Monday, November 21, 2005

Broken Record

There’s seems to be two trends emerging in loss causation. The first is that over the past seven months, Defendants who already lost motions to dismiss in securities class actions have been filing Rule 12(c) motions to dismiss based on Dura. This has resulted in the second trend -- Defendants losing those motions. Today’s decision offers yet another interesting twist on this argument, but ends the same way.

In the Cisco action, Judge James Ware (N.D. Cal.) listened to Defendants' argument that "plaintiffs in this case have merely alleged that the purported disclosures 'had a negative effect on Cisco's stock price, rather than the requisite corrective effect.'" In rejecting the argument, Judge Ware held that since Plaintiffs’ complaint “alleges that there was a steep drop in the price of Cisco's stock after Cisco Defendants began to disclose the alleged ‘truth’ about its financial condition,” it “provides the defendant with fair notice of what the plaintiffs claim is and the grounds upon which it rests.”

You can read Plumbers & Pipefitters Local 572 v. Cisco Systems, issued October 27, 2005, at 2005 U.S. Dist. LEXIS 25398.

Nugget: “Notably, the Dura decision itself does not define the pleading standard for loss causation.”

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