Brief Fact Summary. Kalman and Anita Ross (Plaintiffs), appeal from an order dismissing their proposed class action, which alleged fraud by A.H. Robins Company (Defendant). Plaintiffs alleged that Defendant engaged in a scheme and plan to deceive the public as to the true financial condition of the company regarding Dalkon Shield.
Synopsis of Rule of Law. A complaint alleging fraud must contain specific factual allegations.
Facts. Plaintiffs purchased 100 shares of common stock of Defendant’s company, a manufacturer and distributor of pharmaceutical products. They instituted this proceeding under Section 10b-5 of the Securities and Exchange Act of 1934 on behalf of all persons who purchased stock from April, 1972 through July, 1974. Plaintiffs also named seven individuals who are directors and officers of Defendant. Plaintiffs’ claim alleges that Defendant engaged in a scheme and continuous course of conduct to deceive the investing public as to the true financial condition of the company with matters concerning Dalkon Shield. They also alleged that Defendants concealed from the investing public, facts concerning the safety and efficiency of Dalkon Shield. They also alleged that Defendants released false statements and recklessly disregarded serious issues regarding the safety and efficiency of Dalkon Shield. The information was subsequently released to the public and the stock price dropped from $19 a share to $13 a share. district court granted Defendant’s Motion to Dismiss on the ground that the complaint did not comply with Rule 9(b) of the Federal Rules of Civil Procedure. Plaintiffs appeal.
Issue. Whether the Plaintiffs’ complaint alleged specific facts to prove fraud?