KMK Law Complex Litigation Blog

Everyone practicing in this area knows that over the past several years, hundreds of "stock drop" class action complaints have been filed around the country against virtually every public company and financial institution — whether they survived the worst economic crisis since the Great Depression or not. If you want to get a better handle on the "stock drop" securities and ERISA cases, go to the D & O Diary where blogger Kevin LaCroix has compiled several charts and tables and continuously monitors the progress of the cases.

If you have had to defend one of these cases, as our firm has, you have to appreciate the opening paragraph of the Sixth Circuit's recent "stock drop" opinion:

Seizing on a few vague statements from management, the plaintiffs try to turn bad corporate news into a securities class action.

Because the Private Securities Litigation Reform Act ("PSLRA") forbids such alchemy, we generally affirm the district court's dismissal ...

Indiana State District Council of Laborers and Hod Carriers Pension and Welfare Fund v. Omnicare, Inc., et al., 2009 U.S. App. Lexis 23084, *1-2 (6th Cir. Oct. 21, 2009).

The Sixth Circuit reversed the district court's dismissal of Plaintiffs' Section 11 claims because the district court erroneously dismissed due to a lack of loss causation — but in remanding the case, the Sixth Circuit ruled that Plaintiff's Section 11 claims, which sounded in fraud, must be pled with the specificity required by Rule 9(b), not simple notice pleading under Rule 8(a). Id. at **28-29. The Omnicare court considered and rejected several plaintiffs' arguments common in "stock drop" litigation.