High Court to Weigh Standard for Fraud
The Supreme Court agreed Monday to consider the standard for proving securities fraud, in a case involving a maker of asthma and allergy medicines.
The stock of Dura Pharmaceuticals Inc., a unit of Ireland’s Elan Corp., plummeted 47% in one day after the company announced in February 1998 that it expected lower revenue because of slower-than-expected sales of the antibiotic Ceclor CD.
People who bought stock before the announcement sued, accusing the company of misleading them about sales of the drug and the development of a separate medical device.
A judge dismissed the lawsuit, but the 9th U.S. Circuit Court of Appeals reinstated it. At issue in the appeal is the standard for stock owners to prove that they suffered a loss.
The Bush administration had urged the Supreme Court to consider the matter, saying that about 190 such cases are filed each year.
The Securities Industry Assn. is supporting the appeal, saying securities firms should “not be converted into guarantors that investments will be successful.â€
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