An Oak Is an Oak Is an Oak Is an Oak : The Disappointing Entrenchment in Halliburton Co. v. Erica P. John Fund of the Implied Private Right of Action Under Section 10(b) and Rule 10b-5

On June 23, 2014, the Supreme Court of the United States issued its opinion in Halliburton Co. v. Erica P. John Fund, which has become known as Halliburton II. In that opinion, the Court reaffirmed the existence of an implied private right of action under section 10(b) and Rule 10b-5 and the use of a “fraud-on-the-market” presumption of reliance for purposes of allowing class action certification under that private right of action. The Court also offered a clarification regarding the procedures to be used in class action proceedings.In a certain regard, the Court gets it right in Halliburton II. Although the private right of action and the presumption of reliance under the “fraud-on-the-market” theory should not have been imagined into existence, Congress has repeatedly acquiesced to this presumption by failing to address it in subsequent legislation. The Court also acted sensibly in holding that this presumption can be rebutted at the class certification stage upon a showing that an alleged misrepresentation did not create a price impact because this serves as a check against strike suits and other nuisance litigation. The private right of action under section 10(b) and Rule 10b-5 is a necessary component of policing securities markets in the United States, and it should continue to exist in some fashion.The problem is that the Court has forgotten that the implied private right of action should never have existed in the first place, and the Court has come to excitedly embrace legislating the contours of that right, rather than demanding that Congress do its job and codify the private right of action. This Essay argues that the continued existence and modification of the implied private right of action under section 10(b) and Rule 10b-5 is an affront to Article I, section 7 of the Constitution, which gives Congress the power to pass laws, not courts. This Essay also argues that every opinion by the Supreme Court should include a direct call for Congress to address the implied private right of action under section 10(b) and Rule 10b-5 and either codify or extinguish it. In short, further entrenchment of the private right is not desirable and should not be permitted