Supreme Court of the United States · 2005-04-19
Case and law context
Role: applied; posture: private damages; Rule 12(b)(6); review limited to spray-device misrepresentation and pleaded economic loss/causation; result: claimant-lost; claim:
Instances and excluded annotation blocks
| Case | Element | Holding and scope | Variant | Exact source quotations |
|---|---|---|---|---|
| /us/544/0336-01 — Supreme Court of the United States · 2005 | Actual economic loss in private damages action | not Counted merits instance applied / merits basis: pleaded; count: spray-device claim; subject: count=spray-device claim Inflation is plaintiffs' asserted injury, hence supports polarity for that allegation; the Court rejects its legal sufficiency. The temporary price drop followed by recovery is counterevidence, not an allegation of lasting loss. | purchase-inflation/spray-device | (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.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [2000:2143] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.(7) The next day Dura’s share price temporarily fell but almost fully recovered within one week. Id., at 156a.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [2144:2254] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.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).Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [2255:2629] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.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.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [6860:7034] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.For reasons set forth in Part II-A, supra, however, the “artificially inflated purchase price” is not itself a relevant economic loss.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [16499:16633] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075. |
| /us/544/0336-01 — Supreme Court of the United States · 2005 | Causal connection between fraud and economic loss | not Counted merits instance applied / merits basis: pleaded; count: spray-device claim; subject: count=spray-device claim The large February decline concerned earnings/drug sales; the November spray-device disclosure was different. Neither purchase inflation alone nor the unrelated earnings decline pleads the necessary causal loss. | purchase-inflation/no-loss-link | (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.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [1710:1884] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.(5) The next day Dura’s shares lost almost half their value (falling from about $39 per share to about $21). Ibid.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [1885:1999] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.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.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [16237:16442] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.To “touch upon” a loss is not to cause a loss, and it is the latter that the law requires.Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [8927:9017] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.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.”Source: docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [16634:16864] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075. |
Court interpretations recorded from this case
interpretation
(3) a connection with the purchase or sale of a security, see Blue Chip Stamps, supra, at 730-731;
/us/544/0336-01 — Supreme Court of the United States · 2005
(3) a connection with the purchase or sale of a security, see Blue Chip Stamps, supra, at 730-731;Source:
docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [5661:5759] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.Statutory transaction connection is shared across postures and includes the alternative security-based-swap-agreement branch. Purchaser/seller standing is a separate private-only requirement, not the meaning of this nexus. The source's subsection (b) says securities-based, while its concluding extension says security-based; both spellings are preserved.
interpretation
(4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as “transaction causation,” see Basic, supra, at 248-249 (nonconclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence);
/us/544/0336-01 — Supreme Court of the United States · 2005
(4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as “transaction causation,” see Basic, supra, at 248-249 (nonconclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence);Source:
docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [5760:6153] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.Private plaintiff must connect the deceptive statement to the investment decision, subject to applicable rebuttable presumptions. Xia Bi addresses direct reliance in EB-5 investments; do not universalize that factual route into a rule excluding fraud-on-the-market reliance.
interpretation
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.
/us/544/0336-01 — Supreme Court of the United States · 2005
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.Source:
docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [6860:7034] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.The private remedy requires economic loss, unlike the core SEC violation. Mere payment of an inflated purchase price does not itself establish the loss identified in Dura.
interpretation
To “touch upon” a loss is not to cause a loss, and it is the latter that the law requires.
/us/544/0336-01 — Supreme Court of the United States · 2005
To “touch upon” a loss is not to cause a loss, and it is the latter that the law requires.Source:
docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [8927:9017] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.Distinguish loss causation from reliance/transaction causation. Identify loss caused by the fraud rather than unrelated market or business developments; Dura does not require one particular form of corrective disclosure.