The U.S. Court of Appeals for the Fourth Circuit has issued its first post-Dura decision on loss causation. In Glaser v. Enzo Biochem, Inc., 2006 WL 2692848 (4th Cir. Sept. 21, 2006), the court examined whether the plaintiffs had adequately alleged a Virginia common law fraud claim related to the sale of securities. (The federal securities claims had previously been dismissed on statute of limitations grounds.)
The court found that it “is only after the fraudulent conduct is disclosed to the investing public, followed by a drop in the value of the stock, that the . . . investor has suffered a ‘loss’ that is actionable after the Supreme Court’s decision in Dura.” Because the complaint appeared to concede that the plaintiffs had sold their shares before the “alleged truth about Enzo’s science” was “publicly revealed,” any losses they suffered “must have been the result of market factors or other factors, not the revelation of the alleged truth.”
The 10b-5 Daily 