Many observers of this case felt Halliburton’s challenge was a long-shot. How did you decide to take this issue to the Supreme Court and, based on today’s decision, would you do it again?
AS: When four Justices said in Amgen that Basic may warrant reconsideration, we felt we had a plausible argument for seeking cert on that question. The trick then became persuading the Court to take up that issue only a few months after Amgen. The Court frequently lets issues percolate for a couple of years and rarely addresses the same legal issue in consecutive Terms. We also thought we had a strong backup argument that was nicely illustrated by the facts of our case. Even if you accept Basic’s premise that courts can presume reliance whenever an investor purchases stock at a fraud-inflated price, the evidence in our case showed that the alleged misrepresentations did not distort the stock price. Yet the Fifth Circuit held that Amgen required it to ignore this evidence at the class-certification stage. We were always convinced that if a plaintiff wished to employ the Basic presumption of reliance to gain class certification, it should at least be required to prove price distortion. There was a circuit split on this issue, with the Second Circuit being willing to consider price-distortion evidence. To obtain cert, we had to persuade the Court that Amgen did not resolve this question and that our position was the only way to make sense of Basic and prevent virtually automatic class certifications against publicly traded companies.
Why do you think this case generated so much interest?
AS: A confluence of reasons. First, we were openly asking the Court to overrule a 25-year-old precedent. That is unusual by itself. Second, while that precedent had been criticized in the academy, no one had ever assembled legal arguments for why it should be overruled, and no Justice had questioned it before Amgen. Third, the amounts of money at stake and the importance to the business and plaintiff-lawyer communities were vast. The securities class actions enabled by Basic have resulted in tens of billions of dollars of settlements and judgments. There is a great debate about whether such actions have any deterrent effect on wrongdoing and whether they provide any benefit to shareholders. Finally, we were not only attacking a legal precedent as misguided, we also made a direct assault on the efficient-market theory of economics that underpinned Basic. While economists generally embraced the theory in the decades leading up to Basic, the ensuing market bubbles and collapses in the last 25 years had called it into grave question. This was best illustrated by the fact that the 2013 Nobel Prize in Economics was awarded to one of the efficient market theory’s founders (Eugene Fama) and one its most perceptive detractors (Robert Shiller).
This was your first time presenting an oral argument before the Court. What are your takeaways from the experience? What would you would do differently on a return trip to argue a case before the Court?
AS: It was a thrilling experience to argue before the Court after having sat “second chair” twice and clerking for Chief Justice Rehnquist a decade ago. Extensive preparation and multiple practice sessions are key, and I am grateful to everyone who assisted in that process, especially my fellow Baker Botts appellate partner Evan Young. With each argument before any Court, I hope to get a little bit better. The key to a great oral argument is hammering home 3-4 clearly formulated and compelling points, while addressing the hardest questions and turning them to your advantage. There is always room for improvement on that score. On a more practical note, in future cases, I will be sure to enter the courtroom before 9:58 (for a 10:00 argument). Due to some confusion or miscommunication, Mr. Boies and I and our co-counsel were not escorted into the courtroom until much later than usual. That led to some unnecessary heartburn for a rookie advocate; I had just finished unpacking my materials when the Justices took the bench.