May 14, 2020

Securities Litigation Uniform Standards Act of 1998

Securities Litigation Uniform Standards Act of 1998

The Securities Litigation Uniform Standards Act of 1998: The Sun Sets on California's Blue Sky Laws
      David M. Levine and Adam C. Pritchard, 54(1): 1–54 (Nov. 1998)
This Article discusses the developments that led to the Securities Litigation Uniform Standards Act of 1998 and provides a summary and analysis of the Uniform Act. It also discusses recent developments in securities fraud class actions governed by the Private Securities Litigation Reform Act of 1995 and how the new national standard created by the Uniform Act is likely to affect federal securities class actions.

Civil Liability for Aiding and Abetting
      Richard C. Mason, 61(3):1135—1182 (May 2006)
Civil liability for aiding and abetting provides a cause of action that has been asserted with increasing frequency in cases of commercial fraud, state securities actions, hostile takeovers, and, most recently, in cases of businesses alleged to be supportive of terrorist activities. The U.S. Supreme Court, in its 1994 decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver , ended decades of aiding and abetting liability in connection with federal securities actions. However, the doctrine since has flourished in suits arising from prominent commercial fraud cases, such as those concerning Enron Corporation and Parmalat, and even in federal securities cases some courts continue to impose relatively broad liability upon secondary actors. This article reviews Central Bank and its limitations, before turning to an analysis of the elements of civil liability for aiding and abetting fraud. The article then similarly identifies and analyzes the elements of liability for aiding and abetting breach of fiduciary duty, which predominantly concerns professionals, such as accountants and attorneys, that are alleged to have assisted wrongdoing by their principal. The analysis then examines aiding and abetting liability in the context of particular, frequently–occurring, factual matrices, including banking transactions, directors and officers, state securities actions, and terrorism. The article concludes by summarizing emerging principles evident from judicial decisions applying this very flexible and potent source of civil liability.

Putting Stockholders First, Not the First-Filed Complaint
     Leo E. Strine, Jr., Lawrence A. Hamermesh, and Matthew C. Jennejohn, 69(1): 1-78 (November 2013)
The prevalence of settlements in class and derivative litigation challenging mergers and acquisitions in which the only payment is to plaintiffs’ attorneys suggests potential systemic dysfunction arising from the increased frequency of parallel litigation in multiple state courts. After examining possible explanations for that dysfunction and the historical development of doctrines limiting parallel state court litigation—the doctrine of forum non conveniens and the “first-filed” doctrine—this article suggests that those doctrines should be revised to better address shareholder class and derivative litigation. Revisions to the doctrine of forum non conveniens should continue the historical trend, deemphasizing fortuitous and increasingly irrelevant geographic considerations, and should place greater emphasis on voluntary choice of law and the development of precedential guidance by the courts of the state responsible for supplying the chosen law. The “first-filed” rule should be replaced in shareholder representative litigation by meaningful consideration of affected parties’ interests and judicial efficiency.

Loss Causation and the Materialization of Risk Doctrine in Securities Fraud Class Actions
     Richard A. Booth; 75(2): 1791-1814 (Spring 2020)
In the context of a claim for securities fraud under SEC Rule 10b-5, most federal circuit courts have ruled or recognized that loss causation can be proven by an event that demonstrates an earlier statement by a defendant company to be false. In other words, corrective disclosure need not take the form of speech. Rather, a statement can be shown to be false by the materialization of a risk that was concealed by the company, and investors can be compensated for any losses they suffer as a result. Although this doctrine is well established, its ultimate effect is to overcompensate investors, thus encouraging excessive securities litigation and chilling voluntary disclosure.