Wednesday, February 08, 2006

In. Out. Certified.

In the BearingPoint securities class action pending in the rocket docket, Judge T. S. Ellis, III (E.D. Va.) found himself confronted with the “somewhat novel question” of “whether ‘in-and-out’ purchasers of BearingPoint stock, namely those who bought and sold their shares within the class period, can prove loss causation.” Defendants, relying on Dura (no, don't adjust your set, just more defendants going down the drain with Dura -- again), argued that including these traders "in the proposed class will require individual examination of each in-and-out trader to determine whether each such trader has satisfied the loss causation requirement.”

But Judge Ellis rejected Defendants' argument, holding instead that “although in-and-out traders often have no associated damage because they purchased and sold at prices with the same artificial inflation, this is not always the case. In cases where, as here, there are multiple disclosures, in-and-out traders may well be able to show a loss. Moreover, it is also conceivable that the inflationary effect of a misrepresentation might well diminish over time, even without a corrective disclosure, and thus in-and-out traders in this circumstance would be able to prove loss causation. In sum, because in-and-out traders may conceivably prove loss causation, they are appropriately counted as members of the proposed class.”

Result? You guessed it, class certified.

You can read In re Bearing Point, issued January 17, 2006, at 2006 U.S. Dist. LEXIS 1718.

Nugget: “Even so, the conclusion that the proposed class includes in-and-out traders, does not, alter the conclusion that common issues of law and fact will predominate over individual issues. The issue of whether in-and-out traders can satisfy loss causation is a single legal issue, not dependent on individual factual determinations, and the proper determination of individual damages can be determined at trial through the use of expert witnesses.”

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