LIABILITY IN SECURITIES FRAUD ACTIONS: Part XIX: The Impact of Dura

The Dura decision has had a significant impact on securities damage actions beginning with what is required to plead a cause of action.  Following the decision, one question which emerges is the pleading standards.  Some courts adopted the language in the opinion discussing the notice pleading requirements of Rule 8, while others have required more.  For example, in In re OmniVision Technologies, 2005 WL 1867717 (N.D. Ca. July 29, 2005), the court held that an allegation sufficient which states only that “Plaintiffs purchased OmniVision securities at artificially inflated prices and suffered damages when revelation of the true facts causes a decline in the value of their shares.”  Other courts have suggested however, that at least “some minimal details” be pled, without specifying just how much more.  See, e.g., In re UnumProvident Corp. Sec. Litig., 2005 WL 2206727 (E.D. Tenn. Sept. 12, 2005).  Some courts have required plaintiffs to plead with “specificity.”  For example in Teachers’ Retirement System of LA v. Hunter, 477 F.3d 162 (4th Cir. 2007), the court held that while Rule 9(b) “particularity” was not required, there should be something more than the minimal requirements of Rule 8(a).  Noting that loss causation as required by the PSLRA is an “averment of fraud,” the court stated that a strong argument can be made that it must be pled with particularity.  The court went on to note that “we conclude that a plaintiff purporting to allege a securities fraud claim must not only prove loss causation … but he must also plead it with sufficient specificity to enable the court to evaluate whether the necessary causal link exists.”