Dura No Help to Sears

The Sears securities class action was filed in 2003, but we’re still dealing with motions to dismiss.The third round of them actually.This time, it’s all about (our old friend) loss causation, with Judge Rebecca R. Pallmeyer (N.D. Ill.) taking on the Defendants’ Dura arguments — and pretty much shooting them all down.As she put it, “to the extent Defendants suggest that Dura imposed stricter fact-pleading requirements for the economic loss and causation elements of an action under §10(b), Defendants are mistaken.”

Judge Pallmeyer also commented that “Defendants’ arguments are inconsistent,” and “more importantly, however, the kind of specificity the Defendants seek is simply not required at the pleading stage.”

You can read Ong v. Sears, issued October 18, 2006 at U.S. Dist. LEXIS 80294.

Nugget: “Dura has not abrogated Caremark or changed the law in the Seventh Circuit.”

Two Little Birds, One Big Stone

Judge Lance M. Africk (E.D. La.) (George W., Class of ’02) combined his rulings on the motions to dismiss the US Unwired securities class action and the derivative case. You see, after tossing the derivative case on a standing issue, it all came down to safe harbor and loss causation, with Judge Africk first finding that “beyond the blanket assertion by plaintiff that defendants knew that these statements were false when they were made, the Court can find no other suggestions of this alleged fraud.”

As for Dura, chalk this one up for the defense, as Judge Africk held that the Amended Complaint’s “Truth Begins to Emerge,” section “failed to detail the statements made during the class period that would have revealed the truth about defendants’ alleged misrepresentations and shown these misrepresentations to be the proximate cause of plaintiff’s losses.”

So that’s it, right? Well, maybe not, as the dismissal was entered without prejudice. Remains to be seen if Plaintiffs will take another shot and amend.

You can read Romero v. US Unwired, issued August 11, 2006, at 2006 U.S. Dist. LEXIS 60589.

Nugget: “To establish the requisite causation, the truth regarding a defendant’s putative misrepresentations must come to light.”

Tell it to the Jury Guys

It’s been a while since I wrote about Dura (O.K., all-right, or anything at all – that was a cheap shot by the way), as my fingers were tiring from reporting on all those failed motions to dismiss, and my intracranial pressure was at dangerous levels from reading one-too-many defense oriented articles about how Dura changed the world (when, unless you’ve eaten some magic mushrooms, which I hear are quite delicious, it changed virtually nothing except you can no longer allege price inflation by itself – a result that’s completely logical to me).

Anyway, a new Dura opinion has been issued by Judge Michael M. Baylson (E.D. Penn) (George W. Bush, Class of ‘02) (pictured), and it’s a must-read for you loss causation groupies. In a nutshell, Judge Baylson told the Defendants that couldn’t have summary judgment based on Dura, but they could ask a jury to decide the issue instead. Gee, thanks a lot, just what we need here at CIGNA, a jury of our “peers.”

So, after sorting out the battle of the experts, Judge Baylson held “that (1) Dura Pharmaceuticals does not compel a fundamental change in the way this Court should analyze proof of economic loss; (2) at this time it is not be appropriate to adopt the investment model advanced by Defendants to measure economic loss under the federal securities laws; (3) one of several methods used by courts prior to Dura Pharmaceuticals to analyze and quantify economic loss and damages is a transaction-based methodology; (4) applying that methodology, SERS has a viable claim for economic loss based on particular shares held at the end of the class period; and (5) there are disputes of material fact related to economic loss and damages that make summary judgment particularly inappropriate; and (6) a jury should be permitted to make relevant factual determinations for the purposes of calculating damages.”

So the Nugget lives. It’s good to be back.

You can read In re Cigna, issued August 18, 2006, at 2006 U.S. Dist. LEXIS 59915.

Nugget: “Granting summary judgment on the present record would deprive the Plaintiffs of their constitutional right under the Seventh Amendment to have a jury decide all issues concerning the award of damages.”

Defeat Snatched from Jaws of Victory

So, “for the reasons set forth below, the Court grants Defendants’ request to reconsider its previous opinion.” Hooray! Pop that cork, and let’s get me some bubbly! What… wait… what’s that? What do you mean he’s not finished? Uh, sorry, but you forgot to read the other part, the one that says “but denies the relief requested as the newly considered case law does not alter the Court’s prior decision.”

Bet they kind of feel like this kid, don’t you think? Anyway, it’s our old friend Dura in play here, and this time it has Judge Dennis M. Cavanaugh (D. N.J.) (Clinton Class of ‘00) observing in the Sealed Air action that he “would have to address many issues of fact to make a determination of whether Plaintiff has established loss causation,” but “the Court is prohibited from making these determinations at this point in the litigation.”

You can read Senn v. Hickey, issued July 10, 2006, at 2006 U.S. Dist. LEXIS 46332.

Nugget: “Again, this decision does not mean Defendants may not later prove Plaintiff failed to establish loss causation. The Court is only stating that it would be improper to make a ruling on this issue during a motion to dismiss.”

Revenge of the Dura

Looks like Plaintiffs’ newly minted complaint in the Dura case is back in the District Court after winding it’s way up to the Supremes and back. In ruling on the motions to dismiss (surprise, surprise, loss causation is the main issue), Judge M. James Lorenz (S.D. Cal.) (Clinton ‘99) commented that, “there is some appeal to requiring a corrective disclosure to occur at the end of the class period,” but such “a rule requiring the corrective disclosure to immediately follow the end of the Class Period would ensure such purchasers’ interests are protected. Nevertheless, the Court finds the authority Defendants cite insufficient to impose such a requirement.”

That’s because “when presented with this case, the Supreme Court could have held that as a matter of law Plaintiffs cannot establish loss causation because the corrective disclosures regarding Albuterol Spiros were made several months after the Class Period ended. The Supreme Court did not so hold, and instead only required the Plaintiffs to properly allege a causal connection between the economic losses suffered and the Defendants’ misrepresentations.”

Result? Motion to dismiss granted in part and denied in part. Leave to amend granted.

You can read In re Dura, issued June 2, 2006, at 2006 U.S. Dist. LEXIS 41193.

Nugget: “The Supreme Court’s decision did not create a heightened pleading standard for loss causation: the Court noted its holding did not affect Rule 8(a)(2)’s applicability.”

Too Many Gaps

It seems the “fundamental problem with Plaintiffs’ allegations” in the Gilead securities class action is “that they require the Court to make the unreasonable inference that a public revelation on August 8 caused a price drop three months later on October 28.” In other words, as Judge Martin J. Jenkins (N.D. Cal.) continued, “there are too many logical and factual gaps in Plaintiffs’ allegations to support the conclusion that Defendants’ alleged misconduct proximately caused Gilead’s stock decrease in October.”

So, since “there was no price drop immediately after the August 8 revelation,” and “Plaintiffs have failed to remedy the deficiencies of their allegations in each amended version, the Court finds that further amendment is futile. Accordingly, the Court dismisses the Complaint with prejudice.”

You can read In re Gilead, issued May 12, 2006, at 2006 U.S. Dist. LEXIS 32893.

Nugget: “Indeed, the evidence Plaintiffs have presented to the Court only supports an inference that the market gave little or no weight to the FDA Warning Letter.”

Judge Keeps Tire Company Action Rolling

Well, now that the Bridgestone securities class action is back from the Sixth Circuit, it has Judge Robert L. Echols (M.D. Tenn.) pondering some loss causation issues. You see, the complaint was drafted back in 2001, long before Dura, so it “alleges similarly to Dura:” Blah, blah, blah. Oh, sorry, it alleges that “class members were damaged in reliance on the integrity of the market” because “they paid artificially inflated prices for Bridgestone’s stock and ADRs.”

Uh-oh, right? Well, no, because “even so, Plaintiff alleges elsewhere in the Consolidated Complaint that the value of Bridgestone shares dropped significantly in September 2000, shortly after she bought one ADR, as a direct result of additional negative information about Bridgestone and Firestone that made its way into the marketplace.”

So, “this distinguishes Plaintiff’s case from Dura” “because Plaintiff does allege that Bridgestone’s share price fell in September 2000 as the true severity of problems with ATX tires surfaced and Plaintiff does connect the alleged fraud with the ultimate disclosure and loss.”

You can read In re Bridgestone, issued May 3, 2006, at 2006 U.S. Dist. LEXIS 28745.

Nugget: “Here, Plaintiff has alleged the share price drop and tied it directly to the market’s acknowledgment of Bridgestone’s and Firestone’s prior alleged misrepresentations.”

Where’s Kevorkian When You Need Him?

Well, it took eleven years, but it looks like the Jasmine securities class action is finally over. Originally filed in November 1994, it appears Plaintiffs were practically begging the Court to put an end to their seemingly endless suffering. You see, after last June’s partial summary judgment dismissal (Ho, Ho, Ho, Who’s Laughing Now?), Defendants swooped in with five more summary judgment motions to finish off more of the claims. On December 20, 2005, Judge Robert B. Kugler (D.N.J.) noted that “Plaintiffs did not oppose the motions, opting instead to file a brief conceding that loss causation is the rule of the case and that the lack of loss causation entitled Defendants to summary judgment.” Judge Kugler then granted the motions and ordered “the parties to submit a statement advising the Court of any unresolved claims against any Defendants.” Plaintiffs complied, and at the same time “moved to amend/correct the December 20, 2005, Judgment to grant summary judgment on all remaining claims.” Please Your Honor, please.

So you’d think that would be it, but noooooo, Judge Kugler “denied Plaintiffs’ Motion to Amend/Correct.” Why you ask? Because they failed “to identify any errors in the Court’s Order of December 20, 2005.” What do we have to do to get rid of this thing? Anyway, the last group of Defendants then moved for summary judgment again to euthanize Plaintiffs, who then “instead of filing an Opposition” merely adopted and incorporated their earlier response “conceding Andersen’s entitlement to summary judgment.”

This time Plaintiffs got their wish, with Judge Kugler throwing out the rest of the case for the same loss causation reasons he did nearly a year ago.

Whew.

You can read McKown v. Jasmine, issued May 5, 2006, at 2006 U.S. Dist. LEXIS 27860.

Nugget: “Where the market never obtains information, it must be the case that factors other than that information are the sole cause of plaintiffs’ loss.”

Both Sides Win, Both Sides Lose

Many of you surely remember reading in the Nugget last October about how Judge Marilyn Hall Patel (N.D. Cal.) called everyone down to the courthouse and basically advised Defendants to file answers instead of motions to dismiss in the Cornerstone securities class action. Well, now we are at the class certification stage, and Judge Patel has issued her ruling. In it, she finds that “Defendants’ assertion that Lead Plaintiff and the named representatives are atypical and inadequate as class representatives because of Lamphere’s [he’s a class rep] purported non-reliance on the CornerStone financial statements, the possibility of a statute of limitations defense, and the existence of potential intra-class conflicts is not supported by the relevant caselaw.” However, “pursuant to the Supreme Court’s holding in Dura, the Class may not include individuals who purchased and sold CornerStone stock prior to any corrective disclosure by the company.”

Result this time? “Plaintiff’s motion for class certification is granted, subject to an amendment of the Class definition to exclude plaintiffs who purchased and sold their stock prior to any corrective disclosure in July 2001.”

So — not a total loss for Defendants by any means, as Plaintiffs proposed class period reached back to July 1998.

You can read In re Cornerstone Propane Partners, issued May 3, 2006, at 2006 U.S. Dist. LEXIS 25819.

Nugget: “Statute of limitations defenses for named plaintiffs are not a bar to class certification for securities fraud.”

Ouch

Seems like that document preservation Order the Nugget reported on back in January might not matter much now. That’s because Plaintiffs have suffered (yet more) pain from Judge William L. Standish (W.D. Pa.) (pinch hitting for Judge Arthur J. Schwab) in the IT Group securities class action. The nearly one-and-a-half pound decision (literally — it’s 100 pages), eliminates all of Plaintiffs’ claims with prejudice, and observes that this “third version” of the complaint was “developed over a period of more than four years, and based upon evidence gleaned from an on-going bankruptcy proceeding from which Plaintiffs have received documentary and deposition evidence not usually available to typical securities fraud class plaintiffs.”

But Judge Standish said that in his “previous opinion” he “pointed out precisely the shortcomings in pleading scienter for the individual Defendants, advice which Plaintiffs either failed to follow or are unable to allege with the particularity required by the PSLRA.” In addition, “Plaintiffs have made allegations related to loss causation which are not merely offered in the alterative, but are self-contradictory, a defect which is fatal to their claims.”

Possible appeal? The Nugget thinks so.

Looking back: Loyal Nuggets will likely remember this article, a definite classic, where Judge Standish refused to appoint local counsel.

You can read Payne v. DeLuca, issued May 2, 2006, at 2006 U.S. Dist. LEXIS 25621.

Nugget: “Plaintiffs attempt, it appears, to plead their case by successive approximation, asking Defendants and the Court to point out shortcomings which they then assert they will ‘fix.’ This is not an acceptable method of pleading one’s case in federal court.”