Monday, April 17, 2006

Defendants Bet it All on Dura, and Win

Judge James D. Whittemore (M.D. Fla.) seems a bit frustrated with the parties in the TECO securities class action, commenting that "Plaintiffs spend an inordinate amount of time arguing their position on the other elements of their fraud claim," and "these arguments are neither relevant nor helpful as Defendants' seek dismissal based on failure to plead loss causation and do not challenge the other elements." "Further, the parties spend an inordinate of time arguing about the requirements for proving loss causation." But, "regardless of the words or labels used, the requirements are the same. Under Dura, it is not enough for Plaintiffs to allege an inflated stock price. Rather, Plaintiffs must allege that some truth was disclosed in the market that revealed prior misstatements or omissions -- fraud -- by Defendants that is causally connected to their losses."

So what’s the result? Not good for Plaintiffs, as Judge Whittemore concluded that "although the ‘revelations’ referenced by Plaintiffs suggest that analysts were pessimistic regarding TECO's future, the information contained in the purported revelations does not identify, reveal or correct any prior misstatement, omission, or improper accounting practice by Defendants. In fact, none of the purported revelations indicate or establish that the changes occurring with TECO were remotely associated with prior fraudulent conduct."

Case dismissed without prejudice.

You can read In re TECO Energy Inc., issued March 30, 2006, at 2006 U.S. Dist. LEXIS 18101.

Nugget: "Even assuming that the revelations gave some indication of prior misstatements, omissions, or improper accounting practices, Plaintiffs have not sufficiently alleged that those revelations were related to the fraudulent scheme alleged in the Complaint."

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