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It has been over 15 years since the U.S. Supreme Court addressed
the pleading of loss causation in securities fraud cases.
In its 2005 decision in Dura Pharmaceuticals Inc. v. Broudo,
however, the court merely held that plaintiffs must plead and prove
a causal connection between any alleged misrepresentations and the
subsequent decline in the company s stock price.[1] It did not
address exactly how courts are supposed to assess if loss causation
has been adequately plead.
At a time when many securities class actions are based on
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Loss causation – the causal connection between a
defendant s fraudulent conduct and a plaintiff s economic
loss – is a required element of a federal securities fraud
claim.
1 A typical securities class action is brought on
behalf of investors who contend they purchased a company s
stock in reliance on corporate misstatements. The investors allege
that they purchased their shares at a price artificially inflated
by the misstatements, and then suffered damage when the truth about
the misstatements was revealed to the market and the stock price
dropped.
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The massive data breach of the United States Commerce and Treasury Departments that has roiled the federal government has resulted in federal securities litigation. On January 4, 2021, Plaintiff-Shareholder Timothy Bremer filed a class action complaint against SolarWinds and SolarWinds’ corporate executives in the United States District Court for the Western District of Texas. SolarWinds provides information technology and infrastructure management software products to entities around the globe, including to various U.S. government vendors in the executive branch, military, and intelligence services. According to the complaint, Russian hackers gained access to government email traffic by deceptively interfering with software updates released by SolarWinds. The complaint alleges that SolarWinds violated federal securities law by making false and/or misleading statements and failing to disclose material facts regarding Sol