Last June, you may recall, the U.S. Supreme Court delivered a strong rebuke to the U.S. Court of Appeals for the Fifth Circuit in a case involving an attempted securities class action against Halliburton. In a unanimous opinion written by Chief Justice John Roberts, the Court concluded that the Fifth Circuit was wrong to reject certification of a class led by the Erica P. John Fund on loss causation grounds. Instead of insisting that the class prove investors relied on Halliburton's allegedly false statements, the Supreme Court found, the Fifth Circuit-like all the other federal appeals courts--should have analyzed class certification using the high court's 1988 Basic v. Levinson "fraud on the market" rule.

Justice Roberts also took the opportunity to reject a theory posited by Halliburton's lawyers at Baker Botts in oral arguments in the EPJ Fund case. Halliburton counsel, led by Baker's David Sterlin, tried to convince the Justices that the Fifth Circuit was actually using the phrase "loss causation" as shorthand for the plaintiffs' failure to prove reliance, because the class couldn't show that Halliburton's share price fell when the company made disclosures to correct previous statements. Justice Roberts called that theory "a wishful interpretation."

Wishful or no, Baker Botts has revived the argument at the Fifth Circuit-even though the appeals court, in accordance with the Supreme Court's ruling, already remanded the EPJ Fund case back to the trial court for a ruling on class certification. EPJ's counsel, meanwhile, told OTC that Halliburton's attempt to reargue a theory expressly rejected by the U.S. Supreme Court is "grasping at straws."

In atwo-page per curiam order on July 20, the Fifth Circuit noted that its denial of class certification had been vacated by the Supreme Court, so it was reversing the trial court's class cert denial and remanding the case for "further proceedings or decision."

Two days later, in a remarkable motion, Halliburton's Baker Botts lawyers asked the Fifth Circuit to reconsider its order and reinstate its denial of class certification. Halliburton argued that the Supreme Court ruling said any arguments it had preserved against class certification "may be addressed in the first instance by the Court of Appeals on remand." And because, according to Halliburton, it had "repeatedly pressed its argument" that the class can't be certified because there's no evidence of classwide reliance on Halliburton's alleged misrepresentations, the Fifth Circuit should consider the reliance question before the case goes back to the trial court.

As evidence that Halliburton had preserved its argument that the class couldn't show investors relied on Halliburton's alleged misstatements, Baker Botts noted that Justice Antonin Scalia asked lawyers the EPJ Fund at oral argument whether it would be a Pyrrhic victory to give the fund a narrow ruling that rejected the Fifth Circuit's "loss causation" language but upheld other federal circuits' rulings on reliance. "Halliburton argued in [the Fifth Circuit] and at the Supreme Court that it had rebutted the presumption of classwide reliance by showing an absence of price distortion, and thereby defeated class certification," the Halliburton motion says. "The record, which was fully developed before the district court and reflected in the [Fifth Circuit's] opinion, confirms that none of Halliburton's alleged misrepresentations affected its stock price. This court should therefore recall [the remand to the trial court] and join its sister circuits in holding that the absence of price distortion precludes class certification under the fraud-on-the-market theory."

It's certainly a bold move. Remember, Halliburton's argument at the Supreme Court was basically that the Fifth Circuit messed up by calling its reason for rejecting class certification "loss causation" when the appeals court really meant reliance. Its new motion asks the Fifth Circuit now to go back and undo a remand it ordered at the behest of a Supreme Court opinion that said the appeals court was an outlier in its interpretation of loss causation.

Bold, but completely misguided, according to the EPJ Fund's response to Halliburton's motion, filed late Monday. As a threshold matter, the fund argues, Halliburton didn't make an argument on reliance at the trial court level and referred to the issue only in a footnote in its original Fifth Circuit brief. "Such a fleeting reference, which is not developed, does not suffice to preserve the argument," wrote class counsel from Boies, Schiller & Flexner. In fact, when Justice Sonia Sotomayor asked Halliburton's lawyer at oral argument to cite evidence it had argued the reliance theory in the lower court, the fund asserted, "counsel for Halliburton failed to provide a record citation and merely responded that '[it] was not addressed as a merits question.'"

The EPJ Fund also argues that Halliburton's motion should fail as a matter of procedure, because appellate courts can only reverse Supreme Court-ordered remands to prevent extraordinary injustice, which is hardly the case in the Halliburton class action.

The Fifth Circuit could have held onto the case under the Supreme Court's ruling, the fund's lawyer told OTC. But the appeals court evidently didn't want to. "The Supreme Court sent its message loud and clear by its 9-to-0 decision," fund counsel Neil Rothstein of Kahn Swick & Foti said in an e-mail. "Had the Fifth Circuit wanted to entertain any issues that they believed were preserved by the Halliburton defendants, they would have done so.The Halliburton defendants did not preserve any arguments on class certification and only argued loss causation, and therefore, they are grasping at straws." Rothstein said he's confident that the Fifth Circuit will reject Halliburton's motion and Dallas federal court judge Barbara Lynn will certify the class when the case returns to her courtroom.

OTC left messages with Halliburton lawyers at Baker Botts but didn't hear back.

(Reporting by Alison Frankel)