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.
Issue. Whether the Plaintiffs’ complaint alleged specific facts to prove fraud?
Held. No. Judgment is affirmed, however Plaintiffs should be given a chance to replead. A plaintiff alleging fraud in connection with a securities transaction must allege specific facts upon which his claim is founded, in other words, they must do more than track the language of Rule 10b-5. Here, the Plaintiffs alleged misrepresentations made by the Defendant. However, the complaint failed to show a connection between the Defendants and the individual who made the misrepresentations in the report. Plaintiffs also failed to indicate when they obtained the information and when the crucial events occurred. Further, the complaint also fails to specify the time period during which the stock fell from $19 a share to $13 a share.
Discussion. The purpose of Rule 9(b) is to diminish the possibility that a plaintiff will file a groundless or frivolous claim. This exhibits an attempt to increase the efficiency of the judicial system by eliminating frivolous claims.