85,730 research outputs found
The Effects of Securities Class Action Litigation on Corporate Liquidity and Investment Policy
The risk of securities class action litigation alters corporate savings and investment policy. Firms with greater exposure to securities litigation hold significantly more cash in anticipation of future settlements and other related costs. The result is due to firms accumulating cash in anticipation of lawsuits and not a consequence of plaintiffs targeting firms with high cash levels. The market value of cash is significantly lower for firms exposed to litigation risk. Corporate investment decisions are also affected by litigation risk, as firms reduce capital expenditures in response. Our results are robust to endogeneity concerns and possible spurious temporal effects
Sword or Shield? Setting Limits on SLUSA’s Ever-Growing Reach
Concerned by the overwhelming presence of vexatious federal securities-fraud class actions, Congress passed the Private Securities Litigation Reform Act of 1995 to increase the procedural burden plaintiffs would face in filing these nonmeritorious suits. Instead of being deterred, plaintiffs simply brought their suits in state court. Congress responded with the Securities Litigation Uniform Standards Act of 1998 (SLUSA), making federal court the exclusive venue for securities-fraud class actions. However, Congress expressly saved from SLUSA\u27s reach claims that were traditionally brought in state court under corporate law through the Delaware carve-out.
Though this exemption was meant to protect the historic dual federal-state securities-regulation regime, recent appellate court opinions have stretched SLUSA\u27s reach too far, leaving plaintiffs incapable of bringing many traditional state-law claims essential to the proper policing of corporate law regardless of the forum. This Note addresses the implications of such a broad reading of SLUSA and advocates a two-pronged approach that will simultaneously effectuate SLUSA\u27s purpose while still preserving these important state-law claims. By looking to the heart of a complaint, courts can best effectuate congressional intent both to limit problematic litigation practices and to preserve the important role federalism plays in the securities-law context
Federalism and Investor Protection: Constitutional Restraints on Preemption of State Remedies for Securities Fraud
Warren discusses the Private Securities Litigation Reform Act and the National Securities Market Improvement Act, among other issues. Predominant federalism postulates foreclose the proposed intrusion into investors\u27 tort remedies traditionally allowed by the states under common law
In Connection With What?: Chadbourne & Parke LLP v. Troice and the Applicability of the Securities Litigation Uniform Standards Act
This commentary previews an upcoming Supreme Court case, Chadbourne & Parke LLP v. Troice, in which the Court will clarify whether the Securities Litigation Uniform Standards Act precludes a state law class action alleging a scheme of fraud involving misrepresentations about transactions in covered-securities
Deterrence of Corporate Fraud Through Securities Litigation: The Role of Institutional Investors
Johnson suggests that institutions are uniquely positioned to enhance the deterrence function of securities litigation without undermining the compensation goal
Preempting Unintended Consequences
Sommer offers some insights on preemption. The case for preemption is that there is an inherent logic and consistency in having litigation involving nationally traded securities resolved in a single forum
Interview with Sherrie R. Savett
For transcript, click the Download button above. For video index, click the link below.
Sherrie R. Savett (L\u2773) is a leading practitioner in the areas of securities litigation and consumer litigation with the firm of Berger Montague, where she has served as Chair Emeritus of the firm, Chair of the Securities Litigation Department and of the Qui Tam/False Claims Act Department
What Happens in Delaware Need Not Stay in Delaware: How Trulia Can Strengthen Private Enforcement of the Federal Securities Laws
Class-action lawsuits have been used by private plaintiffs to enforce the federal securities laws since those laws were enacted in the 1930s. With the SEC retaining concurrent authority to enforce federal securities laws, a debate has emerged as to whether the private right of action helps or hinders public enforcement. The primary criticism of private securities litigation is that rent-seeking attorneys abuse the system by bringing frivolous litigation aimed at achieving a settlement and a fee. In the public merger context, the potentially disastrous consequences of failing to close an announced deal on time make corporations eager to settle potentially troublesome litigation. The government responded to the overabundance of securities lawsuits in the 1990s by tightening the reigns on class-action securities litigation, making what was once low-hanging fruit for plaintiffs’ attorneys more difficult to grasp. At the same time, there was a marked uptick in the number of class-action corporate lawsuits brought in state courts, in particular, in Delaware. These suits claim breach of fiduciary duty on the grounds that securities filings accompanying public merger announcements provided shareholders with insufficient or inadequate information. This Comment claims that the wave of merger objection class-action suits arising in the mid-2000s should be properly viewed as federal securities law claims masquerading as corporate law claims, thus avoiding the heightened securities class-action requirements of the 1990s. In a recent case from the Delaware Court of Chancery, In re Trulia, Inc. Shareholder Litigation, Chancellor Bouchard established a new “plainly material” standard for approving class-action settlements where deficient federal securities filings are at issue. Because Trulia is properly viewed as a state court’s response to deficient enforcement of the federal securities laws, it has the potential to serve as a bellwether for the state of health of private enforcement of the federal securities laws
The Logic and Limits of Event Studies in Securities Fraud Litigation
Event studies have become increasingly important in securities fraud litigation after the Supreme Court’s decision in Halliburton II. Litigants have used event study methodology, which empirically analyzes the relationship between the disclosure of corporate information and the issuer’s stock price, to provide evidence in the evaluation of key elements of federal securities fraud, including materiality, reliance, causation, and damages. As the use of event studies grows and they increasingly serve a gatekeeping function in determining whether litigation will proceed beyond a preliminary stage, it will be critical for courts to use them correctly.
This Article explores an array of considerations related to the use of event studies in securities fraud litigation. It starts by describing the basic function of the event study: to determine whether a highly unusual price movement has occurred and the traditional statistical approach to making that determination. The Article goes on to identify special features of securities fraud litigation that distinguish litigation from the scholarly context in which event studies were developed. The Article highlights the fact that the standard approach can lead to the wrong conclusion and describes the adjustments necessary to address the litigation context. We use the example of six dates in the Halliburton litigation to illustrate these points.
Finally, the Article highlights the limitations of event studies – what they can and cannot prove – and explains how those limitations relate to the legal issues for which they are introduced. These limitations bear upon important normative questions about the role event studies should play in securities fraud litigation
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Securities Litigation Risk for Foreign Companies Listed in the U.S.
We study securities litigation risk faced by foreign firms listed on U.S. exchanges. We find that U.S. listed foreign companies experience securities class action lawsuits at about half the rate as do U.S. firms with similar levels of ex ante litigation risk. The lower rate appears to be driven partly by higher transaction costs in uncovering and pursuing litigation against foreign firms. However, once a lawsuit triggering event like an accounting restatement, missing management guidance, or a sharp stock price decline occurs, there is no difference in the litigation rates between a foreign and comparable U.S. firm. This suggests that effective enforcement of securities laws is constrained by transaction costs, and the availability of high quality information that reveals potential misconduct is an important determinant of a well-functioning litigation market for foreign firms listed in the U.S
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