[The following post comes to us from Lawrence E. Mitchell, Joseph C. Hostetler – Baker & Hostetler Professor of Law at Case Western Reserve University School of Law.  All formatting errors should be attributed to me, Stefan Padfield.]

The March 5, 2014 oral argument in Halliburton Co. v. Erica P. John Fund, Inc.¹ made clear that one of the issues being considered by the Supreme Court is whether to supplant the “market efficiency” analysis currently required at the class certification stage in securities fraud class action cases with a “price impact” analysis instead. Our purpose is not to debate the relative merits of that potential change. Rather, it is to identify a critical point that seemed to get lost in the argument: neither the Justices nor the advocates addressed what a price impact analysis would look like in the context of the most common securities fraud scenario—the making of false statements designed to mask bad news. While some of the briefing before the Court touches on the issue, the authors of a working paper cited by proponents of both sides have supplemented their views with a recent blog post that, while brief, discusses potential approaches to measuring the …