Dura Pharmaceuticals, Inc. v. Broudo

In Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 125 S. Ct. 1627, 161 L. Ed. 2d 577 (2005), the plaintiffs brought a securities fraud class action and, in alleging their economic losses, stated only that they had, "'in reliance on the integrity of the market, . . . paid artificially inflated prices for Dura securities.'" Id., at 340, 125 S. Ct. at 1630. The Ninth Circuit determined the "plaintiffs need only 'establish,' i.e., prove, that 'the price on the date of purchase was inflated because of the misrepresentation.'" Id. at 342, 125 S. Ct. at 1631. The Supreme Court reversed the Ninth Circuit, ruling that "an inflated purchase price will not itself constitute or proximately cause the relevant economic loss." Id. The Dura Court stated the Ninth Circuit rule was "inconsistent with the law's requirement that a plaintiff prove that the defendant's misrepresentation (or other fraudulent conduct) proximately caused the plaintiff's economic loss." Id. at 346, 125 S. Ct. at 1633-34. And, the Court said, it "need not, and did not, consider other proximate cause or loss-related questions." Id. In Dura, 544 U.S. at 344, 125 S. Ct. at 1633, the Supreme Court referred to comment b to 548A of the Restatement (Second) of Torts (1977), which addresses the "legal causation of pecuniary loss" and states, in part: One who misrepresents the financial condition of a corporation in order to sell its stock will become liable to a purchaser who relies upon the misinformation for the loss that he sustains when the facts as to the finances of the corporation become generally known and as a result the value of the shares is depreciated on the market.