Last month, the 6th Circuit joined the majority view recognizing the "materialization of the risk" theory of loss-causation as an alternative to "corrective-disclosure" in securities litigation under Rule 10b-5.
The Public Securities Litigation Reform Act ("PSLRA") and federal jurisprudence (Tw-Iqbal) require pleading specific factual allegations of each element of Rule 10b-5 claim, including loss-causation (a proximate causal relationship between not merely the alleged misrepresentation or omission and the transaction, but also the plaintiffs' loss). Dura-Pharm
The US Sixth Circuit last week narrowed its standard for adequately pleading scienter in PSLRA cases using a collective-knowledge theory to impute knowledge to a corporate defendant from among various employees. In Omnicare, the Court limited collective-knowledge scienter by imposing the helpful, but unremarkable, requirement that such a pleading demonstrate a reasonably close connection between the collectively-held-knowledge and the issuance of the misstatement (or decision not to correct a prior omission). In re Omnicare, Inc. Securities Litigation, No. 13-5597 (6th
In 1995, the Private Securities Litigation Reform Act ("PSLRA") was passed to limit frivolous and unwarranted securities lawsuits. 15 U.S.C. §78u-4. While private securities litigation is an indispensable tool in which defrauded investors can recover their losses, such litigation has led to nuisance filings, targeting of deep-pocket defendants, and vexatious discovery requests in attempts to, among other things, extort large settlements. See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006). To combat these actions, the PSLRA changed the pleading ...