Dura Doesn't Impose Sell-To-Sue

If you’ve been relying on Judge John Winslow Bissell’s (D. N.J.) August 9, 2005 opinion in Royal Dutch/Shell that held "because the stock had recovered its lost value, any putative class member who did not sell the subject securities within 90 days after the end of the Class Period could not establish the economic loss or loss causation elements of a Section 10(b) securities fraud claim as to those unsold shares," then you’re probably not going to be very happy with this new development. You see, due to Judge Bissell’s retirement on September 1, 2005, Judge Joel A. Pisano (D. N.J.) now has the case, and has reconsidered Judge Bissell’s imposition of what is appropriately termed sell-to-sue.

In rejecting the doctrine, Judge Pisano concluded that, "in order to plead and prove loss causation and economic loss, a plaintiff alleging fraud in connection with the purchase of securities is not necessarily required to sell the subject securities. First, the statutory scheme that provides the measure of damages available to securities fraud plaintiffs does not mandate sale of the securities. Second, holding plaintiffs have long been permitted to litigate securities fraud claims. Third, policy concerns dictate against the imposition of a sell-to-sue requirement. Finally, Dura neither expressly nor implicitly mandates that the subject securities be sold in order for a plaintiff to have suffered cognizable economic loss."

Just when you thought Dura might actually change something, right?

You can read In re Royal Dutch/Shell, issued December 12, 2005, at 2005 U.S. Dist. LEXIS 32190.

Nugget: "Mandating that defrauded investors liquidate their holdings in order to preserve their right to pursue damages might have harmful consequences."