Looking for some fun beach reading this summer? Stay away from these articles! But if you want some interesting examinations of securities class action law, here are a few of the latest offerings.
1) The Santa Clara Law Review has an empirical study entitled “Securities Class Action Settlements” by Mukesh Bajaj, Sumon Mazumdar, and Atulya Sarin (43 Santa Clara L. Rev. 1001 (2003)). The authors studied 1203 federal case filings and 92 state court filings, spanning from 1988 to 1999, to draw conclusions about dismissal and settlement trends.
Quote of note: Among other conclusions, the authors found: (a) “The settlement process, as well as the rate of dismissals, has declined since the passage of the PSLRA;” (b) “Quick settlements generally involve relatively small settlement amounts;” (c) “Mean and median settlements have increased in the post-PSLRA period;” and (d) “Cases naming accounting firms as co-defendants, while relatively rare, involve average and median settlements that are greater than the sample as a whole.” Many of these results are similar to those in the recent NERA study.
2) The ALI-ABA has published an article entitled “Central Bank is Alive and Well: Defense Strategies for Defeating ‘Scheme To Defraud’ Allegations in Private Securities Litigation” by Brian Pastuszenski, Christopher Robertson, and Jason Frank (SHO83 ALI-ABA 439 (May 8-9, 2003)). The authors focus on plaintiffs’ recent attempts to use the holding in SEC v. Zandford, 535 U.S. 813 (2002), where the Supreme Court found a broker liable for engaging in a “scheme to defraud” under Rule 10b-5 when he misappropriated funds from a customer’s account, to avoid the prohibition on “aiding and abetting” liability found in the Court’s earlier holding in Central Bank. Recent district court decisions (notably in the Enron case) “have allowed claims to proceed against secondary actors who were not alleged to have made any actual misstatements relied on by plaintiffs, but instead were alleged only to have participated in certain transactions underlying the alleged misstatements.”
Quote of note: “Successfully arguing a motion to dismiss based on Central Bank, however, requires articulating clearly the difference between (a) a ‘misstatement’ case in which plaintiffs complain about the purchase of stock at inflated prices as a result of allegedly false and misleading statements and (b) a case that alleges other forms of ‘deception’ that caused plaintiffs harm . . . In the typical class action case, only the defendant who actually made the offending statements themselves has any potential liability after Central Bank.” (A discussion of another recent article on this general topic, with a different viewpoint.
3) The same ALI-ABA “course of study” has an article on “Anonymous Informants: How Identifiable Must They Be Under The PSLRA” by Peter Saparoff and Justin Kudler (SH083 ALI-ABA 479 (May 8-9 2003)). The authors survey the recent case law on this contentious issue.
Quote of note: “The trend in the case law now has solidified around providing a description of the informant, but not necessarily his or her name, in a complaint alleging violations of the federal securities laws that was pleaded under the PSLRA.”