Legal Definitions - negative causation

Definition: Negative causation refers to the defense that part of the plaintiff's damages were caused by factors other than the alleged wrongdoing. In securities law, it specifically refers to the argument that the plaintiff's losses were not solely caused by the depreciation in value of the securities resulting from registration-statement defects.

For example, if an investor sues a company for securities fraud, claiming that the company made false statements that caused the investor to buy the stock at an inflated price, the company may argue negative causation. They may claim that the investor's losses were actually caused by other factors, such as general market conditions or the investor's own decisions.

If negative causation is proven, the plaintiff's damages may be reduced.