While the Supreme Court’s 2005 decision in Dura Pharmaceuticals, Inc. v. Broudo in 2005 is the leading decision on loss causation, it did not clarify what a party must do to plead loss causation. The Ninth Circuit Court of Appeals’ recent decision (Oregon Public Employees Retirement Fund v. Apollo Group Inc.) lends support to raising the pleading standard for securities fraud actions.
According to Pillsbury Law, after the Supreme Court decision, federal courts struggled to answer what the Supreme Court did not.
“The Fifth Circuit concluded that Rule 8 applies. The Fourth and Seventh Circuits concluded that Rule 9(b) applies. The First Circuit — and, until now, the Ninth Circuit — ducked the issue. And the Second Circuit developed a two-part standard of its own grounded in neither rule.
“Now the Ninth Circuit has cast its lot with the Fourth and Seventh Circuits, holding that the higher Rule 9(b) standard applies to allegations of loss causation and indeed to all elements of a 10b-5 claim.”
Per Pillsbury, judges have been increasingly receptive to challenges to the link between alleged fraud and alleged harm. The Ninth Circuit’s decision will assist defendants in submitting these very challenges.