By Michelle D. Schwartz
AFJ Director of Justice Programs

» The AFJ report discussed in this post is available here.

>>Analyisis of oral arguments using excerpts from Court audio is available here. 

Yesterday morning, I was privileged to attend Supreme Court oral arguments in Halliburton Co. v. Erica P. John Fund, Inc.

This is the case where Halliburton is asking the Supreme Court to overturn a 26-year old precedent in order to make it infinitely more difficult for shareholders to stand up for their rights  in court against corporations that have defrauded them out of their hard-earned money.  Halliburton itself is accused by plaintiffs, led by an organization supporting the charitable work of the Archdiocese of Milwaukee, of making material misrepresentations to its investors on such issues as its asbestos liability, causing losses to those investors.

As Alliance for Justice noted in our new report, “Halliburton at the Supreme Court:  What’s at Stake in Halliburton, Inc. v. Erica P. John Fund,” if the Supreme Court rules the way Halliburton is asking it to, “In many instances, it would essentially be giving businesses like Halliburton a ‘get out of jail free’ card to defraud their own shareholders without consequence.”


It’s always exciting to be present for oral argument—and sometimes it can be good theater.

A few asides to note: First, Sandra Day O’Connor was there. Maybe she’s there all the time, but I’m not, and I thought that was pretty cool.

Second, Justice Breyer was downright hilarious when he delivered the opinion in BG Group PLC v. Republic of Argentina. I know, treaties and arbitration are not normally the stuff of hilarity, but—as any great comedian will tell you—delivery matters.

Justice Breyer frequently noted how “complicated” the case was, sometimes as he struggled to describe the details himself. I know, it doesn’t look that funny on paper, but he had SCOTUS LOL, if not quite ROTFL.

Third, Justice Breyer was so funny that he got Justice Thomas to make a joke! Seriously! And talk about delivery. He was totally deadpan as he began to announce the decision in Lozano v. Alvarez, noting, “and it’s not complicated.” Close to ROTFL (if only the Marshals would allow it).

–Michelle Schwartz

At oral argument, Aaron Streett, arguing on behalf of Halliburton, also made a Monopoly analogy, arguing that we cannot make it too easy for plaintiffs “to collect $200 and pass go and get right to class certification.”

All of which leads me to an important reminder:  This isn’t Monopoly money.

What’s at stake in this case is the financial security of Americans—from the recent college graduate investing her earnings for the first time, to the new parents already thinking about paying for their child’s college education, to the retiree who’s been saving his whole life and is now relying on his investments.

Shareholders’ ability to hold wrongdoers accountable not only returns hard-earned money to defrauded investors, but also deters securities fraud from happening in the first place—making the securities markets safer for everyone.

These investors assume that stock prices are based on the truth, and they are owed compensation when they purchase stocks based on lies.

But these mom-and-pop investors didn’t seem to be on Streett’s mind yesterday.  Instead, he talked about sophisticated investors:  “Many investors, such as hedge fund, rapid fire, volatility traders, index fund investors, sophisticated value investors do not—they have investment strategies that do not rely on the integrity of the market price whatsoever.”

Justice Alito was similarly focused on sophisticated investors who are supposedly gaming the system, as is evidenced by the following exchange with David Boies, arguing for the plaintiffs:

Justice Alito:  Are you saying there are not categories of investors who might say to themselves, You know what?  There is a possibility that the price of this stock on this particular day might be artificially inflated by some statement that was made in the past that isn’t true, but I’m going to buy it anyway because I still think it’s either, it’s undervalued or because there are some other statistics regarding the market that tell me that this price is going to go up.

You tell me that there are—there are not large categories of investors who think that way?

Boies:  I think there are not large categories of investors that think that way, and I think there is absolutely no empirical evidence at all that there are large categories of investors that think that way.

Like Boies, Deputy Solicitor General Malcolm Stewart, arguing in support of the plaintiffs, took issue with this line of argument.  Stewart cited an amicus brief from institutional investors that do rely on the integrity of the market price, “allowing the market to do most of the work and then buying stocks that are broadly representative of the market.”

So let’s hope that, when they decide this case, the justices think about actual real-world investors who have lost their life savings, rather than mythical wily investors playing with Monopoly money.