Dura Pharmaceuticals, Inc. v. Broudo

Facts

1. 10 Actual economic loss in private damages action not pleaded

   (6) About eight months later (in November 1998), Dura announced that the FDA would not approve Dura’s new asthmatic spray device. Id., at 110a.

2. 10 Actual economic loss in private damages action not pleaded

   (7) The next day Dura’s share price temporarily fell but almost fully recovered within one week. Id., at 156a.

3. 10 Actual economic loss in private damages action not pleaded

   Most importantly, the complaint says the following (and nothing significantly more than the following) about economic losses attributable to the spray device misstatement: “In reliance on the integrity of the market, [the plaintiffs] . . . paid artificially inflated prices for Dura securities” and the plaintiffs suffered “damagefs]” thereby. Id., at 139a (emphasis added).

4. 10 Actual economic loss in private damages action not pleaded

   Normally, in cases such as this one (i. e., fraud-on-the-market cases), an inflated purchase price will not itself constitute or proximately cause the relevant economic loss.

5. 10 Actual economic loss in private damages action not pleaded

   For reasons set forth in Part II-A, supra, however, the “artificially inflated purchase price” is not itself a relevant economic loss.

6. 11 Causal connection between fraud and economic loss not pleaded

   (4) On the last day of the purchase period, February 24, 1998, Dura announced that its earnings would be lower than expected, principally due to slow drug sales. Id., at 51a.

7. 11 Causal connection between fraud and economic loss not pleaded

   (5) The next day Dura’s shares lost almost half their value (falling from about $39 per share to about $21). Ibid.

8. 11 Causal connection between fraud and economic loss not pleaded

   To “touch upon” a loss is not to cause a loss, and it is the latter that the law requires.

9. 11 Causal connection between fraud and economic loss not pleaded

   The complaint’s failure to claim that Dura’s share price fell significantly after the truth became known suggests that the plaintiffs considered the allegation of purchase price inflation alone sufficient.

10. 11 Causal connection between fraud and economic loss not pleaded

    And the complaint nowhere else provides the defendants with notice of what the relevant economic loss might be or of what the causal connection might be between that loss and the misrepresentation concerning Dura’s “spray device.”