Below is the first part of an article by Meagan Hatcher-Mays from mediamatters.org. It reads…
One of right-wing media’s favorite myths about class action lawsuits — their supposedly frivolous nature — is now permeating respectable news sources.
On March 5, the Supreme Court heard oral arguments in Halliburton v. Erica P. John Fund, a case about securities class actions in which the conservative justices could make it practically impossible for average shareholders to effectively sue large corporations who distort the company’s stock price through fraud. Plaintiffs in these lawsuits — increasingly institutional investors like large pension funds — have traditionally been able to join together as a class action to even the odds against these deep-pocketed corporate defendants.
Right-wing media have steadily pushed the myth that these types of equalizing lawsuits are ineffective orfrivolous. For example, The Wall Street Journal editorial board has long stoked fears inaccurately andinconsistently about class actions, and has been highly supportive of the conservative justices’ attempts toshut the courthouse doors to this type of collective action. In a recent editorial, the WSJ attacked the shareholder lawsuits at issue in Halliburton as “economically destructive” and beneficial only to plaintiffs lawyers, who have “dined out for years on the windfall of securities class-action suits.”
Based on Supreme Court precedent, securities class action plaintiffs can file suits based on the “fraud on the market” theory. This is a 25-year-old legal doctrine that assumes for the purposes of class certification that all publicly available information is reflected in a company’s stock price. Rather than forcing plaintiffs at this pre-trial stage to show that they relied on any one fraudulent statement made by a corporate officer, the fraud on the market theory assumes that in a relatively efficient market, those statements affected and unjustly inflated the company’s stock price. These presumptions are later rebuttable at trial, where the merits of this alleged fraud can be litigated.
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