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Dura Pharms., Inc. v. Broudo

Supreme Court of the United States

January 12, 2005, Argued ; April 19, 2005, Decided

No. 03-932

Opinion

 [*338]  [**1629]   Justice Breyer delivered the opinion of the Court.

A private plaintiff who claims securities fraud must prove that the defendant's fraud caused an economic loss. 109 Stat 747, 15 USC § 78u-4(b)(4)[15 USCS § 78u-4(b)(4)]. We consider a Ninth Circuit holding that a plaintiff can satisfy this requirement--a requirement that courts call "loss causation"--simply by alleging in the complaint and subsequently establishing that "the price" of the security "on the date of purchase was inflated because of the misrepresentation."  339 F.3d 933, 938 (2003) (internal quotation marks omitted). In our view, the Ninth Circuit is wrong, both in respect to what a plaintiff must prove and in respect to what the plaintiffs' complaint here must allege.

 [*339]  I

Respondents are individuals who bought [****6]  stock in Dura Pharmaceuticals, Inc., on the public securities market between April 15, 1997, and February 24, 1998. They have brought this securities fraud class action against Dura and some of [**1630]  its managers and directors (hereinafter Dura) in federal court. In respect to the question before us, their detailed amended (181 paragraph) complaint makes substantially the following allegations:

(1) Before and during the purchase period, Dura (or its officials) made false statements concerning both Dura's drug profits and future Food and Drug Administration (FDA) approval of a new asthmatic spray device. See, e.g., App. 45a, 55a, 89a.

(2) In respect to drug profits, Dura falsely claimed that it expected that its drug sales would prove profitable. See, e.g., id., at 66a-69a.

(3) In respect to the asthmatic spray device, Dura falsely claimed that it expected the FDA would soon grant its approval. See, e.g., id., at 89a-90a, 103a-104a.

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544 U.S. 336 *; 125 S. Ct. 1627 **; 161 L. Ed. 2d 577 ***; 2005 U.S. LEXIS 3478 ****; 73 U.S.L.W. 4283; Fed. Sec. L. Rep. (CCH) P93,218; 18 Fla. L. Weekly Fed. S 233

DURA PHARMACEUTICALS, INC., et al., Petitioners v. MICHAEL BROUDO et al.

Subsequent History: Motion granted by, in part, Motion denied by, in part In re Dura Pharms., Inc. Secs. Litig., 452 F. Supp. 2d 1005, 2006 U.S. Dist. LEXIS 41193 (S.D. Cal., June 2, 2006)

Prior History:  [****1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

Broudo v. Dura Pharms., Inc., 339 F.3d 933, 2003 U.S. App. LEXIS 15621 (9th Cir. Cal., 2003)

Disposition: Reversed and remanded.

CORE TERMS

misrepresentation, inflated, economic loss, causation, purchase price, proximate, plaintiffs', spray, purchaser, cases, private security, common-law

Antitrust & Trade Law, Sherman Act, Claims, Securities Law, Civil Liability Considerations, Securities Litigation Reform & Standards, General Overview, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Deceptive & Manipulative Devices, Blue Sky Laws, Offers & Sales, Torts, Fraud & Misrepresentation, Actual Fraud, Elements, Business Torts, Civil Procedure, Pleadings, Complaints, Requirements for Complaint, Pleading & Practice, Rule Application & Interpretation