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MONTH-IN-BRIEF (Jan 2020)

Securities Regulation

Second Circuit Ups the Ante on Undisclosed Wrongdoing in 10b-5 Claims

By Keith R. Fisher, Domestic & International Court Initiatives - ‎National Center for State Courts

A recent Second Circuit decision raises the bar on 10b-5 claims predicated on undisclosed wrongdoing.  In Gamm v. Sanderson Farms, the court held that a plaintiff must plead with particularity not only the alleged misstatement or omission but also the facts of the underlying misconduct – i.e., that statements made by a defendant were rendered false and misleading because of nondisclosure of illegal activity.  This is necessary to comply with Fed. R. Civ. P. 9(b) (some of the pleading standards of which were discussed in a 2017 ABA Litigation Section article) and § 10(b) of the Private Securities Litigation Reform Act.

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