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Negative Causation [Securities]: A Comprehensive Legal Overview
Definition & Meaning
Negative causation is a legal defense used by defendants in cases involving securities. It asserts that a portion of the damages claimed by a plaintiff was caused by factors unrelated to defects in a registration statement that led to a decline in the value of the securities. This defense is also referred to as a loss causation defense. Essentially, negative causation serves as an affirmative defense that can reduce or eliminate liability for the defendant, often presented during motions for summary judgment or at trial.
Table of content
Legal Use & context
Negative causation is primarily utilized in civil litigation, particularly in securities fraud cases. It allows defendants to argue that other factors contributed to the financial losses experienced by the plaintiff, rather than solely the alleged defects in the securities registration. This defense can be critical in cases where plaintiffs seek damages for perceived losses, as it helps clarify the causes of those losses. Users can manage their legal needs related to this defense by utilizing legal templates provided by US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
(hypothetical example) A company faces a lawsuit from investors claiming they lost money due to misleading information in a securities registration statement. The company argues negative causation, presenting evidence that the stock price also fell due to market-wide economic downturns, which were unrelated to the registration statement.
Comparison with related terms
Term
Description
Difference
Loss causation
Refers to the need for a plaintiff to prove that the defendant's actions caused their financial losses.
Negative causation is a defense against loss causation claims, asserting other causes for losses.
Affirmative defense
A defense strategy where the defendant introduces evidence to counter the plaintiff's claims.
Negative causation is a specific type of affirmative defense focused on causation issues.
Common misunderstandings
What to do if this term applies to you
If you find yourself involved in a securities case where negative causation may apply, consider the following steps:
Gather evidence that supports your claim regarding alternative causes of the financial losses.
Consult with a legal professional to understand how to effectively present this defense.
Explore US Legal Forms for templates that can assist you in preparing your legal documents.
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Negative causation is a defense used in legal cases to argue that other factors, not just the alleged defects, caused a plaintiff's financial losses.
Loss causation requires the plaintiff to prove that the defendant's actions caused their losses, while negative causation is a defense claiming that other factors contributed to those losses.
Yes, while commonly associated with securities cases, negative causation can apply in various legal contexts where causation is in dispute.