In 2005, the U.S. Supreme Court decided Dura Pharmaceuticals v. Broudo, where it held that plaintiffs in a securities fraud case must plead and prove that there was a causal connection between the alleged misrepresentations and the subsequent decline in the company’s stock price. The Supreme Court did not address, however, the exact contours of that causal connection. Lower courts have come to significantly different conclusions on questions like what constitutes an adequate corrective disclosure that reveals falsity, when can information about a company be deemed “public,” and the effect of an immediate stock price recovery. As readers of this blog know, over the last six months the U.S. Court of Appeals for the Ninth Circuit has issued a series of decisions on these issues that arguably have created more confusion than clarity.
The author of The 10b-5 Daily has written an article for the May 19, 2021 issue of The Review of Securities & Commodities Regulation on the Ninth Circuit’s recent loss causation decisions, ultimately concluding that it is time for the Supreme Court to bring uniformity to the lower courts as to loss causation. And, indeed, the defendants in one of the discussed decisions – In re BofI Holding, Inc. Securities Litigation – have submitted a cert petition seeking Supreme Court review. A pre-publication copy of the article can be found here.