Monday, February 13, 2006

Another Dura 12(c) Motion Bites the Dust

The trend of Defendants losing 12(c) motions based on Dura marches onward (and on, and on, and you get the point). This time, it's Judge Blanche M. Manning (N.D. Ill.) who has rejected Defendants attempts to jettison the Baxter International securities class action (which earlier almost died an untimely death until the Seventh Circuit revived it) by noting “[a]lthough it is a close question, this court concludes that, at this stage of the pleadings, plaintiffs have adequately alleged loss causation. Unlike the plaintiffs in Dura who alleged only that they paid artificially inflated prices, plaintiffs here allege that their loss was indeed caused by Baxter's announcement of its second-quarter results, which revealed the dire financial situation that the defendants had tried to conceal.”

And “although defendants attempt to characterize this drop as nothing more than the market's reaction to bad news, a liberal reading of plaintiffs' complaint reveals more. Plaintiffs are essentially alleging not just that the price dropped as the result of bad financial news, but rather as the result of the unattainable rosy "financial commitments" issued by Baxter--commitments the company could not possibly have met given its internal state of affairs. In other words, plaintiffs are claiming that the startling disconnect between Baxter's predictions and its actual second-quarter results revealed to the market that the predictions had been unattainable.”

Motion denied.

You can read Asher v. Baxter, issued February 7, 2006, at 2006 U.S. Dist. LEXIS 4821.

Nugget: “If Baxter had not lied about its internal state of affairs and its ability for growth, the disappointing second-quarter results would not have had such a negative impact on the share price.”

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