In Re Copper Mountain Securities Litigation

ORDER

It is well-known that the Private Securities Litigation Reform Act (PSLRA) and FRCP 9(b) impose a particularity requirement in the allegation of securities fraud. This is especially important in the case of a complaint alleging open market fraud or fraud on the market, such as the complaint at bar.

The starting point for the particularity analysis is not the allegedly false or misleading statements of the defendants, but the truth that emerges from the market. An open market trades on different points of view of an issuer’s prospects. If all investors thought the same things, there would be no trading except that prompted by the need of investors to re-balance their portfolios among investment alternatives (i e, cash versus bonds, stocks versus cash, etc). What matters in an open market case is the total mix of information in the market and whether that mix has been altered in some significant way to create a very widely, indeed essentially universal, but wrong view of the value of the security at issue. It is the “truth” that reveals the “error” of the market. The disclosure of this “truth” avulsively changes the price of the security. But disclosure of a market “error”…