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Court weighs securities fraud case changes

Associated Press

WASHINGTON: The Supreme Court on Wednesday seemed open to the possibility of making it harder for investors to join together to sue corporations for securities fraud — but maybe not as hard as companies that have to defend such lawsuits would like.

Any change in the standard for green-lighting class-action lawsuits could have a chilling effect on shareholders who bring the cases, which have generated an estimated $73 billion in settlements since 1997.

Investor groups say class actions help curb corporate abuse and market fraud, while opponents claim they extort money from corporations and create a windfall for plaintiff’s lawyers.

During arguments in a closely watched case against Halliburton Co., most justices appeared unwilling to completely overturn a quarter-century-old decision that has helped investors launch class-action cases based on the effect misleading statements have on a company’s stock price.

But some conservative justices, including Justice Anthony Kennedy, who has often been a swing vote, suggested a middle ground that would force investors to show much earlier in a case that the alleged fraud actually caused a stock’s price to drop.



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