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Broudo (Ps) are individuals who bought stock in Dura Pharmaceuticals, Inc. (D), on the public securities market between April 15, 1997, and February 24, 1998. Ps brought this securities fraud class action against D and some of its managers and directors. Ps allege that Ds made false statements to the FDA about approval of a new asthmatic spray device. On February 24, 1998, D announced that its earnings would be lower than expected, principally due to slow drug sales. D's shares lost almost half their value (falling from about $39 per share to about $21). Eight months later D announced that the FDA would not approve its new asthmatic spray device. Ps claimed that in reliance on the integrity of the market, they paid artificially inflated prices for D securities' and the plaintiffs suffered 'damages' thereby. The District Court dismissed the complaint. It held that the complaint failed adequately to allege an appropriate state of mind, i.e., that Ds had acted knowingly, or the like. In respect to Ps' spray device claim, it held that the complaint failed adequately to allege 'loss causation.' The Court of Appeals for the Ninth Circuit reversed. It held that Ps can establish loss causation if they have shown that the price on the date of purchase was inflated because of the misrepresentation. The Supreme Court granted certiorari.

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