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The Importance of a Causation “Defense” In Post-Credit Crisis Investment Litigation

by Gregory Beaman
Cadwalader, Wickersham & Taft LLP - New York Office

Jason M. Halper
Cadwalader, Wickersham & Taft LLP - New York Office

December 27, 2013

Previously published on December 23, 2013

Nearly a decade ago, the United States Supreme Court in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 345 (2005), emphasized that a securities fraud suit is not an investor’s insurance policy against market losses. As courts continue to address the fallout from the financial crisis that began in 2007, the Court’s admonition is alive and well, and frequently appearing in decisions addressing claims under § 10(b) of the Securities Exchange Act of 1934 and common law claims involving structured products such as mortgage-backed securities. Just recently, two federal courts observed in the § 10(b) context that “[t]he securities laws are not an insurance policy for investments gone wrong, inexperience, bad luck, poor choices, or unexpected market events,” nor are they “a prophylaxis against the normal risks attendant to speculation and investment in the financial markets.”


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