Securities Fraud: Dura Pharmaceuticals, Inc. v. Broudo (CRS Report for Congress)
| Release Date |
Revised May 11, 2005 |
| Report Number |
RS22038 |
| Report Type |
Report |
| Authors |
Michael V. Seitzinger, American Law Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
On June 28, 2004, the United States Supreme Court granted certiorari in the case Dura
Pharmaceuticals, Inc. v. Broudo , appealed from the United States Court of Appeals for the Ninth
Circuit.
The case concerns allegedly false statements made by Dura to its shareholders concerning
development and marketing of two of its products: an asthma inhaler and asthma antibiotic.
Plaintiffs charge that the company knowingly defrauded investors by making overly optimistic
statements about product approval and company earnings.
The district court held that plaintiffs had not satisfied the requirements for bringing an antifraud
case under section 10(b) of the Securities Exchange Act of 1934. The court of appeals stated that
the district court erred in applying the federal law for pleading a securities fraud case and reversed
and remanded the judgment of the district court. The United States Supreme Court heard oral
argument on January 12, 2005. On April 19, 2005, the Supreme Court reversed the decision of the
circuit court and held that an accusation that a company's misrepresentations caused an
inflated share
price was insufficient as a basis for a lawsuit.
