April 29, 2005

The Supreme Court Toughens the Requirements for Private Securities Fraud Claims

Arnold & Porter Advisory

In its April 19, 2005 decision in Dura Pharmaceuticals, Inc. v. Broudo, No. 03-932, the United States Supreme Court established a clear and unambiguous boundary for claims under Section 10(b) of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder. The Court addressed the minimum requirements for the loss causation element of that claim, rejecting the rule adopted in the Ninth Circuit that it is sufficient that the price of the security was allegedly inflated when the security was purchased. Writing for the Court, Justice Breyer reminded the lower courts that the purpose of private securities fraud actions is to deter fraud in order to maintain the "public confidence in the marketplace."


John A. Freedman
John A. Freedman
Senior Pro Bono Counsel
Washington, DC
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