could cut down on meritless cases but make serious suits more complex to litigate, the court held that defendants may rebut the fraud-on-the-market presumption prior to class certification by showing that an alleged misrepresentation had no impact on a stock’s price. The overall formula for securities class actions, however, remains unchanged.
“There was simply too much force in the [Basic] opinion—and too much reliance on it by Congress in fashioning subsequent legislation—to overturn it,” Boies told us Thursday.
The arguments in March marked Boies’ second trip to the Supreme Court in the Halliburton case. As we’ve reported, the litigation initially came to Boies Schiller by way of Boies’ daughter Caryl, who died from lung cancer at age 48 in December 2010. Caryl took over the case from Bill Lerach, despite her father’s fears that the U.S. Court of Appeals for the Fifth Circuit could cripple the case.
Indeed, the case ran aground at the Fifth Circuit, which ruled that the plaintiffs must show Halliburton’s alleged securities violations caused their losses in order to win class certification. But six months after his daughter’s death, Boies persuaded the Supreme Court to vacate the Fifth Circuit’s decision.
Boies handled arguments in the case both times it wound up before the Fifth Circuit and the Supreme Court, but he said his partner Carl Goldfarb has “really picked up the keys” from his daughter, taking responsibility for discovery, depositions and briefing.
In preparation for the latest argument at the Supreme Court, Boies went through multiple moot courts and got feedback from Goldstein & Russell Supreme Court specialist Thomas Goldstein. (Boies referred to Goldstein, a former Boies Schiller associate, as “Tommy” during our conversation.) Boies Schiller senior partner Robert Silver helped Boies with the legal and technical issues. Silver’s contribution included what Boies called a “mind-numbing tutorial on the efficiency of capital markets.” That tutorial proved useful when the justices asked how changes in technology had affected the fraud-on-the-market presumption. There’s “now a much more rapid absorption of information by the capital markets,” Boies said.
When we reached him Thursday, Boies was taking a breather from promoting “Redeeming the Dream,” a book he coauthored with Gibson, Dunn & Crutcher’s Theodore Olson that details their successful legal challenge to California’s ban on same-sex marriage. This weekend Boies and Olson will be in Los Angeles, celebrating the first wedding anniversary of one of the plaintiffs in the California case.
Then it’s back to work. Boies said he’ll soon begin preparing for a September trial in the case that Hank Greenberg’s Starr International brought over the government’s bailout of American International Group Inc. He’s also moving ahead with discovery in a terrorism funding case he’s handling against the Bank of China that could go to trial early next year.