Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Law
Demystifying Causation In Fraud-On-The-Market Actions, Merritt B. Fox
Demystifying Causation In Fraud-On-The-Market Actions, Merritt B. Fox
Faculty Scholarship
An issuer makes a positive, material misstatement in violation of Rule 10b-5. What must an investor who purchases the issuer's shares on the open market show to establish causation in a "fraud-on-the-market" action for damages? After years of confusion in the lower courts, the Supreme Court recently granted certiorari on the question in the case of Broudo v. Dura Pharmaceuticals.
This Article argues that the confusion in the lower courts has arisen because they have analyzed the issue in terms of the twin concepts of "transaction causation" and "loss causation." They initially developed this bifurcated framework as a way …
Causation By Presumption? Why The Supreme Court Should Reject Phantom Losses And Reverse Broudo, John C. Coffee Jr.
Causation By Presumption? Why The Supreme Court Should Reject Phantom Losses And Reverse Broudo, John C. Coffee Jr.
Faculty Scholarship
Over a quarter of a century ago, Judge Henry Friendly coined the term "fraud by hindsight" in upholding the dismissal of a proposed securities class action. As he explained, it was too simple to look backward with full knowledge of actual events and allege what should have been earlier disclosed by a public corporation in its Security and Exchange Commission (SEC) filings. Because hindsight has twenty/twenty vision, plaintiffs could not fairly "seize [] upon disclosures" in later reports, he ruled, to show what defendants should have disclosed earlier.
Today, a parallel concept – "causation by presumption" – is before the …