Twenty-five years ago, a four-justice majority of the Supreme Court held, in Basic v. Levinson, 485 U.S. 224 (1988), that a putative class of investors need not prove actual common reliance on a misrepresentation to achieve class certification and prevail upon the merits. Instead, they may invoke a classwide presumption of reliance, the “fraud-on-the-market presumption,” based upon the theory that the market price of a security in an efficient market will immediately incorporate any material, public representation, and thus a purchaser who buys a security at the market price will be presumed to have relied upon the representation. The Supreme Court is now being asked to overrule Basic because (1) its theoretical economic framework, the “efficient capital markets hypothesis,” has been repudiated through scholarly and empirical attack, (2) there has been a high level of inconsistency in the courts regarding market efficiency, which is required to trigger the presumption, and (3) the Basic presumption is inconsistent with recent Supreme Court’s holdings.1

The opportunity to reconsider Basic is presented through a petition for a writ of certiorari by Halliburton Company from a Fifth Circuit decision in Erica P. John Fund v. Halliburton, 718 F.3d 423 (5th Cir. 2013), which affirmed a district court order granting class certification over Halliburton’s opposition.2 If certiorari is granted, it would be the second time the Supreme Court considered this case. Previously, the district court denied class certification and was affirmed by the U.S. Court of Appeals for the Fifth Circuit, which held that proof of loss causation was required to establish the predominance of common issues under Rule 23(b)(3).3 The Supreme Court granted certiorari and reversed, sub. nom Erica P. John Fund v. Halliburton, 131 S.Ct. 2179 (2011) (EPJ Fund), holding that proof of loss causation was not required at the class certification stage. In doing so, the Supreme Court declined to address Halliburton’s assertion that it was entitled to rebut the fraud-on-the-market presumption or “any other question about the presumption, or how and when it may be rebutted.” 131 S.Ct. at 2187.