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On April 19, 2005, the Supreme Court announced its unanimous opinion in Dura Pharmaceuticals, Inc. v. Broudo, concerning what a plaintiff must show to establish causation in a Rule 10b-5 fraud-on-the-market suit for damages. The opinion had been awaited with considerable anticipation, being described at the time of oral argument in the Financial Times, for example, as the "most important securities case in a decade." After the opinion was handed down, a representative of the plaintiffs' bar lauded it as a unanimous ruling protecting investors' ability to sue. A representative of the defendant's bar equally enthusiastically hailed it as "a significant victory for public companies and others named as defendants in securities fraud cases."

This Article seeks to ascertain the opinion's real significance. It addresses three basic questions. First, what issues have been definitively decided by the Court in Dura and what issues remain open to be decided in future cases. Second, to what extent is the reasoning used by the Court reaching its decision useful in determining how these open issues should be resolved. Third, how, from a policy point of view, should these open issues be resolved. As background for these three inquiries, the Article begins with a brief discussion of how, as a general matter, to understand causation in fraud-on-the-market cases. There is also a short history of the Dura litigation itself.


Law | Securities Law


©2005 by the American Bar Association. Reprinted with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.