Insights
Publications

Halliburton Decision May Drive Up Litigation Costs and Impact Settlement

6/26/2014 Blog

The U.S. Supreme Court’s recent decision in Halliburton Co. v. Erica P. John Fund, Inc. is not the game changer for securities litigation that some hoped for, but D&O insurers will be keeping a close eye on securities cases to see whether the decision increases defense costs or changes settlement calculations.

In Halliburton, the Supreme Court refused to overturn its decision in Basic Inc. v. Levinson, which held that plaintiffs in securities class actions do not need to prove that the class members actually relied on the alleged misrepresentations at issue.  The Court did rule, however, that defendants can now challenge the presumption that the alleged fraud affected share prices at the class certification stage.  The ruling does not give defendants a new right as they were free to challenge the “price impact” presumption after class certification through summary judgment or at trial, but it does mean that defendants can mount this challenge earlier.  Doing so would increase up-front litigation costs, resulting in self-insured retentions being eroded more quickly and implicating D&O coverage at an earlier point. 

Members of the defense bar have already speculated that this change will be a boon to expert witnesses who may be retained at an earlier stage and asked to perform a more wide-ranging analysis.  This could make securities litigation more costly as defendants pay for more expert time as well as the related attorney time necessary to present these arguments to the court.

This shift may also have an impact on settlement negotiations.  If plaintiffs defeat a defendant’s “price impact” argument at the class certification stage, plaintiffs would presumably have increased leverage as they will have already cleared a key hurdle.  This risk may ultimately make defendants shy away from raising the issue at the class certification stage but defendants may still incur the up-front expert costs and attorney time to analyze the issue.

Defense counsel have also speculated there may be a short-term uptick in defense costs as parties wage hard-fought battles in the lower courts regarding exactly what evidence is sufficient to rebut the price impact presumption and what standard of proof applies.  While the ultimate impact of Halliburton remains to be seen, D&O insurers will certainly be watching closely given the risk of increased defense costs and changes in settlement value.

Firm Highlights

News

Farella Expands Insurance Recovery Practice With Addition of Litigation Partner Amy Briggs

Read More
News

Insurers Challenged for Denying Business-Interruption Coverage During Coronavirus Economic Lockdown

Insurance recovery partner Ray Sheen commented in the North Bay Business Journal article, "Insurers Challenged for Denying Business-Interruption Coverage During Coronavirus Economic Lockdown." Read the article, here .

Read More
News

Cyber Insurance Demand Heats Up As COVID-19 Hacks Rise

Tyler Gerking spoke to Law360 for the article "Cyber Insurance Demand Heats Up As COVID-19 Hacks Rise." As far as insurance coverage being available for fines and penalties that arise out of privacy and data security laws such as...

Read More
Publication

Insurance Dispute Resolution

Farella's Real Estate Webinar Series features Amy Briggs discussing "Insurance Dispute Resolution." Businesses have filed claims seeking recovery help under their insurance policies due to various governmental closure orders arising from the COVID-19 pandemic. Losses related...

Read More
Publication

Maximizing Business Insurance Coverage Benefits After a Fire

Unfortunately, we again write while wildfire is devouring homes and businesses in Napa and Sonoma, and threatening many more. We’ve previously posted tips about first steps that you should take in the event your...

Read More
News

Farella Defeats Builder's Risk Insurer's Defense in Lawsuit Brought on Behalf of Webcor-Obayashi Joint Venture

SAN FRANCISCO, August 5, 2020: Farella Braun + Martel has obtained a favorable ruling from the U.S. District Court for the Northern District of California granting partial summary motion and clarifying a legal doctrine...

Read More
Publication

COVID-19 Exposure and GL Coverage: Issues for Personal Injury Claims

Though much of the conversation regarding insurance coverage for COVID-19-related losses has focused on the potential for business interruption-type coverage (see prior discussion  here ), insureds should not overlook the potential that COVID risks...

Read More
Publication

D&O Professionals Series: Tyler Gerking Discusses D&O Coverage and Litigation

Insurance Recovery partner Tyler Gerking explores current trends and observations on D&O coverage and litigation on Willis Towers Watson's "D&O Professionals Series." Read the full article,  here .

Read More
News

52 Farella Braun + Martel Attorneys Listed in The Best Lawyers in America© 2021

Read More
Publication

Maximizing Insurance Coverage: What Cannabis Businesses Need to Know

Farella's Cannabis Industry Education Series features Tyler Gerking discussing "Maximizing Insurance Coverage: What Cannabis Businesses Need to Know." The cannabis industry has flourished, along with it the cannabis insurance market has grown. As more carriers...

Read More