the pleadings. Dura, 544 U.S. at 347.10 Stated another way, plaintiff must establish “a
connection between a drop in stock price and the disclosure of the ‘truth’ about [the
Company’s] previous misstatement or omission . . . even if that connection may be
made in a short and plain statement.” In re TECO Energy, Inc. Sec. Litig., 2006 WL
845161, at *2 (M.D. Fla. Mar. 30, 2006). “[G]eneralized, vague or overbroad allegations
regarding the existence of a disclosure or revelation of a fraud that is merely alleged to
have been connected to a drop in stock price will not suffice to put a defendant on
notice of loss causation claims.” Id. A securities fraud complaint must be dismissed
where the public statement is not “corrective” in that it does not “identify, reveal, or
correct any prior misstatement, omission or improper accounting practice” or,
alternatively, where the disclosure does not “specifically relate to the issues involved in
the alleged fraudulent scheme.” Id. at *4-5.
In TECO, the plaintiffs alleged that the defendant utility holding company made a
number of misrepresentations and omissions regarding (1) abandonment of its prior
business model, (2) liability for certain power plant projects, (3) inability to sell or
transmit power from its merchant energy power plants, (4) exposure to Enron’s demise,
(5) impossibility of maintaining its dividend, and (6) financial results in previous years.
Id., at *1. The “corrective disclosures” relied upon by the plaintiffs were a number of
10Plaintiff argues that the pleading of loss causation is governed by Rule 8, rather than the heightened requirements of Rule 9(b) and the PSLRA. The Supreme Court in Dura did not resolve the issue of whether Rule 8 or Rule 9(b) should be applied in determining whether a party has adequately pleaded loss causation, and the lower courts are divided on the issue. However, the Court need not decide this issue because the allegations of the CAC fail to comply with the notice pleading standard of Rule 8.