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Supreme Court to decide if Halliburton can try to block suit

WASHINGTON — The Supreme Court decided Friday to hear an appeal from Halliburton Co. that could make it more difficult for shareholders to sue companies for engaging in fraud to prop up stock prices.

The high court agreed to hear the corporation’s attempt to stop legal action from shareholders who bought stock between June 1999 and December 2001.

Their lawsuit argues that Halliburton deliberately understated the company’s liability in asbestos litigation, inflated how much money its construction and engineering units would bring in and overstated the benefits of a merger with Dresser Industries. When Halliburton made corrective disclosures, it made the stock price drop and caused investors to lose money, the lawsuit said.

This is the second time this case has been to the Supreme Court.

The 5th U.S. Circuit Court of Appeals in New Orleans originally refused to let the lawsuit go forward as a class-action. But the Supreme Court said in 2011 that ruling was incorrect, and the lawsuit was certified as a class-action suit by the lower courts.

Now Halliburton lawyers want the Supreme Court to throw out its 1988 decision in Basic v. Levinson, which the shareholders’ lawyers call “the cornerstone for modern private securities litigation.” That decision says shareholders do not have to prove they relied on a company’s misrepresentation in order to obtain class certification, meaning that judges can assume that misrepresentations by corporations were taken into account by shareholders when they bought the stock.

Halliburton lawyers say that should be overruled or modified to say that plaintiffs have to prove that the alleged misrepresentations distorted the stock’s market price. A decision upholding that theory would make it harder for shareholders to band together in class action lawsuits to sue corporations in securities lawsuits.

Four justices, Clarence Thomas, Samuel Alito, Anthony Kennedy and Antonin Scalia, have said they were willing to reconsider the Basic decision.

The case is Halliburton v. Erica P. John Fund Inc., 13-317.

Separately on Friday, the court agreed to hear an appeal by police officers in Arkansas who were involved in a car chase that ended with the deaths of the driver and his passenger across the Mississippi River in Memphis, Tenn.

An appeals court ruling allowed a civil lawsuit by the driver’s daughter to proceed against six West Memphis, Ark., police officers. They fatally shot driver Donald Rickard and passenger Kelly Allen in a chaotic scene on a Memphis street.

The lawsuit says police used excessive force. The officers say they should be shielded from liability and cite a 2008 Supreme Court decision allowing police to use tactics that put fleeing suspects at risk of death to end high-speed chases.

That case is Plumhoff v. Rickard, 12-1117.