Milbank Litigation partner Jed Schwartz was recently quoted in a Law360 article titled “As Investor Suits Tick Up, Loss Causation May Be A Hard Sell.”
The article discusses how the COVID-19 pandemic may cause an uptick in the number of securities class action cases, but the market volatility could make it more difficult for plaintiffs to prove fraud. Section 10b-5 of the Securities Exchange Act of 1934, which most securities fraud claims are filed under, requires plaintiffs to prove that a company's fraud directly caused its stock price to drop. Mr. Schwartz said proving this causation is “usually an expert issue that comes deep into the case — trying to parse out what actually caused the decline in a stock price on the dates in question." He continued: "And when you have a whole bunch of other stuff that's going on — the markets are going crazy, oil prices are volatile, the country's in a pandemic and who knows what else — it's very hard to answer that question."
