Publications
Dura Pharmaceuticals, Inc. v. Broudo (03-932)
Greetings, Court fans!
The Court released only one opinion today, and a short one at that. In Dura Pharmaceuticals, Inc. v. Broudo, No. 03-932, Justice Breyer, for a unanimous court, reversed the Ninth Circuit’s holding that, in the context of a securities fraud class action, an allegation that purchasers paid an “inflated purchase price” was sufficient to allege loss causation. As a matter of logic, this could not be true, because the moment the individuals purchase the inflated stock, they have suffered no loss — the stock is worth exactly what they paid. If they sell immediately, they incur no loss. And the link between an inflated purchase price and later economic loss is not invariably strong, since a great many factors may affect stock price (9/11 is one prime example). Thus, the Court easily rejected the Ninth Circuit’s interpretation, which conflicted with decisions by the Second, Third, Seventh and Eleventh Circuits. As a matter of policy, if the mere allegation of an inflated purchase price was sufficient to allege loss causation, abusive lawsuits “with only a faint hope that the discovery process might lead eventually to some plausible cause of action” would be permitted and private securities litigation would tend to transform into “partial downside insurance policy.”
That’s all for today. This is the fortieth opinion of the term — so we’re only about half way there!
Kim & Ken
From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400
