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Loss Causation In Fraud On The Market Cases Post-Dura Pharmaceuticals, Ann Morales Olazábal

Business Law Articles and Papers

As a critical matter, class action securities fraud plaintiffs employing the fraud-on-the-market theory of reliance must still plead and eventually prove loss causation and damages. The Supreme Court's April 2005 decision in Dura Pharmaceuticals v. Broudo disapproved of the Ninth Circuit's simple price inflation theory of pleading loss causation (namely that a plaintiff's loss occurs at the time she purchases stock at a price artificially inflated by fraud) without expressly sanctioning any of the other prevailing approaches to loss causation. This leaves open the question of precisely how courts should properly handle loss causation. Consequently, this Article critically examines the …