Securities litigation reform

Gregory A. Markel
Sarah A. Fedner

As this blog’s readers know, a recurring recent topic on this blog has been the need for another round of securities class action litigation reform. In the following guest post, Gregory A. Markel and Sarah A. Fedner of the Seyfarth Shaw law firm explore the possible opportunities for reform with respect two specific areas of concern: duplicative state and federal court litigation in the wake of Cyan and the payment of mootness fees in merger cases. The authors outline the policy objections to these practices and suggest that Congress should intervene to end them. My thanks to Greg and Sarah for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Greg and Sarah’s article.
Continue Reading Guest Post: Two Areas for Reform in Securities Litigation

As the number and rate of securities class action lawsuit filings has remained at historically high levels over the past three years, there have been renewed calls for securities class action litigation reform, as I have detailed in prior post (for example, here). According to a March 25, 2020 paper by the U.S. Chamber Institute of Legal Reform (ILR), the “broken securities class action system continues out of control” and the need for securities litigation reform remains urgent.  On April 1, 2020, I participated in an ILR event, along with ILR President Harold Kim and Andrew Pincus of the Mayer Brown law firm, entitled “An Update on Securities Litigation,” in which we discussed key recent securities litigation developments and the continuing case for securities litigation reform. The paper can be found here and a video recording of the ILR event can be found here.
Continue Reading The Continuing Case for Securities Litigation Reform

If you have not been following the drama surrounding the question of the attorneys’ fees to be paid to class counsel in the State Street foreign currency exchange overcharge case, you will want to read the latest order from District of Massachusetts Judge Mark Wolf. Among other things, in his February 27, 2020 order, Judge Wolf cut the fees of the law firms that acted as class counsel, from $75 million to $60 million. Perhaps even more significantly, Judge Wolf concluded that lawyers at two of the lead plaintiff law firms had violated applicable provisions of the professional code of conduct and referred the attorneys to the local state bar professional practices unit. Judge Wolf’s findings also include his own reflection about the indispensable role of judge in supervising class counsel and their fees. A copy of Judge Wolf’s order can be found here.
Continue Reading Court Ratchets Down Fee Award, Refers Class Counsel for Possible Ethics Violation

Nessim Mezrahi

In numerous prior posts on this site (for example, here), I have written about the problems caused by the U.S. Supreme Court’s March 2018 decision in Cyan, Inc. v. Beaver County Employees Retirement Fund. In the following guest post, Nessim Mezrahi, cofounder and CEO of SAR, a securities class action data analytics and software company, issues a call for reform to address the “confusion” that Cyan has caused. A version of this article previously appeared on Law 360. I would like to thank Nessim for allowing me to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to publish a guest post. Here is Nessim’s article.
Continue Reading Guest Post: Time To Resolve Post-Cyan Securities Class Action Confusion

Regular readers of this blog know that the statistics surrounding U.S. securities litigation in recent years are nothing short of alarming, including, for example, both record numbers of lawsuits and record percentages of listed companies sued. Severity trends are concerning as well. All of these trends are exacerbated by the impact of the U.S. Supreme Court’s 2018 Cyan decision, which opens companies conducting securities offerings to multiple, conflicting lawsuits in state and federal court. Given these trends, it is hardly surprising that there have been renewed calls from business groups for securities class action litigation reform. Now, Chubb, a leading global insurer, has added its voice to the calls for reform. In an interesting June 11, 2019 paper entitled “From Nuisance to Menace: The Rising Tide of Securities Class Action Litigation” (here), the company details the extent of the current securities litigation mess and sets forth a number of proposals for securities litigation reform. 
Continue Reading Chubb Sounds Securities Litigation Alarm, Calls for Reform

When Congress enacted the PSLRA in 1995, one of the goals was to try to deter frivolous litigation. As time has passed, it has also become clear that many of the PSLRA’s procedural reforms also created a structure of incentives for plaintiffs’ lawyers. For example, the PSLRA’s most adequate plaintiff requirement created an incentive for plaintiffs’ lawyers to seek to represent institutional investors. However, according to a recent academic study, with the passage of time, some of the incentives have had a distorted impact, as the incentives motivate plaintiffs’ lawyers to try to get hold of a mega-case “lottery ticket” that will produce a jackpot outcome – for the lawyers. These distortions in turn are creating many of the ills we are now seeing the securities class action litigation arena, justifying, according to the academic authors, another round of securities litigation reform.
Continue Reading Securities Litigation Reform: Addressing the Class Action Lottery

Because the lawsuits are so expensive to litigate and to resolve, securities class action litigation has long been the subject of both scrutiny and criticism. However, while the history of concern about securities litigation is long, the case can be made that there has rarely been a time when securities litigation in the U.S. deserves a critical look more than it does now. As has been well-documented on this site and elsewhere, securities class action lawsuit filing activity has been a record levels for the past two years. Signs are so far this year that these heightened levels of activity, which can only be described as alarming, are continuing. Given these circumstances, it is hardly surprising that business groups and others are now raising calls for another round of securities class action litigation reform.
Continue Reading Securities Class Action Reform Discussed at Washington Event

Last fall, the U.S. Chamber Institute for Legal Reform issued a paper detailing the ways in which the U.S. securities class action litigation system is “spinning out of control,” and calling for a renewed wave of securities litigation reform. In a new paper, entitled “Containing the Contagion: Proposals to Reform the Broken Securities Class Action System,” the Institute renews the call for reform and sets out a series of specific proposals intended address the “abuses” the paper identifies. The current securities class action litigation system, according to the paper, is “plainly broken, harming investors and our capital markets.” The Institute’s February 25, 2019 paper can be found here.
Continue Reading U.S. Securities Class Action Litigation: Alarm Bells and Reform Proposals