Court Dismisses Securities Fraud Claim for Failure to Allege Economic Loss

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Notwithstanding a high level corporate officer’s allegedly duplicitous conduct, the U.S. District Court for the Western District of Pennsylvania recently dismissed a securities fraud claim based on the plaintiff’s failure to allege economic loss attributable to the alleged misrepresentation of the defendant. The plaintiff, a corporation that sells graphite, brought this action against its former president, alleging, among other things, that the defendant had violated Section 10(b) of the Securities Exchange Act. Specifically, the plaintiff alleged that the defendant had made material misrepresentations in his nondisclosure, noncompetition and nonsolicitation agreements, which had induced the plaintiff to issue to the defendant shares of common stock as a part of an employee stock purchase agreement...

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