We had Plaintiffs getting hammered the other day, but now it’s time to turn the tables. This time it’s Defendants who get stomped, and oh boy, do they get stomped. Listen to these comments from Judge Curtis Joyner (E.D. Pa.) on the motions to dismiss in the Select Medical securities class action.
O.K., well, let’s see, Judge Joyner concluded that Defendants' arguments are "unpersuasive and irrelevant," "would entirely undermine the Exchange Act's fraud provisions," "ignores significant distinctions," they "offer no legal authority for this conclusion," "present no binding authority," "is not persuasive," "is unavailing," "present no legal authority for the categorical exclusion of second-hand knowledge," "is seriously misplaced," "have not persuaded us otherwise," their "reliance on the lack of market reaction is misplaced," make unpersuasive "conclusory arguments" regarding "the confidential witnesses" "offer no authority," "cannot defend alleged material omissions by noting that their statements omitted the same information on which Plaintiffs' claims are based," and to top it all off, "we reject Defendants characterization of the case."
But that's just on the issues of on the issues of materiality, duty, safe harbor, bespeaks caution, particularity, confidential witnesses, loss causation, and scienter. This glass is half full, as Defendants did "correctly point out that it is not a violation of the securities laws to simply fail to . . . provide sufficient internal controls." Nice.
Result? Plaintiffs take near total victory on the motions.
You can read Marsden v. Select Medical, issued April 6, 2006, at 2006 U.S. Dist. LEXIS 16795.
Nugget: "Because we have found that Plaintiffs have identified actionable statements made earlier in the Class Period, we will not dismiss their claims based on post-Class Period statements."