Loss Causation Law and Legal Definition

Loss causation requires that a plaintiff show that the loss was a direct result of the defendant's wrongful actions and that it was independent of other causes. It is an essential element of a claim for negligent misrepresentation.

Under New York law, to establish a claim for fraud, a plaintiff must plead loss causation. Loss causation requires the plaintiff to show that the misrepresentations or omissions caused the economic harm, and not simply that they caused the plaintiff to engage in the transactions. [De Kwiatkowski v. Bear, Stearns Co., 1997 U.S. Dist. LEXIS 13078 (S.D.N.Y. Aug. 28, 1997)].