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Friday, February 9, 2007

NCLC Urges Supreme Court to Strengthen Standards In Securities Fraud Cases    

WASHINGTON, DC—In a friend-of-the-court brief filed today, the National Chamber Litigation Center (NCLC) urged the U.S. Supreme Court to strengthen congressional standards—known as “knowledge standards”—in allegations of fraud in securities litigation under the Private Securities Litigation Reform Act (PSLRA).

“Stronger standards are necessary for allowing fraud defendants to avoid blackmail settlements—a primary reason why many of these lawsuits are filed,” said Robin Conrad, NCLC senior vice president. “These types of abusive securities lawsuits are driving companies out of the United States and forcing them to seek capital elsewhere.” 
 
Addressing the rise of allegations of corporate securities fraud, Congress enacted PSLRA in 1995 to curb frivolous litigation. This created a “strong inference” standard for knowledge of alleged fraud, which has been misinterpreted by lower courts, according to the NCLC. In Tellabs, Inc., et al., v. Makor Issues & Rights, Ltd., the Seventh Circuit weakened Congress’ intent by creating a “could infer” standard that does not require hard evidence of securities fraud but merely an inference of fraud. The case stems from allegations that Tellabs intentionally made optimistic public statements about sales of its products contrary to internal sales projections.     
        
“Weak standards create windfalls for overzealous securities class action lawyers, creating significant uncertainty for the financial industry and investors,” Conrad added.  “It’s critical to employers and investors that the Supreme Court give real meaning to Congress’ desire to implement stricter standards.”  

NCLC, the public policy law firm of the U.S. Chamber of Commerce, is a membership organization that advocates fair treatment of business in the courts and before regulatory agencies. The U.S. Chamber is the world’s largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

NCLC 

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