The opinion of the court was delivered by: Pisano, District Judge
The claims in this putative securities fraud class action stem from the dissemination of what Lead Plaintiff characterizes as "materially false and misleading statements" concerning the reported proved oil and natural gas reserves of the Royal Dutch Petroleum Company and the Shell Transport and Trading Company, PLC (together, "Royal Dutch/Shell"). See Consolidated Amended Class Action Complaint ("Complaint") ¶ 3. Defendants filed motions to dismiss the Complaint, on which Chief Judge Bissell heard extensive oral argument and ultimately resolved in a comprehensive opinion filed on August 9, 2005. See In re Royal Dutch/Shell Transport Securities Litigation, 380 F. Supp. 2d 509, 515 (D.N.J. 2005).
The parties filed multiple motions for reconsideration of various portions of the Order. Among these was Lead Plaintiff's motion for reconsideration of the dismissal of the Section 10(b) claims asserted by those who purchased Royal Dutch/Shell securities during the Class Period*fn2 but had not yet sold their securities as of the time of the Court's decision ("Holding Plaintiffs"), as set forth in Paragraph 8 of the Court's August 9, 2005 Order and at page 557 of the Opinion. On August 26, 2005, this litigation was reassigned to the undersigned. After the reassignment, the Court entered an order on November 9, 2005 denying all motions for reconsideration except Lead Plaintiff's motion concerning the dismissal of Holding Plaintiffs' claims. Because Chief Judge Bissell did not have the benefit of briefing on the pertinent issues and authorities, the Court granted Lead Plaintiff's motion for reconsideration.
The Court has now reconsidered those portions of the Court's August 9, 2005 Order and Opinion that dismissed Holding Plaintiffs' claims. The instant opinion addresses the merits of Defendants' motions to dismiss the claims of Holding Plaintiffs. For the reasons expressed below, the Court denies Defendants' motions to dismiss the claims of Holding Plaintiffs.
In their motions to dismiss, Defendants, citing Dura Pharmaceuticals, Inc. v. Broudo, __ U.S. __, 125 S.Ct. 1627 (April 19, 2005), had challenged the adequacy of the Complaint's allegations of loss causation and economic loss. Among Defendants' arguments was that, because the stock had recovered its lost value, any putative class member who did not sell the subject securities within 90 days after the end of the Class Period could not establish the economic loss or loss causation elements of a Section 10(b) securities fraud claim as to those unsold shares.
In the August 9, 2005 Opinion, the Court dismissed Holding Plaintiffs' claims as follows:
Shares of Purchasers Who Have Purchased During the Class Period and Have Not Yet Sold
Defendants also argue that the claims of those purchasers that have not yet sold the securities cannot survive this motion to dismiss. In light of the Dura decision, this Court agrees. Such purchasers are invoking the exact insurance policy that Dura warned against and any such losses are speculative, at best. Those who purchased during the Class Period but have yet to sell their securities have not alleged proximate causation and economic loss; therefore those purchasers may not join the putative class.
Royal Dutch/Shell Transport Securities, 380 F. Supp. 2d at 557; see also Order ¶ 8 (August 9, 2005). Underlying the Court's conclusion was the assumption that, in order to adequately plead, and ultimately to prove, loss causation and economic loss, a plaintiff who purchased during the Class Period also must have subsequently sold the subject securities.
In moving for reconsideration of the Court's dismissal of the Holding Plaintiffs' claims, Lead Plaintiff challenges the Court's application of Dura because Dura did not address whether securities fraud victims must sell their securities after revelation of wrongdoing in order to adequately plead economic loss or loss causation, and argues that the Court's ruling conflicts with the Private Securities Litigation Reform Act ("PSLRA"), decades of jurisprudence, and public policy. In opposition, Defendants in relevant part argue that Dura requires both a purchase of and a sale of securities in order for a plaintiff to plead economic loss, and thus that the Court's construction of Dura was correct.
Upon reconsideration, the Court concludes that Holding Plaintiffs' securities fraud claims should not have been dismissed solely because the Holding Plaintiffs retained the subject securities. In order to plead and prove loss causation and economic loss, a plaintiff alleging fraud in connection with the purchase of securities is not necessarily required to sell the subject securities. First, the statutory scheme that provides the measure of damages available to securities fraud plaintiffs does not mandate sale of the securities. Second,holding plaintiffs have long been permitted to litigate securities fraud claims. Third, policy concerns dictate against the imposition of a ...