The Federalist Society

New Opportunities for Defendants in Securities Class Actions

October 1, 2007

Francis J. Menton

The securities class action litigation industry, known for its stability the last twenty or so years, could see some real changes soon. Several developments in the past year have given defendants opportunities previously unavailable to deliver potentially fatal blows to some of the many weak cases brought every year. These include (1) the Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., prescribing how to apply the “strong inference of scienter” requirement of the Private Securities Litigation Reform Act of 1995 (“Reform Act”); (2) decisions from the Second and Fifth Circuits, making class certifi cation more difficult in what could be large groups of cases; and (3) consideration by the SEC of allowing issuers to provide, in their by-laws or otherwise, for arbitration of securities disputes with shareholders....

New Opportunities for Defendants in Securities Class Actions  


The Federalist Society