halliburtonAccording to the company’s December 23, 2016 press release (here), Halliburton has reached an agreement to settle the long-running securities class action pending against the company and certain of its directors and officers for $100 million. During its 14-year existence, the storied case had made two trips to the U.S. Supreme Court and three trips to the Fifth Circuit. The settlement is subject to court approval. Nate Raymond’s December 23, 2016 Reuters article about the settlement can be found here.


The Halliburton case has been pending since June 2002. The plaintiffs alleged that the company and certain of its directors and officers understated the company’s exposure to asbestos liability and overestimated the benefits of the company’s merger with Dresser Industries. The plaintiffs also allege that the defendants overstated the company’s ability to realize the full revenue benefit of certain cost-plus contracts.


For many years, the parties have been engaged in full-scale combat on the issue of whether or not a class should be certified in the case.


The class certification issue was the subject of the case’s first trip to the U.S. Supreme Court; in 2011, the Court unanimously rejected  the company’s argument (and the Fifth Circuit’s holding) that in order for a plaintiff to obtain class certification, the plaintiff must first establish loss causation.


Following the Supreme Court’s 2011 ruling, the case was remanded back to the lower courts. In June 2013 the Fifth Circuit affirmed the certification of a shareholder class in the case.  In its opinion, the Fifth Circuit expressly affirmed the district court’s holding that Halliburton could not present evidence at the class certification stage that the alleged misrepresentation did not impact the company’s share price and therefore that there was no basis for the presumption of reliance. Halliburton filed a petition for writ of certiorari, which the U.S. Supreme Court granted.


For a time, it appeared that the Halliburton case’s second trip to the Supreme Court might make the case the most important securities lawsuit for a generation, as the court agreed to take up the question of whether or not to set aside the presumption of reliance based on the fraud on the market theory that the Court first recognized in its 1988 decision in Basic, Inc. v. Levinson.


As noted here, in the end the Court, in a June 2014 opinion written by Chief Justice John Roberts and joined by five other justices, declined to overturn Basic, but held that a securities class action defendant should have the opportunity at the class certification stage to try to rebut the presumption by showing that the alleged misrepresentation did not impact the defendant company’s share price. The Supreme Court’s opinion can be found here.


The Court’s consideration of the question of whether or not to overturn Basic was a near-run thing. Justice Thomas, joined by Justices Scalia and Alito, wrote an opinion concurring in the judgment in which he contended that the Court should have overturned Basic.


In July 2015, on remand, Northern District of Texas Barbara Lynn, applying the Supreme Court’s standards in its second Halliburton decision, certified a class in the case based on one of the six alleged misrepresentations on which the plaintiffs relied, as discussed in detail here. After the ruling, the case made its way to the Fifth Circuit for the third time. The appellate court heard oral argument in August 2016.   Discovery and briefing had continued in the district court while the class certification issues pending at the Fifth Circuit. The parties reached their settlement while the appeal remained pending.


Readers of this blog will be interested to note while the company itself is contributing $54 million to the settlement, the remaining $46 million of the settlement amount is to be funded by the company’s D&O insurance.


Observers can be forgiven for their surprise that after 14 years of knock down drag out litigation there is anything remaining of the D&O insurance. Observers may still wonder whether an earlier settlement, at a time when more of the insurance remained available, might have cost the company itself less of its own money. Of course, it takes two sides to settle a case, and an earlier settlement might well not have been an available option.


Readers who wonder, if the case was just going to settle in the end anyway, why it didn’t settle a long time ago, will want to read Alison Frankel’s excellent December 27, 2016 post on her On the Case blog (here), where she lays out the history of the case and the settlement.


As Frankel notes, there had been an earlier bid to settle the case back in 2007, when prior plaintiff’s counsel reportedly was moving towards a $7 million settlement. But when the Milwaukee –based pension fund that was acting as lead plaintiff got wind of the settlement initiative, it fired the plaintiff’s lawyer then leading the case, and substituted David Boies and his law firm. Frankel’s recounting of the tale includes some interesting commentary from Boies, including the report that his daughter (who had been at Boies’s law firm but who passed away in 2011), had always insisted that the case should settle for at least $100 million.