The Eleventh Circuit Rules that the Disclosure of an SEC Investigation is Insufficient to Plead Loss Causation

The US Court of Appeals for the Eleventh Circuit recently issued an important decision that addresses two types of allegations that plaintiffs routinely rely on to plead loss causation in federal securities fraud cases. In Meyer v. Greene, 2013 US App. LEXIS 4187 (11th Cir. Feb. 25, 2013), the Eleventh Circuit appears to have become the first federal court of appeals to rule definitively that the mere announcement of an investigation by the US Securities and Exchange Commission (“SEC”) followed by a decline in a company’s stock price is insufficient to plead loss causation. The Court also ruled, consistent with decisions from other federal circuits, that a negative third-party analyst presentation is not a corrective disclosure for purposes of pleading loss causation if the presentation is based on publicly available information.


The St. Joe Company (“St. Joe” or the “Company”) is one of the largest real estate development corporations in the State of Florida. The plaintiffs asserted that, despite extensive public knowledge of declining real estate prices, the Company made material misstatements and omissions in its SEC filings by overstating the value of its real estate holdings and failing to record impairment charges on its assets.

The plaintiffs claimed that the truth about St. Joe’s overstated real estate holdings began to emerge on October 13, 2010, when David Einhorn, a prominent hedge fund investor, gave a presentation at an investor conference entitled “Field of Schemes: If You Build It, They Won’t Come” (the “Einhorn Presentation”). In the presentation, Einhorn suggested that St. Joe’s assets were significantly overvalued and should be written down. During the next two days of trading, St. Joe’s stock price declined approximately 20% on unusually high volume.

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