Circuit Split On Safe Harbor

The PSLRA created a safe harbor for forward-looking statements to encourage companies to provide investors with information about future plans and prospects. Under the first prong of the safe harbor, a defendant is not liable with respect to any forward-looking statement if it is identified as forward-looking and is accompanied by “meaningful cautionary statements” that alert investors to the factors that could cause actual results to differ.

As discussed in a post in The 10b-5 Daily from last August entitled “The Safe Harbor May Just Be A Safe Puddle,” the U.S. Court of Appeals for the Seventh Circuit has weakened the protection afforded by the safe harbor. In Asher v. Baxter International, the court found that may be impossible, on a motion to dismiss, to determine whether a company’s cautionary statements are “meaningful.”

The New York Law Journal has an article (via – free regist. req’d) discussing the Seventh Circuit’s decision and comparing it to a contrary decision issued by the Second Circuit last year. Baxter International apparently has indicated that it will appeal to the U.S. Supreme Court and the article suggests that this could be the next securities litigation issue, after loss causation in the Dura case, that the Court hears.

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