(Slip Opinion) OCTOBER TERM, 2013 1 

Syllabus 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader. 

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. 

SUPREME COURT OF THE UNITED STATES 

Syllabus 

HALLIBURTON CO. ET AL. v. ERICA P. JOHN FUND, 

INC., FKA ARCHDIOCESE OF MILWAUKEE
 

SUPPORTING FUND, INC. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 

THE FIFTH CIRCUIT 

No. 13–317. Argued March 5, 2014—Decided June 23, 2014 

Investors can recover damages in a private securities fraud action only

if they prove that they relied on the defendant’s misrepresentation in

deciding to buy or sell a company’s stock. In Basic Inc. v. Levinson, 

485 U. S. 224, this Court held that investors could satisfy this reliance requirement by invoking a presumption that the price of stock 

traded in an efficient market reflects all public, material information—including material misrepresentations. The Court also held, 

however, that a defendant could rebut this presumption by showing

that the alleged misrepresentation did not actually affect the stock 

price—that is, that it had no “price impact.”

Respondent Erica P. John Fund, Inc. (EPJ Fund), filed a putative

class action against Halliburton and one of its executives (collectively 

Halliburton), alleging that they made misrepresentations designed to

inflate Halliburton’s stock price, in violation of section 10(b) of the

Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5. The District Court initially denied EPJ Fund’s

class certification motion, and the Fifth Circuit affirmed. But this 

Court vacated that judgment, concluding that securities fraud plaintiffs need not prove loss causation—a causal connection between the 

defendants’ alleged misrepresentations and the plaintiffs’ economic

losses—at the class certification stage in order to invoke Basic’s presumption of reliance. On remand, Halliburton argued that class certification was nonetheless inappropriate because the evidence it had

earlier introduced to disprove loss causation also showed that its alleged misrepresentations had not affected its stock price. By demonstrating the absence of any “price impact,” Halliburton contended, it 
 

 

 

 

 

2 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Syllabus 

had rebutted the Basic presumption. And without the benefit of that 

presumption, investors would have to prove reliance on an individual 

basis, meaning that individual issues would predominate over common ones and class certification would be inappropriate under Federal Rule of Civil Procedure 23(b)(3). The District Court rejected Halliburton’s argument and certified the class. The Fifth Circuit 

affirmed, concluding that Halliburton could use its price impact evidence to rebut the Basic presumption only at trial, not at the class 

certification stage. 

Held: 

1. Halliburton has not shown a “special justification,” Dickerson v. 

United States, 530 U. S. 428, 443, for overruling Basic’s presumption

of reliance. Pp. 4–16.

(a) To recover damages under section 10(b) and Rule 10b–5, a

plaintiff must prove, as relevant here, “ ‘reliance upon the misrepresentation or omission.’ ” Amgen Inc. v. Connecticut Retirement Plans 

and Trust Funds, 568 U. S. ___, ___. The Court recognized in Basic, 

however, that requiring direct proof of reliance from every individual

plaintiff “would place an unnecessarily unrealistic evidentiary burden on the . . . plaintiff who has traded on an impersonal market,” 

485 U. S., at 245, and “effectively would” prevent plaintiffs “from proceeding with a class action” in Rule 10b–5 suits, id., at 242. To address these concerns, the Court held that plaintiffs could satisfy the

reliance element of a Rule 10b–5 action by invoking a rebuttable presumption of reliance. The Court based that presumption on what is 

known as the “fraud-on-the-market” theory, which holds that “the

market price of shares traded on well-developed markets reflects all

publicly available information, and, hence, any material misrepresentations.” Id., at 246. The Court also noted that the typical “investor who buys or sells stock at the price set by the market does so in

reliance on the integrity of that price.” Id., at 247. As a result, 

whenever an investor buys or sells stock at the market price, his “reliance on any public material misrepresentations . . . may be presumed for purposes of a Rule 10b–5 action.” Id. at 247. Basic also 

emphasized that the presumption of reliance was rebuttable rather 

than conclusive. Pp. 5–7.

(b) None of Halliburton’s arguments for overruling Basic so discredit the decision as to constitute a “special justification.” Pp. 7–12.

(1) Halliburton first argues that the Basic presumption is inconsistent with Congress’s intent in passing the 1934 Exchange Act—

the same argument made by the dissenting Justices in Basic. The 

Basic majority did not find that argument persuasive then, and Halliburton has given no new reason to endorse it now. Pp. 7–8.

(2) Halliburton also contends that Basic rested on two premis-
 

 

Cite as: 573 U. S. ____ (2014) 3 

Syllabus 

es that have been undermined by developments in economic theory. 

First, it argues that the Basic Court espoused “a robust view of market efficiency” that is no longer tenable in light of empirical evidence

ostensibly showing that material, public information often is not

quickly incorporated into stock prices. The Court in Basic acknowledged, however, the debate among economists about the efficiency of

capital markets and refused to endorse “any particular theory of how 

quickly and completely publicly available information is reflected in

market price.” 485 U. S., at 248, n. 28. The Court instead based the 

presumption of reliance on the fairly modest premise that “market

professionals generally consider most publicly announced material

statements about companies, thereby affecting stock market prices.” 

Id., at 247, n. 24. Moreover, in making the presumption rebuttable, 

Basic recognized that market efficiency is a matter of degree and accordingly made it a matter of proof. Halliburton has not identified 

the kind of fundamental shift in economic theory that could justify

overruling a precedent on the ground that it misunderstood, or has 

since been overtaken by, economic realities. 

Halliburton also contests the premise that investors “invest ‘in reliance on the integrity of [the market] price,’ ” id., at 247, identifying 

a number of classes of investors for whom “price integrity” is supposedly “marginal or irrelevant.” But Basic never denied the existence 

of such investors, who in any event rely at least on the facts that

market prices will incorporate public information within a reasonable

period and that market prices, however inaccurate, are not distorted 

by fraud. Pp. 8–12. 

(c) The principle of stare decisis has “ ‘special force’ ” “in respect 

to statutory interpretation” because “ ‘Congress remains free to alter

what [the Court has] done.’ ” John R. Sand & Gravel Co. v. United 

States, 552 U. S. 130, 139. So too with Basic’s presumption of reliance. The presumption is not inconsistent with this Court’s more recent decisions construing the Rule 10b–5 cause of action. In Central 

Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 

U. S. 164, and Stoneridge Investment Partners, LLC v. ScientificAtlanta, Inc., 552 U. S. 148, the Court declined to effectively eliminate the reliance element by extending liability to entirely new categories of defendants who themselves had not made any material,

public misrepresentation. The Basic presumption, by contrast, merely provides an alternative means of satisfying the reliance element. 

Nor is the Basic presumption inconsistent with the Court’s recent decisions governing class action certification, which require plaintiffs to 

prove—not simply plead—that their proposed class satisfies each requirement of Federal Rule of Civil Procedure 23, including, if applicable, the predominance requirement of Rule 23(b)(3). See, e.g., Wal-
 

 

 

4 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Syllabus 

Mart Stores, Inc. v. Dukes, 564 U. S. ___, ___. The Basic presumption

does not relieve plaintiffs of that burden but rather sets forth what

plaintiffs must prove to demonstrate predominance. Finally, Halliburton emphasizes the possible harmful consequences of the securities class actions facilitated by the Basic presumption, but such concerns are more appropriately addressed to Congress, which has in 

fact responded, to some extent, to many of them. Pp. 12–16.

2. For the same reasons the Court declines to overrule Basic’s presumption of reliance, it also declines to modify the prerequisites for

invoking the presumption by requiring plaintiffs to prove “price impact” directly at the class certification stage. The Basic presumption

incorporates two constituent presumptions: First, if a plaintiff shows

that the defendant’s misrepresentation was public and material and

that the stock traded in a generally efficient market, he is entitled to

a presumption that the misrepresentation affected the stock price. 

Second, if the plaintiff also shows that he purchased the stock at the

market price during the relevant period, he is entitled to a further 

presumption that he purchased the stock in reliance on the defendant’s misrepresentation. Requiring plaintiffs to prove price impact

directly would take away the first constituent presumption. Halliburton’s argument for doing so is the same as its argument for overruling the Basic presumption altogether, and it meets the same fate. 

Pp. 16–18. 

3. The Court agrees with Halliburton, however, that defendants

must be afforded an opportunity to rebut the presumption of reliance

before class certification with evidence of a lack of price impact. Defendants may already introduce such evidence at the merits stage to

rebut the Basic presumption, as well as at the class certification

stage to counter a plaintiff’s showing of market efficiency. Forbidding defendants to rely on the same evidence prior to class certification for the particular purpose of rebutting the presumption altogether makes no sense, and can readily lead to results that are 

inconsistent with Basic’s own logic. Basic allows plaintiffs to establish price impact indirectly, by showing that a stock traded in an efficient market and that a defendant’s misrepresentations were public

and material. But an indirect proxy should not preclude consideration of a defendant’s direct, more salient evidence showing that an alleged misrepresentation did not actually affect the stock’s price and,

consequently, that the Basic presumption does not apply. Amgen 

does not require a different result. There, the Court held that materiality, though a prerequisite for invoking the Basic presumption,

should be left to the merits stage because it does not bear on the predominance requirement of Rule 23(b)(3). In contrast, the fact that a 

misrepresentation has price impact is “Basic’s fundamental premise.” 
 

 

Cite as: 573 U. S. ____ (2014) 5 

Syllabus 

Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___, ___. It 

thus has everything to do with the issue of predominance at the class 

certification stage. That is why, if reliance is to be shown through 

the Basic presumption, the publicity and market efficiency prerequisites must be proved before class certification. Given that such indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the

inquiry at that stage by excluding direct evidence of price impact.

Pp. 18–23. 

718 F. 3d 423, vacated and remanded. 

ROBERTS, C. J., delivered the opinion of the Court, in which KENNEDY, 

GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GINSBURG, J., 

filed a concurring opinion, in which BREYER and SOTOMAYOR, 

JJ., joined. THOMAS, J., filed an opinion concurring in the judgment, in 

which SCALIA and ALITO, JJ., joined. 
 

 

_________________ 

_________________ 

Cite as: 573 U. S. ____ (2014) 1 

Opinion of the Court 

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press. 

SUPREME COURT OF THE UNITED STATES 

No. 13–317 

HALLIBURTON CO., ET AL., PETITIONERS v. ERICA P.

 JOHN FUND, INC., FKA ARCHDIOCESE OF 

 MILWAUKEE SUPPORTING FUND, INC.
 

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

APPEALS FOR THE FIFTH CIRCUIT
 

[June 23, 2014] 

CHIEF JUSTICE ROBERTS delivered the opinion of the 

Court. 

Investors can recover damages in a private securities

fraud action only if they prove that they relied on the 

defendant’s misrepresentation in deciding to buy or sell a

company’s stock. In Basic Inc. v. Levinson, 485 U. S. 224 

(1988), we held that investors could satisfy this reliance

requirement by invoking a presumption that the price of 

stock traded in an efficient market reflects all public, 

material information—including material misstatements.

In such a case, we concluded, anyone who buys or sells the

stock at the market price may be considered to have relied

on those misstatements. 

We also held, however, that a defendant could rebut this 

presumption in a number of ways, including by showing 

that the alleged misrepresentation did not actually affect

the stock’s price—that is, that the misrepresentation had 

no “price impact.” The questions presented are whether 

we should overrule or modify Basic’s presumption of reliance and, if not, whether defendants should nonetheless 
 

 

2 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

be afforded an opportunity in securities class action cases

to rebut the presumption at the class certification stage, 

by showing a lack of price impact. 

I 

Respondent Erica P. John Fund, Inc. (EPJ Fund), is the

lead plaintiff in a putative class action against Halliburton

and one of its executives (collectively Halliburton) alleging

violations of section 10(b) of the Securities Exchange Act

of 1934, 48 Stat. 891, 15 U. S. C. §78j(b), and Securities

and Exchange Commission Rule 10b–5, 17 CFR §240.10b–5

(2013). According to EPJ Fund, between June 3, 1999, 

and December 7, 2001, Halliburton made a series of misrepresentations regarding its potential liability in asbestos

litigation, its expected revenue from certain construction

contracts, and the anticipated benefits of its merger with

another company—all in an attempt to inflate the price of

its stock. Halliburton subsequently made a number of 

corrective disclosures, which, EPJ Fund contends, caused 

the company’s stock price to drop and investors to lose 

money.

EPJ Fund moved to certify a class comprising all investors who purchased Halliburton common stock during the 

class period. The District Court found that the proposed

class satisfied all the threshold requirements of Federal 

Rule of Civil Procedure 23(a): It was sufficiently numerous, there were common questions of law or fact, the representative parties’ claims were typical of the class claims,

and the representatives could fairly and adequately protect the interests of the class. App. to Pet. for Cert. 54a.

And except for one difficulty, the court would have also 

concluded that the class satisfied the requirement of Rule

23(b)(3) that “the questions of law or fact common to class

members predominate over any questions affecting only

individual members.” See id., at 55a, 98a. The difficulty 

was that Circuit precedent required securities fraud plain-
 

 

Cite as: 573 U. S. ____ (2014) 3 

Opinion of the Court 

tiffs to prove “loss causation”—a causal connection between the defendants’ alleged misrepresentations and the

plaintiffs’ economic losses—in order to invoke Basic’s 

presumption of reliance and obtain class certification. 

App. to Pet. for Cert. 55a, and n. 2. Because EPJ Fund 

had not demonstrated such a connection for any of Halliburton’s alleged misrepresentations, the District Court

refused to certify the proposed class. Id., at 55a, 98a. The 

United States Court of Appeals for the Fifth Circuit affirmed the denial of class certification on the same ground. 

Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 597 F. 3d 330 (2010).

We granted certiorari and vacated the judgment, finding

nothing in “Basic or its logic” to justify the Fifth Circuit’s 

requirement that securities fraud plaintiffs prove loss

causation at the class certification stage in order to invoke 

Basic’s presumption of reliance. Erica P. John Fund, Inc. 

v. Halliburton Co., 563 U. S. ___, ___ (2011) (Halliburton 

I ) (slip op., at 6). “Loss causation,” we explained, “addresses a matter different from whether an investor relied 

on a misrepresentation, presumptively or otherwise, when 

buying or selling a stock.” Ibid. We remanded the case for 

the lower courts to consider “any further arguments 

against class certification” that Halliburton had preserved. 

Id., at ___ (slip op., at 9). 

On remand, Halliburton argued that class certification 

was inappropriate because the evidence it had earlier 

introduced to disprove loss causation also showed that

none of its alleged misrepresentations had actually affected its stock price. By demonstrating the absence of any 

“price impact,” Halliburton contended, it had rebutted 

Basic’s presumption that the members of the proposed

class had relied on its alleged misrepresentations simply 

by buying or selling its stock at the market price. And 

without the benefit of the Basic presumption, investors

would have to prove reliance on an individual basis, mean-
 

 

4 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

ing that individual issues would predominate over common ones. The District Court declined to consider Halliburton’s argument, holding that the Basic presumption

applied and certifying the class under Rule 23(b)(3). App.

to Pet. for Cert. 30a. 

The Fifth Circuit affirmed. 718 F. 3d 423 (2013). The 

court found that Halliburton had preserved its price impact argument, but to no avail. Id., at 435–436. While 

acknowledging that “Halliburton’s price impact evidence

could be used at the trial on the merits to refute the presumption of reliance,” id., at 433, the court held that 

Halliburton could not use such evidence for that purpose 

at the class certification stage, id., at 435. “[P]rice impact 

evidence,” the court explained, “does not bear on the question of common question predominance [under Rule 

23(b)(3)], and is thus appropriately considered only on the 

merits after the class has been certified.” Ibid. 

We once again granted certiorari, 571 U. S. ___ (2013), 

this time to resolve a conflict among the Circuits over 

whether securities fraud defendants may attempt to rebut

the Basic presumption at the class certification stage with

evidence of a lack of price impact. We also accepted Halliburton’s invitation to reconsider the presumption of reliance for securities fraud claims that we adopted in Basic. 

II 

Halliburton urges us to overrule Basic’s presumption of

reliance and to instead require every securities fraud

plaintiff to prove that he actually relied on the defendant’s 

misrepresentation in deciding to buy or sell a company’s

stock. Before overturning a long-settled precedent, however, we require “special justification,” not just an argument that the precedent was wrongly decided. Dickerson 

v. United States, 530 U. S. 428, 443 (2000) (internal quotation marks omitted). Halliburton has failed to make that 

showing. 
Cite as: 573 U. S. ____ (2014) 5 

Opinion of the Court 

A 

Section 10(b) of the Securities Exchange Act of 1934 and

the Securities and Exchange Commission’s Rule 10b–5

prohibit making any material misstatement or omission in

connection with the purchase or sale of any security. 

Although section 10(b) does not create an express private

cause of action, we have long recognized an implied private cause of action to enforce the provision and its implementing regulation. See Blue Chip Stamps v. Manor 

Drug Stores, 421 U. S. 723, 730 (1975). To recover damages

for violations of section 10(b) and Rule 10b–5, a plaintiff 

must prove “‘(1) a material misrepresentation or omission

by the defendant; (2) scienter; (3) a connection between the

misrepresentation or omission and the purchase or sale of 

a security; (4) reliance upon the misrepresentation or

omission; (5) economic loss; and (6) loss causation.’” 

Amgen Inc. v. Connecticut Retirement Plans and Trust 

Funds, 568 U. S. ___, ___ (2013) (slip op., at 3–4) (quoting 

Matrixx Initiatives, Inc. v. Siracusano, 563 U. S. ___, ___ 

(2011) (slip op., at 9)). 

The reliance element “‘ensures that there is a proper

connection between a defendant’s misrepresentation and a

plaintiff ’s injury.’” 568 U. S., at ___ (slip op., at 4) (quoting Halliburton I, 563 U. S., at ___ (slip op., at 4)). “The 

traditional (and most direct) way a plaintiff can demonstrate reliance is by showing that he was aware of a company’s statement and engaged in a relevant transaction— 

e.g., purchasing common stock—based on that specific 

misrepresentation.” Id., at ___ (slip op., at 4). 

In Basic, however, we recognized that requiring such

direct proof of reliance “would place an unnecessarily

unrealistic evidentiary burden on the Rule 10b–5 plaintiff

who has traded on an impersonal market.” 485 U. S., at 

245. That is because, even assuming an investor could 

prove that he was aware of the misrepresentation, he 

would still have to “show a speculative state of facts, i.e., 
 

 

6 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

how he would have acted . . . if the misrepresentation had 

not been made.” Ibid. 

We also noted that “[r]equiring proof of individualized 

reliance” from every securities fraud plaintiff “effectively 

would . . . prevent[ ] [plaintiffs] from proceeding with a

class action” in Rule 10b–5 suits. Id., at 242. If every

plaintiff had to prove direct reliance on the defendant’s

misrepresentation, “individual issues then would . . . 

overwhelm[ ] the common ones,” making certification 

under Rule 23(b)(3) inappropriate. Ibid. 

To address these concerns, Basic held that securities 

fraud plaintiffs can in certain circumstances satisfy the

reliance element of a Rule 10b–5 action by invoking a 

rebuttable presumption of reliance, rather than proving 

direct reliance on a misrepresentation. The Court based 

that presumption on what is known as the “fraud-on-themarket” theory, which holds that “the market price of

shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.” Id., at 246. The Court also noted that, 

rather than scrutinize every piece of public information 

about a company for himself, the typical “investor who

buys or sells stock at the price set by the market does so in 

reliance on the integrity of that price”—the belief that it 

reflects all public, material information. Id., at 247. As a 

result, whenever the investor buys or sells stock at the 

market price, his “reliance on any public material misrepresentations . . . may be presumed for purposes of a Rule

10b–5 action.” Ibid. 

Based on this theory, a plaintiff must make the following showings to demonstrate that the presumption of

reliance applies in a given case: (1) that the alleged misrepresentations were publicly known, (2) that they were 

material, (3) that the stock traded in an efficient market,

and (4) that the plaintiff traded the stock between the

time the misrepresentations were made and when the 
 

Cite as: 573 U. S. ____ (2014) 7 

Opinion of the Court 

truth was revealed. See id., at 248, n. 27; Halliburton I, 

supra, at ___ (slip op., at 5–6). 

At the same time, Basic emphasized that the presumption of reliance was rebuttable rather than conclusive. 

Specifically, “[a]ny showing that severs the link between 

the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at 

a fair market price, will be sufficient to rebut the presumption of reliance.” 485 U. S., at 248. So for example, if

a defendant could show that the alleged misrepresentation

did not, for whatever reason, actually affect the market

price, or that a plaintiff would have bought or sold the 

stock even had he been aware that the stock’s price was

tainted by fraud, then the presumption of reliance would

not apply. Id., at 248–249. In either of those cases, a 

plaintiff would have to prove that he directly relied on the 

defendant’s misrepresentation in buying or selling the

stock. 

B 

Halliburton contends that securities fraud plaintiffs

should always have to prove direct reliance and that the 

Basic Court erred in allowing them to invoke a presumption of reliance instead. According to Halliburton, the 

Basic presumption contravenes congressional intent and 

has been undermined by subsequent developments in

economic theory. Neither argument, however, so discredits Basic as to constitute “special justification” for overruling the decision. 

1 

Halliburton first argues that the Basic presumption is

inconsistent with Congress’s intent in passing the 1934

Exchange Act. Because “[t]he Section 10(b) action is a

‘judicial construct that Congress did not enact,’” this

Court, Halliburton insists, “must identify—and borrow 
 

8 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

from—the express provision that is ‘most analogous to the 

private 10b–5 right of action.’” Brief for Petitioners 12 

(quoting Stoneridge Investment Partners, LLC v. ScientificAtlanta, Inc., 552 U. S. 148, 164 (2008); Musick, Peeler 

& Garrett v. Employers Ins. of Wausau, 508 U. S. 286, 294 

(1993)). According to Halliburton, the closest analogue

to section 10(b) is section 18(a) of the Act, which creates an express private cause of action allowing investors to recover damages based on misrepresentations

made in certain regulatory filings. 15 U. S. C. §78r(a). 

That provision requires an investor to prove that he 

bought or sold stock “in reliance upon” the defendant’s

misrepresentation. Ibid. In ignoring this direct reliance

requirement, the argument goes, the Basic Court relieved 

Rule 10b–5 plaintiffs of a burden that Congress would 

have imposed had it created the cause of action. 

EPJ Fund contests both premises of Halliburton’s argument, arguing that Congress has affirmed Basic’s construction of section 10(b) and that, in any event, the closest analogue to section 10(b) is not section 18(a) but

section 9, 15 U. S. C. §78i—a provision that does not require actual reliance.

We need not settle this dispute. In Basic, the dissenting 

Justices made the same argument based on section 18(a) 

that Halliburton presses here. See 485 U. S., at 257–258 

(White, J., concurring in part and dissenting in part). The 

Basic majority did not find that argument persuasive 

then, and Halliburton has given us no new reason to 

endorse it now. 

2 

Halliburton’s primary argument for overruling Basic is 

that the decision rested on two premises that can no longer

withstand scrutiny. The first premise concerns what is 

known as the “efficient capital markets hypothesis.” Basic 

stated that “the market price of shares traded on well-
 

Cite as: 573 U. S. ____ (2014) 9 

Opinion of the Court 

developed markets reflects all publicly available information, and, hence, any material misrepresentations.” 

Id., at 246. From that statement, Halliburton concludes 

that the Basic Court espoused “a robust view of market 

efficiency” that is no longer tenable, for “‘overwhelming 

empirical evidence’ now ‘suggests that capital markets are 

not fundamentally efficient.’” Brief for Petitioners 14–16 

(quoting Lev & de Villiers, Stock Price Crashes and 10b–5

Damages: A Legal, Economic, and Policy Analysis, 47

Stan. L. Rev 7, 20 (1994)). To support this contention,

Halliburton cites studies purporting to show that “public

information is often not incorporated immediately (much

less rationally) into market prices.” Brief for Petitioners 

17; see id., at 16–20. See also Brief for Law Professors as 

Amici Curiae 15–18. 

Halliburton does not, of course, maintain that capital

markets are always inefficient. Rather, in its view, Basic’s 

fundamental error was to ignore the fact that “‘efficiency

is not a binary, yes or no question.’” Brief for Petitioners 

20 (quoting Langevoort, Basic at Twenty: Rethinking 

Fraud on the Market, 2009 Wis. L. Rev. 151, 167)). The 

markets for some securities are more efficient than the 

markets for others, and even a single market can process 

different kinds of information more or less efficiently, 

depending on how widely the information is disseminated

and how easily it is understood. Brief for Petitioners at 

20–21. Yet Basic, Halliburton asserts, glossed over these 

nuances, assuming a false dichotomy that renders the

presumption of reliance both underinclusive and overinclusive: A misrepresentation can distort a stock’s market 

price even in a generally inefficient market, and a misrepresentation can leave a stock’s market price unaffected

even in a generally efficient one. Brief for Petitioners at 

21. 

Halliburton’s criticisms fail to take Basic on its own 

terms. Halliburton focuses on the debate among econo-
 

10 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

mists about the degree to which the market price of a 

company’s stock reflects public information about the

company—and thus the degree to which an investor can 

earn an abnormal, above-market return by trading on 

such information. See Brief for Financial Economists as 

Amici Curiae 4–10 (describing the debate). That debate is 

not new. Indeed, the Basic Court acknowledged it and 

declined to enter the fray, declaring that “[w]e need not

determine by adjudication what economists and social 

scientists have debated through the use of sophisticated 

statistical analysis and the application of economic theory.” 485 U. S., at 246–247, n. 24. To recognize the presumption of reliance, the Court explained, was not “conclusively to adopt any particular theory of how quickly and

completely publicly available information is reflected in 

market price.” Id., at 248, n. 28. The Court instead based 

the presumption on the fairly modest premise that “market professionals generally consider most publicly announced material statements about companies, thereby 

affecting stock market prices.” Id., at 247, n. 24. Basic’s 

presumption of reliance thus does not rest on a “binary” 

view of market efficiency. Indeed, in making the presumption rebuttable, Basic recognized that market efficiency is a matter of degree and accordingly made it a

matter of proof. 

The academic debates discussed by Halliburton have not

refuted the modest premise underlying the presumption of 

reliance. Even the foremost critics of the efficient-capitalmarkets hypothesis acknowledge that public information 

generally affects stock prices. See, e.g., Shiller, We’ll 

Share the Honors, and Agree to Disagree, N. Y. Times, 

Oct. 27, 2013, p. BU6 (“Of course, prices reflect available

information”). Halliburton also conceded as much in its 

reply brief and at oral argument. See Reply Brief 13

(“market prices generally respond to new, material information”); Tr. of Oral Arg. 7. Debates about the precise 
 

Cite as: 573 U. S. ____ (2014) 11 

Opinion of the Court 

degree to which stock prices accurately reflect public information are thus largely beside the point. “That the . . . 

price [of a stock] may be inaccurate does not detract from

the fact that false statements affect it, and cause loss,” 

which is “all that Basic requires.” Schleicher v. Wendt, 

618 F. 3d 679, 685 (CA7 2010) (Easterbrook, C. J.). Even 

though the efficient capital markets hypothesis may have

“garnered substantial criticism since Basic,” post, at 6 

(THOMAS, J., concurring in judgment), Halliburton has not

identified the kind of fundamental shift in economic theory that could justify overruling a precedent on the ground 

that it misunderstood, or has since been overtaken by,

economic realities. Contrast State Oil Co. v. Khan, 522 

U. S. 3 (1997), unanimously overruling Albrecht v. Herald 

Co., 390 U. S. 145 (1968).

Halliburton also contests a second premise underlying 

the Basic presumption: the notion that investors “invest 

‘in reliance on the integrity of [the market] price.’” Reply

Brief 14 (quoting 485 U. S., at 247; alteration in original).

Halliburton identifies a number of classes of investors for 

whom “price integrity” is supposedly “marginal or irrelevant.” Reply Brief 14. The primary example is the value 

investor, who believes that certain stocks are undervalued 

or overvalued and attempts to “beat the market” by buying

the undervalued stocks and selling the overvalued ones. 

Brief for Petitioners 15–16 (internal quotation marks

omitted). See also Brief for Vivendi S. A. as Amicus Curiae 

3–10 (describing the investment strategies of day traders, volatility arbitragers, and value investors). If many

investors “are indifferent to prices,” Halliburton contends,

then courts should not presume that investors rely on the

integrity of those prices and any misrepresentations incorporated into them. Reply Brief 14. 

But Basic never denied the existence of such investors. 

As we recently explained, Basic concluded only that “it is 

reasonable to presume that most investors—knowing that 
 

12 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

they have little hope of outperforming the market in the 

long run based solely on their analysis of publicly available information—will rely on the security’s market price as

an unbiased assessment of the security’s value in light of 

all public information.” Amgen, 568 U. S., at ___ (slip op., 

at 5) (emphasis added).

In any event, there is no reason to suppose that even 

Halliburton’s main counterexample—the value investor—

is as indifferent to the integrity of market prices as Halliburton suggests. Such an investor implicitly relies on the

fact that a stock’s market price will eventually reflect 

material information—how else could the market correction on which his profit depends occur? To be sure, the 

value investor “does not believe that the market price

accurately reflects public information at the time he transacts.” Post, at 11. But to indirectly rely on a misstatement in the sense relevant for the Basic presumption, he 

need only trade stock based on the belief that the market 

price will incorporate public information within a reasonable period. The value investor also presumably tries to

estimate how undervalued or overvalued a particular 

stock is, and such estimates can be skewed by a market

price tainted by fraud. 

C 

The principle of stare decisis has “‘special force’” “in

respect to statutory interpretation” because “ ‘Congress 

remains free to alter what we have done.’” John R. Sand 

& Gravel Co. v. United States, 552 U. S. 130, 139 (2008) 

(quoting Patterson v. McLean Credit Union, 491 U. S. 164, 

172–173 (1989)). So too with Basic’s presumption of reliance. Although the presumption is a judicially created 

doctrine designed to implement a judicially created cause 

of action, we have described the presumption as “a substantive doctrine of federal securities-fraud law.” Amgen, 

supra, at ___ (slip op., at 5). That is because it provides a 
Cite as: 573 U. S. ____ (2014) 13 

Opinion of the Court 

way of satisfying the reliance element of the Rule 10b–5

cause of action. See, e.g., Dura Pharmaceuticals, Inc. v. 

Broudo, 544 U. S. 336, 341–342 (2005). As with any other 

element of that cause of action, Congress may overturn

or modify any aspect of our interpretations of the reliance requirement, including the Basic presumption itself. Given that possibility, we see no reason to exempt

the Basic presumption from ordinary principles of stare 

decisis. 

To buttress its case for overruling Basic, Halliburton 

contends that, in addition to being wrongly decided, the 

decision is inconsistent with our more recent decisions 

construing the Rule 10b–5 cause of action. As Halliburton 

notes, we have held that “we must give ‘narrow dimensions . . . to a right of action Congress did not authorize

when it first enacted the statute and did not expand when 

it revisited the law.’” Janus Capital Group, Inc. v. First 

Derivative Traders, 564 U. S. ___, ___ (2011) (slip op., at 6) 

(quoting Stoneridge, 552 U. S., at 167); see, e.g., Central 

Bank of Denver, N. A. v. First Interstate Bank of Denver, 

N. A., 511 U. S. 164 (1994) (refusing to recognize aidingand-abetting liability under the Rule 10b–5 cause of action); Stoneridge, supra (refusing to extend Rule 10b–5

liability to certain secondary actors who did not themselves make material misstatements). Yet the Basic 

presumption, Halliburton asserts, does just the opposite, 

expanding the Rule 10b–5 cause of action. Brief for Petitioners 27–29. 

Not so. In Central Bank and Stoneridge, we declined to 

extend Rule 10b–5 liability to entirely new categories of 

defendants who themselves had not made any material,

public misrepresentation. Such an extension, we explained, would have eviscerated the requirement that a

plaintiff prove that he relied on a misrepresentation made 

by the defendant. See Central Bank, supra, at 180; Stoneridge, supra, at 157, 159. The Basic presumption does 
 

14 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

not eliminate that requirement but rather provides an

alternative means of satisfying it. While the presumption

makes it easier for plaintiffs to prove reliance, it does not 

alter the elements of the Rule 10b–5 cause of action and 

thus maintains the action’s original legal scope.

Halliburton also argues that the Basic presumption

cannot be reconciled with our recent decisions governing

class action certification under Federal Rule of Civil Procedure 23. Those decisions have made clear that plaintiffs 

wishing to proceed through a class action must actually 

prove—not simply plead—that their proposed class satisfies each requirement of Rule 23, including (if applicable)

the predominance requirement of Rule 23(b)(3). See WalMart Stores, Inc. v. Dukes, 564 U. S. ___, ___ (2011) (slip 

op., at 10); Comcast Corp. v. Behrend, 569 U. S. ___, ___ 

(2013) (slip op., at 5–6). According to Halliburton, Basic 

relieves Rule 10b–5 plaintiffs of that burden, allowing

courts to presume that common issues of reliance predominate over individual ones. 

That is not the effect of the Basic presumption. In 

securities class action cases, the crucial requirement for

class certification will usually be the predominance requirement of Rule 23(b)(3). The Basic presumption does

not relieve plaintiffs of the burden of proving—before class

certification—that this requirement is met. Basic instead 

establishes that a plaintiff satisfies that burden by proving the prerequisites for invoking the presumption—

namely, publicity, materiality, market efficiency, and 

market timing. The burden of proving those prerequisites

still rests with plaintiffs and (with the exception of materiality) must be satisfied before class certification. Basic 

does not, in other words, allow plaintiffs simply to plead 

that common questions of reliance predominate over individual ones, but rather sets forth what they must prove to

demonstrate such predominance. 

Basic does afford defendants an opportunity to rebut the 
 

Cite as: 573 U. S. ____ (2014) 15 

Opinion of the Court 

presumption of reliance with respect to an individual

plaintiff by showing that he did not rely on the integrity of

the market price in trading stock. While this has the 

effect of “leav[ing] individualized questions of reliance in 

the case,” post, at 12, there is no reason to think that these 

questions will overwhelm common ones and render class 

certification inappropriate under Rule 23(b)(3). That the 

defendant might attempt to pick off the occasional class 

member here or there through individualized rebuttal

does not cause individual questions to predominate.

Finally, Halliburton and its amici contend that, by 

facilitating securities class actions, the Basic presumption

produces a number of serious and harmful consequences.

Such class actions, they say, allow plaintiffs to extort large

settlements from defendants for meritless claims; punish

innocent shareholders, who end up having to pay settlements and judgments; impose excessive costs on businesses;

and consume a disproportionately large share of judicial 

resources. Brief for Petitioners 39–45. 

These concerns are more appropriately addressed to

Congress, which has in fact responded, to some extent, to 

many of the issues raised by Halliburton and its amici. 

Congress has, for example, enacted the Private Securities 

Litigation Reform Act of 1995 (PSLRA), 109 Stat. 737,

which sought to combat perceived abuses in securities

litigation with heightened pleading requirements, limits

on damages and attorney’s fees, a “safe harbor” for certain 

kinds of statements, restrictions on the selection of lead 

plaintiffs in securities class actions, sanctions for frivolous

litigation, and stays of discovery pending motions to dismiss. See Amgen, 568 U. S., at ___ (slip op., at 19–20). 

And to prevent plaintiffs from circumventing these restrictions by bringing securities class actions under state 

law in state court, Congress also enacted the Securities 

Litigation Uniform Standards Act of 1998, 112 Stat. 3227,

which precludes many state law class actions alleging 
 

16 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

securities fraud. See Amgen, supra, at ___ (slip op., at 20). 

Such legislation demonstrates Congress’s willingness to

consider policy concerns of the sort that Halliburton says 

should lead us to overrule Basic. 

III 

Halliburton proposes two alternatives to overruling 

Basic that would alleviate what it regards as the decision’s 

most serious flaws. The first alternative would require

plaintiffs to prove that a defendant’s misrepresentation 

actually affected the stock price—so-called “price impact”—in order to invoke the Basic presumption. It should 

not be enough, Halliburton contends, for plaintiffs to 

demonstrate the general efficiency of the market in which

the stock traded. Halliburton’s second proposed alternative would allow defendants to rebut the presumption of 

reliance with evidence of a lack of price impact, not only at 

the merits stage—which all agree defendants may already 

do—but also before class certification. 

A 

As noted, to invoke the Basic presumption, a plaintiff 

must prove that: (1) the alleged misrepresentations were

publicly known, (2) they were material, (3) the stock traded

in an efficient market, and (4) the plaintiff traded the

stock between when the misrepresentations were made 

and when the truth was revealed. See Basic, 485 U. S., at 

248, n. 27; Amgen, supra, at ___ (slip op., at 15). Each of 

these requirements follows from the fraud-on-the-market 

theory underlying the presumption. If the misrepresentation was not publicly known, then it could not have distorted the stock’s market price. So too if the misrepresentation was immaterial—that is, if it would not have “‘been 

viewed by the reasonable investor as having significantly 

altered the “total mix” of information made available,’” 

Basic, supra, at 231–232 (quoting TSC Industries, Inc. v. 
 

 

Cite as: 573 U. S. ____ (2014) 17 

Opinion of the Court 

Northway, Inc., 426 U. S. 438, 449 (1976))—or if the market in which the stock traded was inefficient. And if the 

plaintiff did not buy or sell the stock after the misrepresentation was made but before the truth was revealed, 

then he could not be said to have acted in reliance on a 

fraud-tainted price.

The first three prerequisites are directed at price impact—“whether the alleged misrepresentations affected 

the market price in the first place.” Halliburton I, 563 

U. S., at ___ (slip op., at 8). In the absence of price impact, 

Basic’s fraud-on-the-market theory and presumption of 

reliance collapse. The “fundamental premise” underlying 

the presumption is “that an investor presumptively relies 

on a misrepresentation so long as it was reflected in the 

market price at the time of his transaction.” 563 U. S., at 

___ (slip op., at 7). If it was not, then there is “no grounding for any contention that [the] investor[ ] indirectly

relied on th[at] misrepresentation[ ] through [his] reliance 

on the integrity of the market price.” Amgen, supra, at ___ 

(slip op., at 17).

Halliburton argues that since the Basic presumption

hinges on price impact, plaintiffs should be required to

prove it directly in order to invoke the presumption.

Proving the presumption’s prerequisites, which are at best 

an imperfect proxy for price impact, should not suffice. 

Far from a modest refinement of the Basic presumption,

this proposal would radically alter the required showing

for the reliance element of the Rule 10b–5 cause of action. 

What is called the Basic presumption actually incorporates two constituent presumptions: First, if a plaintiff

shows that the defendant’s misrepresentation was public 

and material and that the stock traded in a generally 

efficient market, he is entitled to a presumption that the 

misrepresentation affected the stock price. Second, if the 

plaintiff also shows that he purchased the stock at the

market price during the relevant period, he is entitled to a 
 

 

18 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

further presumption that he purchased the stock in reliance on the defendant’s misrepresentation. 

By requiring plaintiffs to prove price impact directly,

Halliburton’s proposal would take away the first constituent presumption. Halliburton’s argument for doing so is

the same as its primary argument for overruling the Basic 

presumption altogether: Because market efficiency is not a

yes-or-no proposition, a public, material misrepresentation 

might not affect a stock’s price even in a generally efficient

market. But as explained, Basic never suggested otherwise; that is why it affords defendants an opportunity to

rebut the presumption by showing, among other things, 

that the particular misrepresentation at issue did not 

affect the stock’s market price. For the same reasons we 

declined to completely jettison the Basic presumption, we 

decline to effectively jettison half of it by revising the

prerequisites for invoking it. 

B 

Even if plaintiffs need not directly prove price impact to

invoke the Basic presumption, Halliburton contends that 

defendants should at least be allowed to defeat the presumption at the class certification stage through evidence

that the misrepresentation did not in fact affect the stock 

price. We agree. 

1 

There is no dispute that defendants may introduce such

evidence at the merits stage to rebut the Basic presumption. Basic itself “made clear that the presumption was

just that, and could be rebutted by appropriate evidence,” 

including evidence that the asserted misrepresentation (or

its correction) did not affect the market price of the defendant’s stock. Halliburton I, supra, at ___ (slip op., at 

5); see Basic, supra, at 248. 

Nor is there any dispute that defendants may introduce 
 

Cite as: 573 U. S. ____ (2014) 19 

Opinion of the Court 

price impact evidence at the class certification stage, so 

long as it is for the purpose of countering a plaintiff’s 

showing of market efficiency, rather than directly rebutting the presumption. As EPJ Fund acknowledges, “[o]f 

course . . . defendants can introduce evidence at class 

certification of lack of price impact as some evidence that

the market is not efficient.” Brief for Respondent 53. See 

also Brief for United States as Amicus Curiae 26. 

After all, plaintiffs themselves can and do introduce 

evidence of the existence of price impact in connection with

“event studies”—regression analyses that seek to show

that the market price of the defendant’s stock tends to 

respond to pertinent publicly reported events. See Brief 

for Law Professors as Amici Curiae 25–28. In this case, 

for example, EPJ Fund submitted an event study of various episodes that might have been expected to affect the

price of Halliburton’s stock, in order to demonstrate that

the market for that stock takes account of material, public

information about the company. See App. 217–230 (describing the results of the study). The episodes examined 

by EPJ Fund’s event study included one of the alleged 

misrepresentations that form the basis of the Fund’s suit.

See id., at 230, 343–344. See also In re Xcelera.com Securities Litigation, 430 F. 3d 503, 513 (CA1 2005) (event 

study included effect of misrepresentation challenged in

the case).

Defendants—like plaintiffs—may accordingly submit 

price impact evidence prior to class certification. What 

defendants may not do, EPJ Fund insists and the Court of

Appeals held, is rely on that same evidence prior to class 

certification for the particular purpose of rebutting the

presumption altogether.

This restriction makes no sense, and can readily lead to

bizarre results. Suppose a defendant at the certification

stage submits an event study looking at the impact on the 

price of its stock from six discrete events, in an effort to 
 

 

20 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

refute the plaintiffs’ claim of general market efficiency. 

All agree the defendant may do this. Suppose one of the

six events is the specific misrepresentation asserted by the

plaintiffs. All agree that this too is perfectly acceptable. 

Now suppose the district court determines that, despite

the defendant’s study, the plaintiff has carried its burden

to prove market efficiency, but that the evidence shows no

price impact with respect to the specific misrepresentation 

challenged in the suit. The evidence at the certification 

stage thus shows an efficient market, on which the alleged

misrepresentation had no price impact. And yet under 

EPJ Fund’s view, the plaintiffs’ action should be certified 

and proceed as a class action (with all that entails), even 

though the fraud-on-the-market theory does not apply and 

common reliance thus cannot be presumed.

Such a result is inconsistent with Basic’s own logic. 

Under Basic’s fraud-on-the-market theory, market efficiency and the other prerequisites for invoking the presumption constitute an indirect way of showing price 

impact. As explained, it is appropriate to allow plaintiffs

to rely on this indirect proxy for price impact, rather than

requiring them to prove price impact directly, given 

Basic’s rationales for recognizing a presumption of reliance in the first place. See supra, at 6–7, 16–17. 

But an indirect proxy should not preclude direct evidence when such evidence is available. As we explained in 

Basic, “[a]ny showing that severs the link between the

alleged misrepresentation and . . . the price received (or

paid) by the plaintiff . . . will be sufficient to rebut the 

presumption of reliance” because “the basis for finding 

that the fraud had been transmitted through market price 

would be gone.” 485 U. S., at 248. And without the presumption of reliance, a Rule 10b–5 suit cannot proceed as

a class action: Each plaintiff would have to prove reliance 

individually, so common issues would not “predominate” 

over individual ones, as required by Rule 23(b)(3). Id., at 
 

Cite as: 573 U. S. ____ (2014) 21 

Opinion of the Court 

242. Price impact is thus an essential precondition for any 

Rule 10b–5 class action. While Basic allows plaintiffs to 

establish that precondition indirectly, it does not require 

courts to ignore a defendant’s direct, more salient evidence

showing that the alleged misrepresentation did not actually

affect the stock’s market price and, consequently, that 

the Basic presumption does not apply. 

2 

The Court of Appeals relied on our decision in Amgen in 

holding that Halliburton could not introduce evidence of 

lack of price impact at the class certification stage. The 

question in Amgen was whether plaintiffs could be required to prove (or defendants be permitted to disprove) 

materiality before class certification. Even though materiality is a prerequisite for invoking the Basic presumption, we held that it should be left to the merits stage,

because it does not bear on the predominance requirement 

of Rule 23(b)(3). We reasoned that materiality is an objective issue susceptible to common, classwide proof. 568 

U. S., at ___ (slip op., at 11). We also noted that a failure 

to prove materiality would necessarily defeat every plaintiff ’s claim on the merits; it would not simply preclude

invocation of the presumption and thereby cause individual

questions of reliance to predominate over common ones. 

Ibid. See also id., at ___ (slip op., at 17–18). In this latter 

respect, we explained, materiality differs from the publicity 

and market efficiency prerequisites, neither of which is

necessary to prove a Rule 10b–5 claim on the merits. Id., 

at ___–___ (slip op., at 16–18). 

EPJ Fund argues that much of the foregoing could be

said of price impact as well. Fair enough. But price impact differs from materiality in a crucial respect. Given 

that the other Basic prerequisites must still be proved at 

the class certification stage, the common issue of materiality can be left to the merits stage without risking the 
 

 

22 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

Opinion of the Court 

certification of classes in which individual issues will end 

up overwhelming common ones. And because materiality

is a discrete issue that can be resolved in isolation from 

the other prerequisites, it can be wholly confined to the

merits stage. 

Price impact is different. The fact that a misrepresentation “was reflected in the market price at the time of [the]

transaction”—that it had price impact—is “Basic’s fundamental premise.” Halliburton I, 563 U. S., at ___ (slip op., 

at 7). It thus has everything to do with the issue of predominance at the class certification stage. That is why, if 

reliance is to be shown through the Basic presumption,

the publicity and market efficiency prerequisites must be

proved before class certification. Without proof of those

prerequisites, the fraud-on-the-market theory underlying 

the presumption completely collapses, rendering class 

certification inappropriate. 

But as explained, publicity and market efficiency are

nothing more than prerequisites for an indirect showing of 

price impact. There is no dispute that at least such indirect proof of price impact “is needed to ensure that the 

questions of law or fact common to the class will ‘predominate.’” Amgen, 568 U. S., at ___ (slip op., at 10) (emphasis 

deleted); see id., at ___ (slip op., at 16–17). That is so even 

though such proof is also highly relevant at the merits 

stage.

Our choice in this case, then, is not between allowing

price impact evidence at the class certification stage or

relegating it to the merits. Evidence of price impact will

be before the court at the certification stage in any event.

The choice, rather, is between limiting the price impact 

inquiry before class certification to indirect evidence, or 

allowing consideration of direct evidence as well. As 

explained, we see no reason to artificially limit the inquiry

at the certification stage to indirect evidence of price 

impact. Defendants may seek to defeat the Basic pre-
 

Cite as: 573 U. S. ____ (2014) 23 

Opinion of the Court 

sumption at that stage through direct as well as indirect

price impact evidence. 

* * * 

More than 25 years ago, we held that plaintiffs could

satisfy the reliance element of the Rule 10b–5 cause of 

action by invoking a presumption that a public, material 

misrepresentation will distort the price of stock traded in 

an efficient market, and that anyone who purchases the 

stock at the market price may be considered to have done 

so in reliance on the misrepresentation. We adhere to that 

decision and decline to modify the prerequisites for invoking the presumption of reliance. But to maintain the 

consistency of the presumption with the class certification

requirements of Federal Rule of Civil Procedure 23, defendants must be afforded an opportunity before class 

certification to defeat the presumption through evidence

that an alleged misrepresentation did not actually affect 

the market price of the stock.

Because the courts below denied Halliburton that opportunity, we vacate the judgment of the Court of Appeals for 

the Fifth Circuit and remand the case for further proceedings consistent with this opinion. 

It is so ordered. 
_________________ 

_________________ 

Cite as: 573 U. S. ____ (2014) 1 

GINSBURG, J., concurring 

SUPREME COURT OF THE UNITED STATES 

No. 13–317 

HALLIBURTON CO., ET AL., PETITIONERS v. ERICA P.

 JOHN FUND, INC., FKA ARCHDIOCESE OF 

 MILWAUKEE SUPPORTING FUND, INC.
 

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

APPEALS FOR THE FIFTH CIRCUIT
 

[June 23, 2014] 

JUSTICE GINSBURG, with whom JUSTICE BREYER and 

JUSTICE SOTOMAYOR join, concurring. 

Advancing price impact consideration from the merits 

stage to the certification stage may broaden the scope of 

discovery available at certification. See Tr. of Oral Arg.

36–37. But the Court recognizes that it is incumbent upon

the defendant to show the absence of price impact. See 

ante, at 17–18. The Court’s judgment, therefore, should 

impose no heavy toll on securities-fraud plaintiffs with 

tenable claims. On that understanding, I join the Court’s 

opinion. 
_________________ 

_________________ 

Cite as: 573 U. S. ____ (2014) 1 

THOMAS, J., concurring in judgment 

SUPREME COURT OF THE UNITED STATES 

No. 13–317 

HALLIBURTON CO., ET AL., PETITIONERS v. ERICA P.

 JOHN FUND, INC., FKA ARCHDIOCESE OF 

 MILWAUKEE SUPPORTING FUND, INC.
 

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

APPEALS FOR THE FIFTH CIRCUIT
 

[June 23, 2014] 

JUSTICE THOMAS, with whom JUSTICE SCALIA and 

JUSTICE ALITO join, concurring in the judgment. 

The implied Rule 10b–5 private cause of action is “a

relic of the heady days in which this Court assumed

common-law powers to create causes of action,” Correctional Services Corp. v. Malesko, 534 U. S. 61, 75 (2001) 

(SCALIA, J., concurring); see, e.g., J. I. Case Co. v. Borak, 

377 U. S. 426, 433 (1964). We have since ended that 

practice because the authority to fashion private remedies

to enforce federal law belongs to Congress alone. Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 

552 U. S. 148, 164 (2008). Absent statutory authorization

for a cause of action, “courts may not create one, no matter

how desirable that might be as a policy matter.” Alexander v. Sandoval, 532 U. S. 275, 286–287 (2001). 

Basic Inc. v. Levinson, 485 U. S. 224 (1988), demonstrates the wisdom of this rule. Basic presented the question how investors must prove the reliance element of the 

implied Rule 10b–5 cause of action—the requirement that 

the plaintiff buy or sell stock in reliance on the defendant’s 

misstatement—when they transact on modern, impersonal

securities exchanges. Were the Rule 10b–5 action statutory, the Court could have resolved this question by interpreting the statutory language. Without a statute to 
 

 

2 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

interpret for guidance, however, the Court began instead

with a particular policy “problem”: for investors in impersonal markets, the traditional reliance requirement was

hard to prove and impossible to prove as common among 

plaintiffs bringing 10b–5 class-action suits. Id., at 242, 

245. With the task thus framed as “resol[ving]” that 

“‘problem’” rather than interpreting statutory text, id., at 

242, the Court turned to nascent economic theory and 

naked intuitions about investment behavior in its efforts 

to fashion a new, easier way to meet the reliance requirement. The result was an evidentiary presumption, based 

on a “fraud on the market” theory, that paved the way for

class actions under Rule 10b–5. 

Today we are asked to determine whether Basic was 

correctly decided. The Court suggests that it was, and 

that stare decisis demands that we preserve it. I disagree.

Logic, economic realities, and our subsequent jurisprudence have undermined the foundations of the Basic presumption, and stare decisis cannot prop up the façade that 

remains. Basic should be overruled. 

I 

 Understanding where Basic went wrong requires an

explanation of the “reliance” requirement as traditionally 

understood. 

“Reliance by the plaintiff upon the defendant’s deceptive

acts is an essential element” of the implied 10b–5 private

cause of action.1 Stoneridge, supra, at 159. To prove 

—————— 

1As the private Rule 10b–5 action has evolved, the Court has drawn

on the common-law action of deceit to identify six elements a private

plaintiff must prove: “ ‘(1) a material misrepresentation or omission by

the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon 

the misrepresentation or omission; (5) economic loss; and (6) loss 

causation.’ ” Amgen Inc. v. Connecticut Retirement Plans and Trust 

Funds, 568 U. S. ___, ___–___ (2013) (slip op., at 3–4). 
Cite as: 573 U. S. ____ (2014) 3 

THOMAS, J., concurring in judgment 

reliance, the plaintiff must show “‘transaction causation,’” 

i.e., that the specific misstatement induced “the investor’s

decision to engage in the transaction.” Erica P. John 

Fund, Inc. v. Halliburton Co., 563 U. S. ___, ___–___ 

(2011) (slip op., at 6–7). Such proof “ensures that there is

a proper ‘connection between a defendant’s misrepresentation and a plaintiff ’s injury’”—namely, that the plaintiff 

has not just lost money as a result of the misstatement, 

but that he was actually defrauded by it. Id., at ___ (slip 

op., at 4); see also Dirks v. SEC, 463 U. S. 646, 666–667, n. 

27 (1983) (“[T]o constitute a violation of Rule 10b–5, there 

must be fraud. . . . [T]here always are winners and losers; 

but those who have ‘lost’ have not necessarily been defrauded”). Without that connection, Rule 10b–5 is reduced 

to a “‘scheme of investor’s insurance,’” because a plaintiff 

could recover whenever the defendant’s misstatement 

distorted the stock price—regardless of whether the misstatement had actually tricked the plaintiff into buying (or 

selling) the stock in the first place. Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 336, 345 (2005) (quoting 

Basic, supra, at 252 (White, J., concurring in part and 

dissenting in part)).

The “traditional” reliance element requires a plaintiff to

“sho[w] that he was aware of a company’s statement and 

engaged in a relevant transaction . . . based on that specific misrepresentation.” Erica P. John Fund, supra, at ___ 

(slip op., at 4). But investors who purchase stock from 

third parties on impersonal exchanges (e.g., the New York 

Stock Exchange) often will not be aware of any particular 

statement made by the issuer of the security, and therefore cannot establish that they transacted based on a

specific misrepresentation. Nor is the traditional reliance 

requirement amenable to class treatment; the inherently 

individualized nature of the reliance inquiry renders it 

impossible for a 10b–5 plaintiff to prove that common

questions predominate over individual ones, making class 
 

4 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

certification improper. See Basic, supra, at 242; Fed. Rule 

Civ. Proc. 23(b)(3). 

Citing these difficulties of proof and class certification,

485 U. S., at 242, 245, the Basic Court dispensed with the

traditional reliance requirement in favor of a new one

based on the fraud-on-the-market theory.2 The new version of reliance had two related parts. 

First, Basic suggested that plaintiffs could meet the

reliance requirement “‘indirectly,’” id., at 245. The Court 

reasoned that “‘ideally, [the market] transmits information to the investor in the processed form of a market

price.’” Id., at 244. An investor could thus be said to have 

“relied” on a specific misstatement if (1) the market had 

incorporated that statement into the market price of the

security, and (2) the investor then bought or sold that

security “in reliance on the integrity of the [market] price,” 

id., at 247, i.e., based on his belief that the market price 

“‘reflect[ed]’” the stock’s underlying “‘value,’” id., at 244. 

Second, Basic created a presumption that this “indirect” 

form of “reliance” had been proved. Based primarily on

certain assumptions about economic theory and investor 

behavior, Basic afforded plaintiffs who traded in efficient 

markets an evidentiary presumption that both steps of the 

novel reliance requirement had been satisfied—that (1) 

the market had incorporated the specific misstatement 

into the market price of the security, and (2) the plaintiff 

—————— 

2 In the years preceding Basic, lower courts and commentators experimented with various ways to facilitate 10b–5 class actions by relaxing

or eliminating the reliance element of the implied 10b–5 action. See, 

e.g., Blackie v. Barrack, 524 F. 2d 891 (CA9 1975); Note, The Fraud-onthe-Market Theory, 95 Harv. L. Rev. 1143 (1982); Note, The Reliance

Requirement in Private Actions under SEC Rule 10b–5, 88 Harv. L. 

Rev. 584, 592–606 (1975). The “fraud-on-the-market theory” is an 

umbrella term for those varied efforts. Black, Fraud on the Market: A 

Criticism of Dispensing with Reliance Requirements in Certain Open 

Market Transactions, 62 N. C. L. Rev. 435, 439–457 (1984). 
 

Cite as: 573 U. S. ____ (2014) 5 

THOMAS, J., concurring in judgment 

did transact in reliance on the integrity of that price.3 Id., 

at 247. A defendant was ostensibly entitled to rebut the 

presumption by putting forth evidence that either of those

steps was absent. Id., at 248. 

II 

Basic’s reimagined reliance requirement was a mistake,

and the passage of time has compounded its failings.

First, the Court based both parts of the presumption of 

reliance on a questionable understanding of disputed 

economic theory and flawed intuitions about investor

behavior. Second, Basic’s rebuttable presumption is at 

odds with our subsequent Rule 23 cases, which require

plaintiffs seeking class certification to “‘affirmatively

demonstrate’” certification requirements like the predominance of common questions. Comcast Corp. v. Behrend, 

569 U. S. ___, ___ (2013) (slip op., at 5) (quoting Wal-Mart 

Stores, Inc. v. Dukes, 564 U. S. ___, ___ (2011) (slip op., at 

10)). Finally, Basic’s presumption that investors rely on 

the integrity of the market price is virtually irrebuttable 

in practice, which means that the “essential” reliance 

element effectively exists in name only. 

A 

Basic based the presumption of reliance on two factual 

assumptions. The first assumption was that, in a “welldeveloped market,” public statements are generally “reflected” in the market price of securities. 485 U. S., at 

247. The second was that investors in such markets 

transact “in reliance on the integrity of that price.” Ibid. 

—————— 

3An investor could invoke this presumption by demonstrating certain

predicates: (1) a public statement; (2) an efficient market; (3) that the 

shares were traded after the statement was made but before the truth 

was revealed; and (4) that the statement was material. Basic, 485 

U. S., at 248, n. 27. 
 

 

6 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

In other words, the Court created a presumption that a 

plaintiff had met the two-part, fraud-on-the-market version of the reliance requirement because, in the Court’s

view, “common sense and probability” suggested that each 

of those parts would be met. Id., at 246. 

In reality, both of the Court’s key assumptions are 

highly contestable and do not provide the necessary support for Basic’s presumption of reliance. The first assumption—that public statements are “reflected” in the market 

price—was grounded in an economic theory that has

garnered substantial criticism since Basic. The second assumption—that investors categorically rely on the integrity 

of the market price—is simply wrong. 

1 

The Court’s first assumption was that “most publicly

available information”—including public misstatements—

“is reflected in [the] market price” of a security. Id., at 

247. The Court grounded that assumption in “empirical

studies” testing a then-nascent economic theory known as

the efficient capital markets hypothesis. Id., at 246–247. 

Specifically, the Court relied upon the “semi-strong” version of that theory, which posits that the average investor 

cannot earn above-market returns (i.e., “beat the market”)

in an efficient market by trading on the basis of publicly 

available information. See, e.g., Stout, The Mechanisms of 

Market Inefficiency: An Introduction to the New Finance,

28 J. Corp. L. 635, 640, and n. 24 (2003) (citing Fama,

Efficient Capital Markets: A Review of Theory and Empirical Work, 25 J. Finance 383, 388 (1970)).4 The upshot of 

—————— 

4The “weak form” of the hypothesis provides that an investor cannot 

earn an above-market return by trading on historical price data. See 

Dunbar & Heller, Fraud on the Market Meets Behavioral Finance, 31 

Del. J. Corporate L. 455, 463–464 (2006) (hereinafter Dunbar & Heller). 

The “strong form” provides that investors cannot achieve above-market 

returns even by trading on nonpublic information. See ibid. The weak 
Cite as: 573 U. S. ____ (2014) 7 

THOMAS, J., concurring in judgment 

the hypothesis is that “the market price of shares traded 

on well-developed markets [will] reflec[t] all publicly 

available information, and, hence, any material misrepresentations.” Basic, supra, at 246. At the time of Basic, 

this version of the efficient capital markets hypothesis was 

“widely accepted.” See Dunbar & Heller 463–464. 

This view of market efficiency has since lost its luster. 

See, e.g., Langevoort, Basic at Twenty: Rethinking Fraud 

on the Market, 2009 Wis. L. Rev. 151, 175 (“Doubts about 

the strength and pervasiveness of market efficiency are 

much greater today than they were in the mid-1980s”). As 

it turns out, even “well-developed” markets (like the New

York Stock Exchange) do not uniformly incorporate information into market prices with high speed. “[F]riction in 

accessing public information” and the presence of “processing costs” means that “not all public information will

be impounded in a security’s price with the same alacrity,

or perhaps with any quickness at all.” Cox, Understanding Causation in Private Securities Lawsuits: Building on 

Amgen, 66 Vand. L. Rev. 1719, 1732 (2013) (hereinafter 

Cox). For example, information that is easily digestible

(merger announcements or stock splits) or especially

prominent (Wall Street Journal articles) may be incorporated quickly, while information that is broadly applicable

or technical (Securities and Exchange Commission filings) 

may be incorporated slowly or even ignored. See Stout, 

supra, at 653–656; see e.g., In re Merck & Co. Securities 

Litigation, 432 F. 3d 261, 263–265 (CA3 2005) (a Wall 

Street Journal article caused a steep decline in the company’s stock price even though the same information was 

contained in an earlier SEC disclosure). 

Further, and more importantly, “overwhelming empirical evidence” now suggests that even when markets do 

incorporate public information, they often fail to do so 

—————— 

form is generally accepted; the strong form is not. See ibid.
 
 

 

8 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

accurately. Lev and de Villiers, Stock Price Crashes and 

10b–5 Damages: A Legal, Economic and Policy Analysis, 

47 Stan. L. Rev. 7, 20–21 (1994); see also id., at 21 (“That

many share price movements seem unrelated to specific 

information strongly suggests that capital markets are not

fundamentally efficient, and that wide deviations from

fundamentals . . . can occur”(footnote omitted)). “Scores” 

of “efficiency-defying anomalies”—such as market swings 

in the absence of new information and prolonged deviations from underlying asset values—make market efficiency 

“more contestable than ever.” Langevoort, Taming the 

Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation, 97 Nw. U. L. Rev. 135,

141 (2002); Dunbar & Heller 476–483. Such anomalies 

make it difficult to tell whether, at any given moment, a

stock’s price accurately reflects its value as indicated by

all publicly available information. In sum, economists 

now understand that the price impact Basic assumed 

would happen reflexively is actually far from certain even

in “well-developed” markets. Thus, Basic’s claim that 

“common sense and probability” support a presumption of

reliance rests on shaky footing. 

2 

The Basic Court also grounded the presumption of

reliance in a second assumption: that “[a]n investor who

buys or sells stock at the price set by the market does so in 

reliance on the integrity of that price.” 485 U. S., at 247. 

In other words, the Court assumed that investors transact 

based on the belief that the market price accurately reflects the underlying “‘value’” of the security. See id., at 

244 (“‘[P]urchasers generally rely on the price of the stock 

as a reflection of its value’”). The Basic Court appears to

have adopted this assumption about investment behavior 

based only on what it believed to be “common sense.” Id., 

at 246. The Court found it “‘hard to imagine that there 
Cite as: 573 U. S. ____ (2014) 9 

THOMAS, J., concurring in judgment 

ever is a buyer or seller who does not rely on market integrity. Who would knowingly roll the dice in a crooked 

crap game?’” Id., at 246–247. 

The Court’s rather superficial analysis does not withstand scrutiny. It cannot be seriously disputed that a 

great many investors do not buy or sell stock based on a 

belief that the stock’s price accurately reflects its value. 

Many investors in fact trade for the opposite reason—that 

is, because they think the market has under- or overvalued the stock, and they believe they can profit from that

mispricing. Id., at 256 (opinion of White, J.); see, e.g.,

Macey, The Fraud on the Market Theory: Some Preliminary Issues, 74 Cornell L. Rev. 923, 925 (1989) (The “opposite” of Basic’s assumption appears to be true; some

investors “attempt to locate undervalued stocks in an 

effort to ‘beat the market’ . . . in essence betting that the 

market . . . is in fact inefficient”). Indeed, securities 

transactions often take place because the transacting

parties disagree on the security’s value. See, e.g., Stout, 

Are Stock Markets Costly Casinos? Disagreement, Market Failure, and Securities Regulation, 81 Va. L. Rev.

611, 619 (1995) (“[A]vailable evidence suggests that . . . investor disagreement inspires the lion’s share of equities

transactions”). 

Other investors trade for reasons entirely unrelated to

price—for instance, to address changing liquidity needs,

tax concerns, or portfolio balancing requirements. See id., 

at 657–658; see also Cox 1739 (investors may purchase 

“due to portfolio rebalancing arising from its obeisance to 

an indexing strategy”). These investment decisions— 

made with indifference to price and thus without regard

for price “integrity”—are at odds with Basic’s understanding of what motivates investment decisions. In short, 

Basic’s assumption that all investors rely in common on 
 

10 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

“price integrity” is simply wrong.5 

The majority tries (but fails) to reconcile Basic’s assumption about investor behavior with the reality that

many investors do not behave in the way Basic assumed. 

It first asserts that Basic rested only on the more modest 

view that “‘most investors’” rely on the integrity of a 

security’s market price. Ante, at 12 (quoting not Basic, but 

Amgen Inc. v. Connecticut Retirement Plans & Trust 

Funds, 568 U. S. ___, ___ (2013) (slip op., at 5) (emphasis

added)). That gloss is difficult to square with Basic’s plain

language: “An investor who buys or sells stock at the price 

set by the market does so in reliance on the integrity of 

that price.” Basic, 458 U. S., at 247; see also id., at 246– 

247 (“‘[I]t is hard to imagine that there ever is a buyer or 

seller who does not rely on market integrity’”). In any

event, neither Basic nor the majority offers anything more

than a judicial hunch as evidence that even “most” investors rely on price integrity. 

The majority also suggests that “there is no reason to

suppose” that investors who buy stock they believe to be

undervalued are “indifferent to the integrity of market

prices.” Ante, at 12. Such “value investor[s],” according to

the majority, “implicitly rel[y] on the fact that a stock’s

market price will eventually reflect material information” 

—————— 

5The Basic Court’s mistaken intuition about investor behavior appears to involve a category mistake: the Court invoked a hypothesis

meant to describe markets, but then used it “in the one way it is not 

meant to be used: as a predictor of the behavior of individual investors.” 

Langevoort, Theories, Assumptions, and Securities Regulation: Market 

Efficiency Revisited, 140 U. Pa. L. Rev. 851, 895 (1992). The efficient 

capital markets hypothesis does not describe “how investors behave; [it]

only suggests the consequences of their collective behavior.” Cox 1736. 

“Nothing in the hypothesis denies what most popular accounts assume:

that much information searching and trading by investors, from institutions on down, is done in the (perhaps erroneous) belief that undervalued or overvalued stocks exist and can systematically be discovered.” 

Langevoort, Theories, supra, at 895. 
 

Cite as: 573 U. S. ____ (2014) 11 

THOMAS, J., concurring in judgment 

and “presumably tr[y] to estimate how undervalued or 

overvalued a particular stock is” by reference to the market price. Ibid. Whether the majority’s unsupported

claims about the thought processes of hypothetical investors are accurate or not, they are surely beside the point. 

Whatever else an investor believes about the market, he 

simply does not “rely on the integrity of the market price” 

if he does not believe that the market price accurately

reflects public information at the time he transacts. That 

is, an investor cannot claim that a public misstatement 

induced his transaction by distorting the market price if

he did not buy at that price while believing that it accurately incorporated that public information. For that sort 

of investor, Basic’s critical fiction falls apart. 

B 

Basic’s presumption of reliance also conflicts with our 

more recent cases clarifying Rule 23’s class-certification

requirements. Those cases instruct that “a party seeking

to maintain a class action ‘must affirmatively demonstrate 

his compliance’ with Rule 23.” Comcast, 569 U. S., at ___ 

(slip op., at 5) (quoting Wal-Mart, 564 U. S., at ___ (slip 

op., at 10). To prevail on a motion for class certification, a

party must demonstrate through “evidentiary proof ” that 

“‘questions of law or fact common to class members predominate over any questions affecting only individual

members.’” 569 U. S., at ___ (slip op., at 5–6) (quoting 

Fed. Rule Civ. Proc. 23(b)(3)). 

Basic permits plaintiffs to bypass that requirement of 

evidentiary proof. Under Basic, plaintiffs who invoke the 

presumption of reliance (by proving its predicates) are

deemed to have met the predominance requirement of

Rule 23(b)(3). See ante, at 14; Amgen, supra, at ___ (slip 

op., at 6) (Basic “facilitates class certification by recognizing a rebuttable presumption of classwide reliance”); 

Basic, 485 U. S., at 242, 250 (holding that the District 
 

 

12 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

Court appropriately certified the class based on the presumption of reliance). But, invoking the Basic presumption does not actually prove that individual questions of 

reliance will not overwhelm the common questions in the 

case. Basic still requires a showing that the individual 

investor bought or sold in reliance on the integrity of the

market price and, crucially, permits defendants to rebut

the presumption by producing evidence that individual 

plaintiffs do not meet that description. See id., at 249 

(“Petitioners . . . could rebut the presumption of reliance 

as to plaintiffs who would have divested themselves of

their Basic shares without relying on the integrity of the

market”). Thus, by its own terms, Basic entitles defendants to ask each class member whether he traded in reliance on the integrity of the market price. That inquiry,

like the traditional reliance inquiry, is inherently individualized; questions about the trading strategies of individual investors will not generate “‘common answers apt to

drive the resolution of the litigation,’” Wal-Mart Stores, 

supra, at ___ (slip op., at 10). See supra, at 8–9; see also 

Cox 1736, n. 55 (Basic’s recognition that defendants could 

rebut the presumption “by proof the investor would have 

traded anyway appears to require individual inquiries into

reliance”). 

Basic thus exempts Rule 10b–5 plaintiffs from Rule 23’s 

proof requirement. Plaintiffs who invoke the presumption

of reliance are deemed to have shown predominance as a

matter of law, even though the resulting rebuttable presumption leaves individualized questions of reliance in the 

case and predominance still unproved. Needless to say,

that exemption was beyond the Basic Court’s power to 

grant.6 

—————— 

6The majority suggests that Basic squares with Comcast Corp. v. 

Behrend, 569 U. S. ___ (2013), and Wal-Mart Stores, Inc. v. Dukes, 564 

U. S. ___ (2011), because it does not “relieve plaintiffs of the burden of 
 

Cite as: 573 U. S. ____ (2014) 13 

THOMAS, J., concurring in judgment 

C 

It would be bad enough if Basic merely provided an endrun around Rule 23. But in practice, the so-called “rebuttable presumption” is largely irrebuttable. 

The Basic Court ostensibly afforded defendants an

opportunity to rebut the presumption by providing evidence that either aspect of a plaintiff ’s fraud-on-themarket reliance—price impact, or reliance on the integrity

of the market price—is missing. 485 U. S., at 248–249. As 

it turns out, however, the realities of class-action procedure make rebuttal based on an individual plaintiff ’s lack 

of reliance virtually impossible. At the class-certification 

stage, rebuttal is only directed at the class representatives, which means that counsel only needs to find one 

class member who can withstand the challenge. See 

Grundfest, Damages and Reliance Under Section 10(b) of 

the Exchange Act, 69 Bus. Lawyer 307, 362 (2014). After 

class certification, courts have refused to allow defendants 

to challenge any plaintiff ’s reliance on the integrity of the 

market price prior to a determination on classwide liability. See Brief for Chamber of Commerce of the United 

States of America et al. as Amici Curiae 13–14 (collecting 

cases rejecting postcertification attempts to rebut individual class members’ reliance on price integrity as not pertinent to classwide liability). One search for rebuttals on 

individual-reliance grounds turned up only six cases out of

the thousands of Rule 10b–5 actions brought since Basic. 

Grundfest, supra, at 360.7
 

—————— 

proving . . . predominance” but “rather sets forth what they must prove 

to demonstrate such predominance.” Ante, at 14–15. This argument 

misses the point. Because Basic offers defendants a chance to rebut the 

presumption on individualized grounds, the predicates that Basic sets 

forth as sufficient to invoke the presumption do not necessarily prove 

predominance. 7The absence of postcertification rebuttal is likely attributable in

part to the substantial in terrorem settlement pressures brought to bear 
 

 

14 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

The apparent unavailability of this form of rebuttal has

troubling implications. Because the presumption is conclusive in practice with respect to investors’ reliance on 

price integrity, even Basic’s watered-down reliance requirement has been effectively eliminated. Once the 

presumption attaches, the reliance element is no longer an 

obstacle to prevailing on the claim, even though many

class members will not have transacted in reliance on 

price integrity, see supra, at 8–9. And without a functional reliance requirement, the “essential element” that

ensures the plaintiff has actually been defrauded, see 

Stoneridge, 552 U. S., at 159, Rule 10b–5 becomes the very 

“‘scheme of investor’s insurance’” the rebuttable presumption was supposed to prevent. See Basic, supra, at 252 

(opinion of White, J.).8 

* * * 

For these reasons, Basic should be overruled in favor of 

the straightforward rule that “[r]eliance by the plaintiff 

upon the defendant’s deceptive acts”—actual reliance, not 

the fictional “fraud-on-the-market” version—“is an essential element of the §10(b) private cause of action.” Stoneridge, 552 U. S., at 159. 

—————— 

by certification. See, e.g., Nagareda, Class Certification in the Age of 

Aggregate Proof, 84 N. Y. U. L. Rev. 97, 99 (2009) (“With vanishingly 

rare exception, class certification sets the litigation on a path toward resolution by way of settlement, not full-fledged testing of the plaintiffs’ case

by trial”); see also Stoneridge Investment Partners, LLC v. ScientificAtlanta, Inc., 552 U. S. 148, 163 (2008) (“[E]xtensive discovery and

the potential for uncertainty and disruption in a lawsuit allow plaintiffs

with weak claims to extort settlements from innocent companies”). 8Of course, today’s decision makes clear that a defendant may rebut 

the presumption by producing evidence that the misstatement at issue 

failed to affect the market price of the security, see ante, at 17–22. But 

both parts of Basic’s version of reliance are key to its fiction that an 

investor has “indirectly” relied on the misstatement; the unavailability 

of rebuttal with respect to one of those parts still functionally removes 

reliance as an element of proof. 
Cite as: 573 U. S. ____ (2014) 15 

THOMAS, J., concurring in judgment
 

III

 Principles of stare decisis do not compel us to save 

Basic’s muddled logic and armchair economics. We have 

not hesitated to overrule decisions when they are “unworkable or are badly reasoned,” Payne v. Tennessee, 501 

U. S. 808, 827 (1991); when “the theoretical underpinnings 

of those decisions are called into serious question,” State 

Oil Co. v. Khan, 522 U. S. 3, 21 (1997); when the decisions 

have become “irreconcilable” with intervening developments in “competing legal doctrines or policies,” Patterson 

v. McLean Credit Union, 491 U. S. 164, 173 (1989); or

when they are otherwise “a positive detriment to coherence and consistency in the law,” ibid. Just one of these 

circumstances can justify our correction of bad precedent; 

Basic checks all the boxes. 

In support of its decision to preserve Basic, the majority 

contends that stare decisis “has ‘special force’ ‘in respect to 

statutory interpretation’ because ‘Congress remains free to

alter what we have done.’” Ante, at 12 (quoting John R. 

Sand & Gravel Co. v. United States, 552 U. S. 130, 139 

(2008); some internal quotation marks omitted). But 

Basic, of course, has nothing to do with statutory interpretation. The case concerned a judge-made evidentiary 

presumption for a judge-made element of the implied 

10b−5 private cause of action, itself “a judicial construct

that Congress did not enact in the text of the relevant 

statutes.” Stoneridge, supra, at 164. We have not afforded 

stare decisis “special force” outside the context of statutory interpretation, see Michigan v. Bay Mills Indian 

Community, 572 U. S. ___, ___, n. 6 (2014) (THOMAS, J. 

dissenting) (slip op., at 15, n. 6 and for good reason. In 

statutory cases, it is perhaps plausible that Congress

watches over its enactments and will step in to fix our 

mistakes, so we may leave to Congress the judgment

whether the interpretive question is better left “‘settled’” 

or “‘settled right,’” Square D Co. v. Niagara Frontier 
 

 

16 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

Tariff Bureau, Inc., 476 U. S. 409, 424 (1986). But this 

rationale is untenable when it comes to judge-made law 

like “implied” private causes of action, which we retain a 

duty to superintend. See, e.g., Exxon Shipping Co. v. 

Baker, 554 U. S. 471, 507 (2008) (“[T]he judiciary [cannot] 

wash its hands of a problem it created . . . simply by calling [the judicial doctrine] legislative”). Thus, when we err 

in areas of judge-made law, we ought to presume that 

Congress expects us to correct our own mistakes—not the

other way around. That duty is especially clear in the 

Rule 10b–5 context, where we have said that “[t]he federal

courts have accepted and exercised the principal responsibility for the continuing elaboration of the scope of the 

10b–5 right and the definition of the duties it imposes.” 

Musick, Peeler & Garrett v. Employers Ins. of Wausau, 508 

U. S. 286, 292 (1993). 

Basic’s presumption of reliance remains our mistake to 

correct. Since Basic, Congress has enacted two major

securities laws: the Private Securities Litigation Reform

Act of 1995 (PSLRA), 109 Stat. 737, and the Securities 

Litigation Uniform Standards Act of 1998 (SLUSA), 112

Stat. 3227. The PSLRA “sought to combat perceived

abuses in securities litigation,” ante, at 15, and SLUSA 

prevented plaintiffs from avoiding the PSLRA’s restrictions by bringing class actions in state court, ibid. 

Neither of these Acts touched the reliance element of the 

implied Rule 10b–5 private cause of action or the Basic 

presumption.

Contrary to respondent’s argument (the majority wisely 

skips this next line of defense), we cannot draw from

Congress’ silence on this matter an inference that Congress approved of Basic. To begin with, it is inappropriate 

to give weight to “Congress’ unenacted opinion” when 

construing judge-made doctrines, because doing so allows 

the Court to create law and then “effectively codif[y]” it

“based only on Congress’ failure to address it.” Bay Mills, 
 

 

 

 

 

Cite as: 573 U. S. ____ (2014) 17 

THOMAS, J., concurring in judgment 

supra, at ___ (THOMAS, J., dissenting) (slip op., at 14).

Our Constitution, however, demands that laws be passed 

by Congress and signed by the President. U. S. Const., 

Art. I, §7. Adherence to Basic based on congressional

inaction would invert that requirement by insulating error

from correction merely because Congress failed to pass a 

law on the subject. Cf. Patterson, supra, at 175, n. 1 

(“Congressional inaction cannot amend a duly enacted 

statute”).

At any rate, arguments from legislative inaction are

speculative at best. “[I]t is ‘“impossible to assert with any

degree of assurance that congressional failure to act represents” affirmative congressional approval of ’ one of this 

Court’s decisions.” Bay Mills, supra, at ___ (THOMAS, J., 

dissenting) (slip op., at 13) (quoting Patterson, supra, at 

175, n. 1). “‘Congressional inaction lacks persuasive 

significance’” because it is indeterminate; “‘several equally

tenable inferences may be drawn from such inaction.’” 

Central Bank of Denver, N. A. v. First Interstate Bank of 

Denver, N. A., 511 U. S. 164, 187 (1994) (quoting Pension 

Benefit Guaranty Corporation v. LTV Corp., 496 U. S. 633, 

650 (1990)). Therefore, “[i]t does not follow . . . that Congress’ failure to overturn a . . . precedent is reason for this 

Court to adhere to it.” Patterson, supra, at 175, n. 1. 

That is especially true here, because Congress passed a 

law to tell us not to draw any inference from its inaction.

The PSLRA expressly states that “[n]othing in this Act . . .

shall be deemed to create or ratify any implied private 

right of action.” Notes following 15 U. S. C. §78j–1, p. 430.

If the Act did not ratify even the Rule 10b–5 private cause 

of action, it cannot be read to ratify sub silentio the presumption of reliance this Court affixed to that action.

Further, the PSLRA and SLUSA operate to curtail abuses

of various private causes of action under our securities 

laws—hardly an indication that Congress approved of 

Basic’s expansion of the 10b–5 private cause of action. 
 

 

18 HALLIBURTON CO. v. ERICA P. JOHN FUND, INC. 

THOMAS, J., concurring in judgment 

Congress’ failure to overturn Basic does not permit us to

“place on the shoulders of Congress the burden of the

Court’s own error.” Girouard v. United States, 328 U. S. 

61, 70 (1946). 

* * * 

Basic took an implied cause of action and grafted on a

policy-driven presumption of reliance based on nascent 

economic theory and personal intuitions about investment 

behavior. The result was an unrecognizably broad cause

of action ready made for class certification. Time and 

experience have pointed up the error of that decision,

making it all too clear that the Court’s attempt to revise

securities law to fit the alleged “new realities of financial 

markets” should have been left to Congress. 485 U. S., at 

255 (opinion of White, J.).