Pleading Loss Causation

In its Dura decision, the Supreme Court left open the question of whether loss causation is subject to a heightened pleading standard. The court assumed, without deciding, “that neither the [Federal Rules of Civil Procedure] nor the securities statutes impose any special further requirements in respect to the pleading of proximate causation or economic loss,” and applied the notice pleading requirements of F.R.C.P. 8(a)(2). Following Dura, several courts have concluded that notice pleading is sufficient (see, e.g., Greater Penn. Carpenters Pension Fund v. Whitehall Jewellers, Inc., 2005 WL 1563206 (N.D. Ill. June 30, 2005)).

A contrary view can be found in the recent decision in In re The First Union Corp. Sec. Litig., 2006 WL 163616 (W.D.N.C. Jan. 20, 2006). The court noted that the Supreme Court had “expressly declined to consider whether loss causation must be pled with particularity.” Based on pre-Dura circuit court decisions finding that F.R.C.P. 9(b)’s particularity standard is applicable to loss causation and the fact that “the Fourth Circuit has held that every element of a common law fraud action must be plead with particularity,” the court decided that the plaintiffs needed to satisfy the heightened pleading standard.

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