On Second Thought

Motions for reconsideration are rarely successful, but loss causation issues may be an exception given the need to interpret the Supreme Court’s recent Dura decision. In In re Royal Dutch/Shell Transport Sec. Litig., 2005 WL 3359695 (D.N.J. Dec. 12, 2005), the court had held, based on Dura, that investors who purchased securities during the class period, but did not subsequently sell the securities, could not adequately plead loss causation. Therefore, those investors could not join the putative class.

On reconsideration (and after the case was reassigned to another judge), the court found that Dura “neither expressly nor implicitly mandates that the subject securities be sold in order for a plaintiff to have suffered cognizable loss.” The court also found that the PSLRA did not require such a sale to bring a securities fraud action and that it would be against public policy to judicially create this requirement.

Holding: Motion for reconsideration granted.

Quote of note: “Nothing in Dura indicates that the Supreme Court intended to overrule the established precedent permitting holding plaintiffs to maintain actions for securities fraud, to call into question the statutory scheme by creating a sell- to-sue requirement, or to undermine relevant policy concerns without any analysis. Moreover, Dura‘s holding was limited to rejecting the Court of Appeals for the Ninth Circuit’s standard for pleading loss causation and economic loss in a securities fraud action, which had required only an allegation of inflated purchase price because of a misrepresentation; the Supreme Court expressly stated that it did not ‘consider other proximate cause or loss-related questions.’ Accordingly, Dura cannot be read to require both purchase and sale of the subject securities.”

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