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Court Of Chancery Explains Loss Causation

Posted In Business Torts

Vichi v. Koninklijke Philips Electronics N.V., C.A. 2578-VCP (February 18, 2014)

This may be the longest opinion ever written by the Court of Chancery.  In one sense, that is too bad because it has the best explanation of loss causation in any recent opinion.  Briefly, if A invests in company ABC because of false representations about its earnings and then the value of ABC declines because all its officers die, A has lost money because he invested in ABC.  However, his loss is not caused by the fraud but by the deaths of the officers.  In that situation, A has not proved loss causation. This is an important point that is too often overlooked.