In the current economic environment, claimants in litigation arising from the decline in value of financial assets, including real estate-related assets, will need to overcome the argument that market conditions in the economy as a whole or in a particular industry sector as opposed to any fault of the defendants caused the loss.1 This article focuses on the standards for proving or disproving proximate cause, or loss causation as it is referred to in securities cases,2 in the context of claims for damages arising from the decline in value of financial assets in the midst of a volatile market environment.
In any dispute involving proximate cause or loss causation issues, the nature of the conduct and its relationship to the loss is central. For instance, in Bastian v. Petren Resources Corporation, plaintiffs who had invested in certain oil and gas limited partnerships that ultimately lost their entire value asserted federal RICO and Rule 10b-5 claims against the promoter, alleging that they would not have invested in the specific oil and gas limited partnerships had it not been for misrepresentations and misleading omissions in the offering materials concerning the competence and integrity of the promoter. 892 F.2d 680 (7th Cir. 1990). The U.S. Court of Appeals for the Seventh Circuit, in an opinion authored by Judge Richard Posner, affirmed dismissal of the claims for failure to adequately plead proximate cause and loss causation.
