Judge Kimba Wood

Purchasers of common stock of Chinese company NIVS Intellimedia Technology Group, claimed to have purchased NIVS stock on the American Stock Exchange at artificially inflated prices and suffered losses when the stock’s value precipitously declined. Defendants, the United States underwriters for the company moved to dismiss the Securities claim under Federal Rules of Civil Procedure 8, 9, and 12 and the Private Securities Litigation Reform Act ("PSLRA"). The parties agreed that the pleading requirements of Rule 9(b) and the PSLRA applied to the only plaintiff who brought claims under the Securities Act. Defendants contended that the complaint supported a finding of "negative causation," an affirmative defense which proved that plaintiff’s losses were not attributable to the alleged Securities Act violations. The court found that the specific allegations of this case presented a rare circumstance where negative causation was clear from the face of the complaint. The court reasoned that plaintiff, having sold all his stock prior to the corrective disclosures, could not attribute his losses to the alleged misrepresented facts. Thus the Securities Act claims were dismissed.