David Saxe and Danielle Lesser Author Article on Loss Causation in Securities Fraud Cases

October 20, 2017 - The Hon. David B. Saxe, (ret.) and Danielle C. Lesser authored the article “Loss Causation in Securities Fraud Cases,” that appeared in the New York Law Journal on October 19, 2017. Michael Mix assisted in the drafting of the article.

The article examines the Appellate Division, First Department and lower court decisions in Basis PAC-Rim Opportunity Fund (Master) v. TCW Asset Mgmt. Co., 149 A.D.3d 146 (1st Dep't 2017).  Both decisions focused on the role the 2008 market crash played in whether the plaintiff could go to trial on a securities fraud case.  The plaintiff alleged that the defendant had recommended an investment in an RMBS strategy it claimed could mitigate the risk of such an investment although discovery demonstrated that these claims were false.  The trial court (Kornreich, J.) found that the plaintiff had met its burden.  The First Department reversed.  The appellate court found that the 2008 market crash meant that any RMBS strategy would have lost money, which it held warranted a finding that loss causation had not been proven.  The article examines whether the absence of damages rather than loss causation should have been considered as a basis on which to dismiss the case. Click here to read an examination of the decision reached by the First Department.