Sunday, January 08, 2006

Defendants Lose Dura Summary Judgment Bid

First it was the 12(b)(6) Dura motions to dismiss that changed almost nothing, then it was the 12(c) Dura motions that didn’t fare much better. Now it’s the summary judgment motions, and, well, seems Dura isn’t having the effect that some in the defense bar no doubt had hoped for (although admittedly others said it would discourage baseless suits from ever being filed, a reasonable but hard to test assertion). As for the cases that are on file, it’s not that Defendants haven’t won some motions that addressed Dura -- they have. But for the most part, the result would likely have been the same with or without Dura. (See this Paul Weiss article by Richard Rosen and Dawn Barker for an excellent recap on Dura).

Anyway, agree or not, take the Loewen Group ("TGLI") securities class action, where Defendants asserted on summary judgment that the corrective disclosures occurred on three specific dates beginning in November 1997 when "the price of TLGI stock either increased or decreased slightly after the information was made available publicly." Plaintiffs didn’t exactly disagree, as Judge Thomas N. O'Neill, Jr. (E.D. Pa.) noted that Plaintiffs "for the most part," "do not dispute that the improper accounting of imputed interest was disclosed on the dates alleged by the defendants." Instead, Plaintiffs say that "those disclosures merely provided additional detail to information already known, and that the market's reaction to the imputed interest charges was already accounted for as part of the stock price drops in September 1997 and October 1998."

Judge O’Neill concluded that "throughout the class period, the price of TLGI stock dropped significantly, from $ 33.250 on March 5, 1997, to $ 5.125 on January 14, 1999 and TLGI's market capitalization dropped by $ 2 billion. Plaintiffs have pleaded loss causation adequately by alleging that they purchased TLGI stock at an inflated price and lost money when the price fell. They allege that the stock price fell as a result of the defendants' failure to properly record imputed interest, and have offered enough evidence on that point to survive summary judgment. To prove loss causation at trial, plaintiffs face a stronger burden of persuasion and will probably need to rely on expert reports, but they have satisfied their burden at this time." As a result, "Plaintiffs have met their burden regarding loss causation."

You can read In re Loewen, issued October 18, 2005, at 395 F. Supp. 2d 211.

Nugget: "Under Dura, plaintiffs cannot satisfy the loss causation requirement by claiming that they bought securities at inflated prices. To survive summary judgment, plaintiffs must demonstrate some actual loss."

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