Paul Hastings discusses Ninth Circuit’s Decision on Loss Causation

On August 7, 2014, the Ninth Circuit issued its decision in Loos v. Immersion Corporation, addressing for the first time whether a company’s announcement of an internal investigation into fraud is, alone, sufficient to establish “loss causation” for claims under the federal securities laws.[1] The Court held that the mere announcement of an investigation was not sufficient to plead loss causation.[2] The decision in Loos solidifies defendants’ position that the disclosure of a “risk” or “potential” for fraud cannot stand as the revelation of fraud to support loss causation arguments at the pleadings stage.

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