Thursday, November 7, 2013

Dura Pharmaceuticals, Inc. v. Michael Broudo case brief

Dura Pharmaceuticals, Inc. v. Michael Broudo case brief summary
544 U.S. 336 (2005)

Respondent purchasers of stock in a corporation sued petitioners, the corporation and corporate officials, alleging that a misrepresentation by petitioners caused the stock price to be artificially inflated. Upon the grant of a writ of certiorari, petitioners challenged the judgment of the U.S. Court of Appeals for the Ninth Circuit which held that the purchasers sufficiently pleaded loss causation as required by 15 U.S.C.S. § 78u-4(b)(4).

The purchasers alleged that petitioners falsely stated that the corporation's pharmaceutical spray device would receive federal approval, and the purchasers also alleged that they suffered damages based on the artificially inflated price of the corporation's stock which resulted from the misrepresentation.

The U.S. Supreme Court held that the purchasers' allegation that the price of the stock on the date of purchase was inflated because of the misrepresentation was insufficient by itself to establish the loss causation required by § 78u-4(b)(4).


  • At the time of purchase, the purchasers suffered no loss since at that instant the stock price was in fact the value of the stock, and it was not necessarily true that any subsequent decline in the value of the stock was caused by the artificially inflated price rather than other factors. 
  • Further, the purchasers' complaint nowhere provided petitioners with notice of what the relevant economic loss might have been or of what the causal connection was between that loss and the misrepresentation concerning the spray device.


The judgment upholding the loss causation element of the purchasers' securities fraud claim was reversed, and the case was remanded for further proceedings.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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