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The Loss Causation Requirement for Rule 10b-5 Causes-of-Action: The Implication of Dura Pharmaceuticals v. Broudo


Allen Ferrell


Harvard Law School; European Corporate Governance Institute (ECGI)

Atanu Saha


Compass Lexecon

August 2007

Harvard Law and Economics Discussion Paper No. 596

Abstract:     
In order to have recoverable damages in a Rule 10b-5 action, plaintiffs must establish loss causation, i.e. that the actionable misconduct was the cause of economic losses to the plaintiffs. The requirement of loss causation has come to the fore as the result of the Supreme Court's landmark decision in Dura Pharmaceuticals v. Broudo. We address in this paper a number of loss causation issues in light of the Dura decision, including issues surrounding the proper use of event studies to establish recoverable damages, the requirement that there be a corrective disclosure, what types of disclosure should count as a corrective disclosure, post-corrective disclosure stock price movements, the distinction between the class period and the damage period, collateral damage caused by a corrective disclosure, and forward-casting estimates of recoverable damages.

Number of Pages in PDF File: 26

Keywords: Securities damages, Dura, Dura Pharmaceuticals, Broudo, securities litigation, Rule 10b-5, event study, securities regulation, loss causation

JEL Classification: K22, K42

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Date posted: August 16, 2007  

Suggested Citation

Ferrell, Allen and Saha, Atanu, The Loss Causation Requirement for Rule 10b-5 Causes-of-Action: The Implication of Dura Pharmaceuticals v. Broudo (August 2007). Harvard Law and Economics Discussion Paper No. 596. Available at SSRN: http://ssrn.com/abstract=1006088 or http://dx.doi.org/10.2139/ssrn.1006088

Contact Information

Allen Ferrell (Contact Author)
Harvard Law School ( email )
Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Atanu Saha
Compass Lexecon ( email )
New York, NY
United States
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