Grave Doubts and Absurdity

If the Federal Rules of Civil Procedure were applicable to judicial opinions, few would have the temerity to argue that Judge Scheindlin was in violation of Rule 9 when she opines on the federal securities laws.

In this recent ruling in the In re eSpeed, Inc. Sec. Litig. , 05 Civ. 2091 (S.D.N.Y.), Judge Scheindlin has written an extensive overview of the state of the federal securities laws today.

While ultimately dismissing the complaint for failing to adequately allege scienter and finding that the complained of statements were either mere puffery or covered by the bespeaks caution doctrine, there are several interesting passages in the Opinion.

First, while Judge Scheindlin dismissed the complaint, she granted plaintiffs leave to replead. Normally a non-event, Judge Scheindlin added some drama, noting:

I grant leave to replead with some reluctance. After reviewing the pleadings in this case, I harbor grave doubts as to whether plaintiffs can ever allege facts sufficient to survive a motion to dismsiss . . . plaintiffs should not file an amended Complaint unless they reasonably believe that the deficiencies identified in this Opinion can be addressed.

Second, the Court held that the complaint was not time-barred and noted that Defendants argument:

that plaintiffs could have drafted the complaint based on an article published in November 2002, before [the product at issue] was even launched, is absurd, as the Complaint alleges specific misrepresentations [made after that article was published].

And as the case does have an analysis of loss causation under Dura, be on the lookout for The PSLRA Nugget to weigh in.