D&O Update Litigation: Be careful what you wish for: The unintended effects of the Private Securities Litigation Ref
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Volume 3 Number 2
D&O Update Litigation Be careful what you wish for: The unintended effects of the Private Securities Litigation Reform Act of 1995 Melvyn I. Weiss and Lee A. Weiss* Received (in revised form): 19th March, 2006 *Milberg Weiss Bershad & Schulman LLP, One Pennsylvania Plaza, New York, NY 10119, USA; Tel: +1 (212) 594-5300; Fax: +1 (212) 868-1229; E-mail: [email protected]
Melvyn I. Weiss, Senior and Founding Partner of Milberg Weiss Bershad & Schulman LLP, is a leading practitioner in the fields of securities, insurance, environmental, antitrust, and consumer litigation. The firm’s practice focuses on prosecuting class, derivative, and mass actions, and substantial private claims. Lee A. Weiss is a partner at Milberg Weiss Bershad & Schulman LLP, and focuses his practice on class actions on behalf of defrauded investors and consumers, as well as complex commercial litigation.
ABSTRACT KEYWORDS: Private Securities Litigation Reform Act of 1995, PSLRA, ERISA, institutional investors, corporate governance Corporations lobbied for the passage of the Private Securities Litigation Reform Act of 1995 (PSLRA) to limit private enforcement of the US securities laws. While the PSLRA has achieved this goal to a certain extent, it has also impacted securities litigation, and related Employee Retirement Income Security Act (ERISA) and derivative litigation, in ways that its proponents never intended.
This paper discusses the impact of institutional investor participation in securities litigation, which increased significantly as a result of lead plaintiff provisions in the PSLRA that evince an intent to have institutional investors play a larger role in securities cases. Specifically, the paper focuses on the ability of institutional investors to obtain corporate governance reforms and the contribution of personal funds by outside directors, as components of securities litigation settlements. The paper also provides an overview of ERISA actions that are often litigated in parallel with securities fraud actions. While these actions concern different legal theories, pleading standards and damages formulations to those of securities actions, there is an interplay between the two types of actions in at least two major areas — settlement and discovery. Indeed, the presence of parallel ERISA litigation in several high-profile securities actions has enabled the securities plaintiffs to obtain relief from the PSLRA’s discovery stay allowing them to have early access to any materials that have been produced to the ERISA plaintiffs.
INTRODUCTION The recently announced $2.7bn settlement of the Nortel Networks civil securities fraud
International Journal of Disclosure and Governance, Vol. 3, No. 2, 2006, pp. 115–131 © Palgrave Macmillan Ltd, 1746–6539/06 $30.00
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Be careful what you wish for
class action also requires Nortel to implement certain corporate governance enhancements, including the yearly election of a non-executive Chairman of the Board of Directors.1 Last year, the multi-billion dollar settlem
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