Stephen Choi, a law professor at Berkeley, has published an article entitled “Do the Merits Matter Less After the Private Securities Litigation Reform Act?” Choi finds that the PSLRA has reduced nuisance litigation, but may discourage some meritorious suits.
Notably, Choi’s research suggests that two classes of cases are less likely to be brought post-PSLRA: (1) cases against “companies engaged in smaller offerings or with a lower secondary market volume (and therefore reduced potential damage awards);” and (2) cases against “companies engaged in fraud where no hard evidence of the fraud is announced pre-filing of a suit.” Choi concludes that the PSLRA “has operated less like a selective deterrence against fraud and more as a simple tax on all litigation (including meritorious suits).”
The 10b-5 Daily 