A panel of the Sixth Circuit consisting of Judges Kennedy, Daughtrey, and Sutton issued a unanimous opinion yesterday affirming Judge Rosen’s (E.D. Mich.) September 19, 2003 pre-Dura dismissal of the Kmart securities class action. The Court of Appeals found that plaintiffs’ loss causation allegations did “not differ in any material respect from Broudo’s” allegations in Dura, and therefore did not meet the required pleading standard. The Court held that the Kmart plaintiffs “did not plead that the alleged fraud became known to the market on any particular day, did not estimate the damages that the alleged fraud caused, and did not connect the alleged fraud with the ultimate disclosure and loss.” The decision, which was not recommended for full-text publication, is available here or at 2005 U.S. App. LEXIS 11267.
Nugget: “[T]he observation that a stock price dropped on a particular day, whether as a result of bankruptcy or not, is not the same as an allegation that a defendant’s fraud caused the loss.”