Defense Counsel Offers Faulty Recap

Better be careful when summarizing what your Judge "recognized" at that motion to dismiss oral argument. You see, Defendants in the Wave Systems securities class action put forth a Dura defense, pointing out that "during oral argument, this court recognized the absence of any necessary casual link between any allegedly misleading statements and Wave's drop in stock price following the announcement of the SEC investigation in December, 2003." Whoops. Judge Michael A. Ponsor (D. Mass.) responded that "it should come as no surprise that many judges use oral argument as an opportunity . . . to focus the argument, or to test the extreme implications of a litigants position. A court speaks authoritatively, however, only in its opinions, orders, and judgments," and "assuming a devil's advocate role is a familiar ploy of the neutral decision-maker."

Yep, that's right, Defendants lost the Dura argument (how much punishment can these Dura proponents take?), with Judge Ponsor holding that "Dura does not require that a corrective disclosure precede a stock's decline." Defendants lost nearly every other point too, including puffery, safe harbor, materiality, reliance, and scienter.

You can read In re Wave Systems, issued January 11, 2006, at 2006 U.S. Dist. LEXIS 725.

Nugget: "Some statements, although literally accurate, can become, through their context and manner of presentation, devices which mislead investors. For that reason, the disclosure required by the securities laws is measured not by literal truth, but by the ability of the material to accurately inform rather than mislead prospective buyers."