How Dura will curb US securities class actions

Author: | Published: 1 Jun 2005

Public companies whose shares are traded in the US stock markets are now better prepared to defend themselves against class action lawsuits alleging securities fraud. For decades, federal securities class action lawsuits have burdened the US federal court system and imposed heavy costs on corporations who have been forced to defend themselves against general market declines resulting from factors unrelated to fraudulent conduct.

On April 19 2005, the US Supreme Court, in the case of Dura Pharmaceuticals, Inc et al v Michael Broudo, issued a unanimous landmark decision in securities fraud litigation, setting the threshold a shareholder must meet before suing companies to recoup for stock losses in the US securities markets. The decision overturned a 2003 ruling by the Court of Appeals for the Ninth Circuit, which had permitted a class-action lawsuit to proceed against Dura Pharmaceuticals for losses that the plaintiffs said were the result of misstatements about the prospects for government approval of a new spray...