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.” 

A second question concerned whether Dura represented the only way in which loss causation could be established.  Some court have held that Dura only established what is not sufficient, not what standard must be met.  See, e.g., In re Initial Pub. Offering Sec. Litig., 2005 WL 1529569 (S.D. N.Y. June 28, 2005); In re The Warnaco Group, Inc. Sec. Litig., 388 F. Supp. 2d 37 (S.D.N.Y. 2005);  In re Coca-Cola Enterprises, Inc., Sec. Litig., 207 WL 472943 (N.D.Ga. Feb. 7 2007); Marsden v. Select Medical Corp., 2007 WL 1725204 (E.D. Pa. June 12, 2007).  Others have held that there are theories beyond DuraSee, e.g., Ray v. Citigroup Global Markets, Inc., 482 F.3d 991 (7th Cir. 2007).  Indeed, the Ray court concluded that there are three ways to establish loss causation. 

(1)  Fraud on the market.  This is the standard used in Dura.  It requires proof of an artificial price and a decline in value when the truth is revealed. 

2)  Materialization of risk.  This standard requires plaintiff to prove that “it was the very facts about which the defendant lied which caused its injuries.”  

3)  Representation that the investment is risk free.  This theory requires an explicit representation that the investment is risk free.  

See also Glover v. Deluca, 2006 WL 2850448 (W.D. Pa. Sept. 29, 2006) (noting that there are two methods of establishing loss causation). 

Next:  The application of specific theories.