Ninth Circuit Holds Loss Causation Required For California Securities Claim

Section 25400(d) of the California Corporations Code declares it is unlawful for any person, directly or indirectly, in this state:

If such person is a broker-dealer or other person selling or offering for sale or purchasing or offering to purchase the security, to make, for the purpose of inducing the purchase or sale of such security by others, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or which omitted to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and which he knew or had reasonable ground to believe was so false or misleading.

A person who willfully violates Section 25400(d) may be liable to "any other person who purchases or sells any security at a price which was affected by such act or transaction for the damages sustained by the latter as a result of such act or transaction".  Cal. Corp. Code § 25500.

In Irving Firemen's Relief & Ret. Fund v. Uber Techs., 2021 U.S. App. LEXIS 14892, the plaintiff argued that mere inflation of the stock price is enough to show loss causation under California law.   Yesterday, the Ninth Circuit Court of Appeals rejected that position, finding that California's mere inflation is insufficient to show loss causation under California law.   While finding federal precedent to be "unusually persuasive", the Court emphasized that California law still governs claims under Section 25400 and 25500.  

My friend, Matt Ashley at Irell & Manella LLP, argued this case for Uber.