Opinion ID: 2799870
Heading Depth: 2
Heading Rank: 3

Heading: Failure to Plead Loss Causation Adequately

Text: “‘[L]oss causation analysis in a fraud-on-the-market case focuses on the following question: even if the plaintiffs paid an inflated price for the stock as a result of the fraud, (i.e., even if the plaintiffs relied), did the relevant truth eventually come out and thereby cause the plaintiffs to suffer losses?’” Meyer, 710 F.3d at 1197 (quoting FindWhat, 658 F.3d at 1312). The market may react negatively to the disclosure of an investigation, because it “can be seen to portend an added risk of future corrective action.” Id. at 1201. An adverse market reaction, however, does not establish the disclosure of an investigation constitutes 18 Case: 14-12838 Date Filed: 05/11/2015 Page: 19 of 31 a corrective disclosure; further allegations are required to establish that previous statements were “false or fraudulent.” Id. New information is necessary to show loss causation, because “the market price of shares traded on well-developed markets reflects all publicly available information.” Basic Inc., 485 U.S. at 246, 108 S. Ct. at 991. “[B]ecause a corrective disclosure must reveal a previously concealed truth, it obviously must disclose new information, and cannot be merely confirmatory.” FindWhat, 658 F.3d at 1311 n.28. We held in Meyer that an SEC investigation, like the OIG investigation in this case, “without more, is insufficient to constitute a corrective disclosure for purposes of § 10(b).” Meyer, 710 F.3d at 1201. Revelation of the OIG investigation, including issuance of subpoenas, does not show any actual wrongdoing and cannot qualify as a corrective disclosure. Plaintiffs-appellants contend the subsequent 2012 Skolnick Report, combined with the OIG investigation, together provided sufficient evidence of a corrective disclosure to cause an adverse market response and satisfied the requirements of Meyer. The Meyer whistleblower case, the basis of the 2012 Skolnick Report, was not proof of fraud, because a civil suit is not proof of liability. Like the Einhorn Presentation in Meyer, the 2012 Skolnick Report summarized facts from the Meyer case that had existed in publicly accessible court dockets for three months before the Skolnick Report issued. While we may 19 Case: 14-12838 Date Filed: 05/11/2015 Page: 20 of 31 “countenance some lag” in the capacity of the market to digest publically available information, the Meyer action was publicly available and the impetus for the 2012 Skolnick Report. Id. at 1198 n.9. Consequently, the information first revealed by the Meyer action and summarized in the 2012 Skolnick Report was easily obtainable, and the market was able to assimilate the information without the assistance of the 2012 Skolnick Report. See Pub. Emps. Ret. Sys. of Miss. v. Amedisys, Inc., 769 F.3d 313, 323 (5th Cir. 2014) (noting “complex economic data understandable only through expert analysis may not be readily digestible by the marketplace” and analysis of that data may not be merely confirmatory); In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1058 (9th Cir. 2008) (determining a threemonth delay between a disclosure and a price drop did not break the causal chain for loss causation where physicians, but not the general public, would be responsive to the content of a Federal Drug Administration warning letter, and the market did not respond until financial disclosures were made). “[T]he mere repackaging of already-public information by an analyst or short-seller is simply insufficient to constitute a corrective disclosure.” Meyer, 710 F.3d at 1199 (citing cases holding opinions and analyses of publicly available information are not corrective disclosures). The lack of new information in the 2012 Skolnick Report is “fatal to the [plaintiffs-appellants’] claim of loss causation.” Id. at 1198 (citing FindWhat, 658 F.3d at 1311 n.28). If an analyst’s 20 Case: 14-12838 Date Filed: 05/11/2015 Page: 21 of 31 report, such as the 2012 Skolnick Report, “based on already-public information could form the basis for a corrective disclosure, then every investor who suffers a loss in the financial markets could sue under § 10(b) using an analyst’s negative analysis of public filings as a corrective disclosure.” Id. at 1199. Plaintiffs-appellants’ allegations show only there was an OIG investigation, a whistleblower lawsuit the market disregarded, and a negative summary of already public information. Taken independently or combined, they are inadequate to establish the falsity of HMA disclosures. Neither the OIG investigation nor the 2012 Skolnick Report are corrective disclosures, establishing a causal link for plaintiffs-appellants’ stock-value loss. After three attempts at drafting complaints, the district judge correctly decided plaintiffs-appellants had failed to allege adequately loss causation to establish their securities-fraud class action and dismissed their case with prejudice. AFFIRMED. 21 Case: 14-12838 Date Filed: 05/11/2015 Page: 22 of 31