U.S. Supreme Court Rules Unanimously In Favor Of Dura Pharmaceuticals Inc.

April 21, 2005

Decision Sets New Standard for Plaintiff Lawsuits

Washington, DC (April 21, 2005) - - In a landmark securities litigation case, the U.S. Supreme Court yesterday ruled in favor of Dura Pharmaceuticals Inc. - a decision that marked a significant legal victory for publicly-held companies. Paul, Hastings, Janofsky & Walker LLP (Paul Hastings) partner William Sullivan represented Dura before the Supreme Court during oral arguments in January.

The Dura decision addresses important legal questions regarding the issue of loss causation in securities litigation: can a securities fraud plaintiff sue a company by pleading that the purchase of stock at an inflated price, due to a misrepresentation, affected the stock's value without also pleading that a corresponding decline in price is attributable to a subsequent corrective disclosure in the market.
Paul Hastings attorney William Sullivan said, "This was a landmark ruling by the Supreme Court. It provides defendants in securities lawsuits an important tool to avoid expensive and unmeritorious cases. With a controlling decision from the Supreme Court, a new and consistent standard has been set for any plaintiff wishing to sue a public company."

Specifically, the Dura case examined what a plaintiff needs to plead and prove in order to make a claim of loss causation. Dura shareholders filed class action suits to claim damages for a loss in stock value that preceded an announcement regarding an asthma drug delivery system that failed to win FDA approval. The suit was dismissed on two previous occasions in California federal district court, with the court holding that plaintiffs had not pled a share price decline (loss) associated with the asthma device's failure to win approval. The Ninth Circuit Court of Appeal reversed, setting the stage for the Supreme Court arguments and subsequent ruling.

Almost a decade ago, Congress passed the Private Securities Litigation Reform Act designed specifically to limit the number of meritless shareholder suits against corporations whose stocks dropped for legitimate reasons. The loss causation requirement was part of the Reform Act's statutory scheme, thus laying the groundwork for its application in the Dura case.

Dura Pharmaceuticals was a San Diego based specialty pharmaceutical company that markets and sells prescription products that treat infectious diseases, respiratory conditions and dermatological conditions. In 2001, Dura merged with and into Elan Pharmaceuticals, Inc.

Paul, Hastings, Janofsky & Walker LLP, founded in 1951, is an international law firm, representing Fortune 500 companies with more than 1,000 attorneys located in 17 offices: Atlanta, Beijing, Brussels, Hong Kong, London, Los Angeles, Milan, New York, Orange County, Palo Alto, Paris, San Diego, San Francisco, Shanghai, Stamford, Tokyo and Washington, DC.