Nos. 96 Civ. 3610 (JFK), 96 Civ. 3611 (JFK).
November 22, 2005
MEMORANDUM OPINION and ORDER
Defendants move for reargument of the Court's August 30, 2005 Opinion and Order, which granted Plaintiffs' motion for partial reconsideration of the Court's February 8, 2005 Order. The dispute is over the negative causation defense in Section 11(e) of the Securities Act of 1933 ("1933 Act"). The Court already has considered this issue not once but twice. For the reasons that follow, the motion is denied.
Defendants offer five arguments in support of their contention that the Court erred in granting Plaintiffs' motion for partial reconsideration. First, Defendants claim that the Court failed to consider judicial admissions in Plaintiffs' July 25, 2005 letter to the Court. As the Court stated in its prior opinion, supplemental briefing from the parties on Plaintiffs' motion was neither desired nor authorized. See In re WRT Energy Sec. Litig., No. 96 Civ. 3610, 3611 (JFK), 2005 WL 2088406 at *1 n. 1 (S.D.N.Y. Aug 30, 2005). The Court decided the motion on the memoranda of law, pursuant to Local Civil Rule 6.3.
Second, Defendants argue that the Court failed to consider WRT's October 27, 1995 announcement. Defendants urge that "[a]s plaintiffs now concede, this announcement did not disclose that the Registration Statement was false when issued. (Exh. A: Plaintiffs' 7/25/05 Letter Brief, at p. 2)." (Def. Mem. in Supp. of Motion to Reargue at 2). This argument relies on the July 25, 2005 letter and fails for the reason given in the preceding paragraph.
Third, Defendants contend that the Court overlooked the Supreme Court's decision in Dura Pharmaceuticals, Inc. v. Broudo, 125 S. Ct. 1627 (2005). The Court did not overlook it. Dura is just not controlling here. The case arose under Rule 10b-5 and Section 10(b) of the Securities Exchange Act of 1934, under which the plaintiff has the burden of pleading loss causation. The issue was whether an allegation of an inflated purchase price on the date of purchase, in and of itself, was sufficient to meet that burden. See id. at 1629. Defendants cite no case extendingDura to cases brought under Section 11 of the 1933 Act, where the plaintiff need not plead loss causation as part of itsprima facie claim. See, e.g., Adair v. Bristol Technology Systems, Inc., 179 F.R.D. 126, 135 (S.D.N.Y. 1998).
Fourth, Defendants claim that the Court improperly burdened them with "`affirmatively' establishing some reason other than the alleged misstatements in the WRT registration statements for the drop in the value of the WRT securities." (Def. Mem. at 3). Defendants argue that under Section 11(e) of the 1933 Act, they "only bear the burden of proving `that the decline in value was not caused by the alleged misstatements in the registration statements." (citing McMahan v. Wherehouse Entertainment, Inc., 65 F.3d 1044, 1048 (2d Cir. 1995)). This is a distinction without a difference. However Defendants word the burden, they have not met it. The Court so decided in the August 30 Order, and that finding stands.
Fifth, Defendants argue that WRT's October 27, 1995 Form 8-K provides reasons other than the alleged misstatements in the WRT registration statements for the drop in the value of the WRT securities. (Def. Mem. in Supp. of Motion to Reargue at 7-8). Just because WRT's Form 8-K says something, that does not make it true. The excerpt from the Form 8-K in Exhibit B of Defendants' moving papers does not establish conclusively the defense of negative causation.
Defendants' motion for reargument is denied.