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Stanford. March 18, 2002
The Stanford Clearinghouse. By Joseph A. Grundfest
The Stanford Clearinghouse offers investors, policymakers, scholars, judges, lawyers and the media a powerful research tool that provides a detailed look into the workings of federal securities fraud class action litigation. By digitizing and linking the full text of complaints, motions, dockets, judicial opinions, and other major class action filings, together with summaries and analyses of those lawsuits into a single website with its own full-text search engine, the Stanford Clearinghouse offers information that is substantially more detailed and timely than can be found on other services, which generally limit their databases to judicial decisions. By accessing this site, each user can form his or her own opinion as to whether litigation is with or without merit, whether too few or too many companies are being sued, and whether recoveries are too small or too large. In 1914, Justice Louis D. Brandeis observed, "Sunlight is said to be the best of disinfectants, electric light the most efficient policeman." [Louis D. Brandeis, Other People's Money, ch.5 (1914)] The Internet's ability to disseminate information and to harness the forces of disclosure in the public's interest are, we believe, at least as powerful as Brandeis's "electric light" and we hope that this website makes a contribution in this direction. Institutional investors with more than $1.5 trillion in assets under management have already registered with the Stanford Clearinghouse to receive automatic notices of litigation developments that may affect investments in their portfolios. All members of the public are invited to join these major institutional investors and to register to receive prompt notification of litigation developments. (Note: you will need a valid e-mail address so that we can communicate with you.) This Internet site would not be possible without the cooperation of the judges of the United States District Court for the Northern District of California who have approved Local Rule 23-2. Rule 23-2 is the first local rule of court that requires Internet posting of major securities fraud class action litigation filings. The cooperation of the United States Securities and Exchange Commission in various aspects of this project is also extremely helpful. This project is made possible only through the vision and generosity of our sponsors: Cornerstone Research now provides major ongoing support, together with the Nasdaq Stock Market. George Roberts provided the "seed capital" for this venture, and MarketSpan provides their services for background research. Please browse through the additional links described above to learn more about this site and our plans for the future. We recognize that this is an experimental effort, and we are happy to receive any suggestions about how we might improve the quality of our service. We know that we are still learning about how the Internet can help improve the legal process and hope that you will share your insights with us. Back to Top
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Stanford. September 21, 2000
Five distinct reasons to focus on Securities Fraud Class Action Litigation
We selected class action securities fraud litigation as the first subject area for our new Internetefforts for five distinct reasons: - Thousands of investors have an interest in class action securities fraud litigation. The Internetprovides a low-cost means of communicating with these members of the class. The broad public interest inclass action securities fraud litigation distinguishes it from most private party litigation in which a relatively small number of parties havea direct interest.
- The Private Securities Litigation Reform Act of 1995 provides a clear starting point for studyingthe effects of major statutory reform. The Website therefore has a realistic chance of capturing theentire bitstream describing the evolution of a new area of the law.
- There is a pre-existing and well-defined community of participants who are actively engaged insecurities fraud class action litigation. A relatively small number of law firms account for a largeshare of the litigation on plaintiffs' side, and an identifiable group of law firms have active defense practices. Many of these law firms aretechnologically sophisticated and are able to take advantage of this Website quickly.
- Even after the passage of the 1995 Reform Act and defeat ofPropositions 201, 202, and 211 in California, class action securities fraud litigation continues to be atopic of great public interest. A Website dedicated to an objective representation of developments inthat area of the law may be useful in the formation of reasonable public policy.
- The 1995 Reform Act contains provisions that require public notification upon the filing andsettlement of class action securities fraud litigation. These provisions are consistent with Internetaccess to the full litigation record.
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Stanford. September 27, 2004
Securities Class Action Clearinghouse Database: Definition of the SCAC Sample Data
A record in our database is a case that identifies a defendant or defendants that are being sued in Federal Court by shareholders (plaintiff) of the same issuer, or issuers, for the first time in violation of Federal Securities Laws. In other words, if two or more securities class action complaints against the same defendant, or defendants, have the same underlying allegations, there is only one record in our database. Accordingly, when a case arises out of the same subject matter as one of the actions first filed and is brought by shareholders of the same issuer, or issuers, it is hereafter part of that record. The defendant may or may not be the issuer of the plaintiff's securities. They may be underwriters, investment banks, broker firms, mutual funds, etc. For example, in the "Analyst" type cases the lawsuits generally do not allege that the issuers are engaged in any unlawful activity. Note, the cases where the issuer is not named as a defendant does not represent the large majority of lawsuits in the database. Furthermore, often in a securities class action issuers, underwriters, investment banks, broker firms, mutual funds, or a combination of these, will be sued in multiple filings, filed by different named plaintiffs represented by different plaintiffs' law firms. While these filings often contain substantially similar allegations, there may be variations between the allegations or defendants in separate complaints. In addition, a record (case) in our database generally describes only one complaint of all the filings against the same defendant. As a general rule, we select the first complaint we have identified. If multiple complaints are filed at one time, we choose the complaint that appeared to contain the most detailed allegations. However, if we locate the amended and/or consolidated complaint, we update the case summary and other information as needed.
Notes:
We do not track lawsuits filed is state court where there is no parallel federal civil class action, nor do we track SEC enforcement proceedings when there is no parallel federal civil class action.
One of the benefits of our approach (definition of a record) is that we do not make the mistake of counting suits that will be consolidated or managed jointly, and consequently we do not duplicate suits against the same defendant.
The definition of the case in our database is based on a "lawsuit brought by shareholders of the same issuer," which is similar to the approach of the Courts and Judicial Panel on Multi-district Litigation in connection to case management issues. Back to Top
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The Stanford Clearinghouse
A useful tool for Investors
- Investors can track the list of companies that have been sued to determine if they hold stock inany defendant corporations.
- The Private Securities Litigation Reform Act of 1995 creates a new role of "lead plaintiff" witha presumption that the investor having the largest financial stake in the litigation can serve as leadplaintiff. Institutional investors will most often have the largest stake in the outcome of the litigation. Some commentators question whetherinstitutions have a fiduciary duty to at least consider becoming lead plaintiffs. See, Elliot J.Weiss and John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors CanReduce Agency Costs in Securities Class Actions, 104 Yale L.J. 2053, 2112 (1995). By registeringto receive information from this site, and by searching posted materials, institutional investors can become more informed about the status of litigation as itaffects their portfolios, and thereby better fulfill their fiduciary obligation, if any, to monitorclass action securities fraud litigation.
- Investors can review the litigation record to form their own opinions as to whether thelitigation does or does not have merit.
- Investors can hotlink to Stockmaster to track thedefendant corporation's recent stock price performance.
- Investors can review our summaries to learn more about patterns of securities fraud litigationaffecting the entire stock market.
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The Stanford Clearinghouse
A useful tool for Judges
- Judges can search court dockets in the Northern District of California, and can also search theClearinghouse database for cases nationwide, for arguments relevant to issues they are called upon todecide. The best arguments and most relevant precedents are not necessarily in the papers filed before any individual judge in any specific cases, andthis Website provides the judiciary with a powerful new legal research tool.
- Judges can use the site's full text search capability to conduct electronic searches of thebriefs pending in case before them to focus on each side's treatment of specific events and precedents.
- Judges can compare litigation pending in their courts with broader litigation patterns anddetermine whether a case raises issues that are common or atypical.
- Even outside of Northern District of California, judges can order posting of major filings andsettlement materials in a manner consistent with Northern District of California Local Rule 23-2. Suchposting will improve communications with shareholders -- the real parties at interest in these lawsuits -- and make the class action process moretransparent.
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The Stanford Clearinghouse
A useful tool for Lawyers
- When a company is sued, it and its officers and directors need legal representation. Consistentwith relevant standards of ethics, information about pending litigation can help defendants and counselbecome aware of counsel that have litigated similar matters.
- Plaintiff counsel who learn of the pendency of litigation against a particular company can,consistent with relevant standards of ethics, determine whether they represent clients with an interestin the litigation.
- Counsel can search filings nationwide to learn of arguments made in other pending cases thatcould benefit their clients.
- Counsel can use the site's full-text search engine to research opposing briefs to help assurethat they have responded to all relevant arguments and precedents.
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The Stanford Clearinghouse
A useful tool for the Media
- By registering for automatic E-mail notification reporters can learn of major new filings andlitigation developments quickly and efficiently.
- Free on-line access, combined with summaries and related research tools, will help reporterscraft more accurate stories in less time and in greater detail.
- By monitoring developments across all class action securities fraud litigation, the media will beable to spot trends and developments previously hidden in court dockets.
- By examining court documents, the media can develop and refine leads useful in investigativejournalism regarding complaints and defenses that may appear to be with or without merit.
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_____________________________________________________________________will help policy makers answer basic q uestions about the effects of the 1995 ReformAct, and thereby help determine whether the statute is achieving its intended purpose or should bemodified. For example, the Website will help answer basic questions such as: - Has the number of companies sued increased or decreased since passage of the Reform Act?
- Has the nature of claims brought changed because of passage of the Act?
- Is there reason to believe that plaintiffs are unable to bring meritorious actions against companies that may have committed fraud, or that the Reform Act has prevented plaintiffs from achieving an appropriate recovery?
The Website will help policymakers study the effect of the procedural costs imposed againstlitigants as a result of the passage of the 1995 Reform Act.The Securities and Exchange Commission has often observed that private class action litigationcan be a valuable supplement to Commission enforcement proceedings. By monitoring this site, theCommission will be able to track private litigation developments on a more timely basis and form its own opinion as to whether private litigation is acting asan appropriate complement to Commission enforcement activity.Back to Top
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The Stanford Clearinghouse
A useful tool for Scholars
- By creating an easily accessible and publicly available database designed to track litigationfrom inception through conclusion -- without regard to whether the litigation results in a reporteddecision -- the Clearinghouse allows scholars to study an unbiased sample of the entire process of "law in action." The Clearinghouse thus allows scholars toconduct analyses that are currently impractical.
- By bringing timely information to researchers' desktops, this site will help reduce the oftensubstantial lag between the period covered by an academic analysis and the date the analysis isreleased. Put another way, legal research is often based on stale data which render the analysis of more historical than practical interest. This site may helpresearchers close that time gap and produce more relevant information.
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The Stanford Clearinghouse
A useful tool for Teachers
- Casebooks are filled with excerpts of reported judicial decisions. Most law students will, however, spend their careers writing pleadings and briefs, not authoring judicial opinions. A strong argument can be made that teachers need to teach from briefs and pleadings -- not just reported decision-- so that students can better learn how to be effective advocates. The Clearinghouse will allow teachers and students access to a broad range ofrecent pleadings and briefs that can be used to develop the art of advocacy and legal reasoning. No such comprehensive teaching tool is available to teachersand students today.
- The Clearinghouse will be most immediately helpful to teachers and students in the areas of:
- Civil Procedure -- where the Clearinghouse can help students observe the entire sequence oflitigation, from complaint through settlement, dismissal, or judgment;
- Complex litigation -- where the Clearinghouse will facilitate the study of class actiondynamics, the operation of Rule 23, and more procedural standards unique to securities fraud litigation; and
- Securities Regulation -- where access to original litigation documents can help track theelements of the Section 11 and Rule 10b-5 offenses, and other critical elements of the federalsecurities laws.
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1.- I am unable to print and/or download PDF court documents. What is happening?
A: The problem with certain PDF documents on our Website, unfortunately, comes directly from the law firms providing us with the complaints. Some of these PDF documents are encrypted. When a PDF document is encrypted you are unable to do anything but what the author allows the user to do. One of the most common encryptions is not allowing the user to print the document. We apologize since we are unable to do anything about those specially encrypted documents.
If you require a hard copy of a filing with a encrypted PDF document, you will need to contact the court where the complaint was filed or the firm who filed the complaint. The court will most definitely charge a fee. Some firms do charge and some don't. Back to Top
2.- What cases do the Clearinghouse cover?
A: A securities class action is a case brought pursuant to Federal Rule of Civil Procedure 23 on behalf of a group of persons who purchasedthe securities of a particular company during a specified period of time(the class period). The complaint generally contains allegationsthat the company and/or certain of its officers and directors violatedone or more of the federal or state securities laws. A suit is filedas a class action because the members of the class are so numerous thatjoinder of all members is impracticable. For a case to proceed asa class action, there should be a well-defined commonality of interestin the questions of law and fact involved in the case. Further, theplaintiffs must establish that a class action is superior to other availablemethods for the fair and efficient adjudication of the controversy andthat the prosecution of separate actions by individual class members wouldcreate a risk of inconsistent and varying adjudications. Back to Top
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3.- How often is the Clearinghouse updated?
A: The box score is updated each business day. The case list is updated each business day a securities class action isfiled in federal court. Back to Top
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4.- How soon after a filing does the Clearinghouse send out an e-mail notification of the filing?
A: We generally send out e-mail notification once a week concerningall cases which have been filed since the previous notice. Back to Top
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5.- How soon after a filing does the Clearinghouse post the complaint in an action?
Northern District of California A: For cases filed in the Northern District of California, theattorneys who file a complaint are required to submit the complaint withinthree days to a Designated Internet Site (such as this site). A complaintfiled in the Northern District of California is posted on the site withintwo business days. To date, complaints filed in the Northern Districtby the law firm of Milberg Weiss Bershad Hynes & Lerach have been postedon that firm's Designated Internet Site at: http://www.securities.milberg.com. Other Districts and State Courts For cases filed in other districts and State Courts, we attempt toobtain a copy of the complaint and post it on the site as soon as possible. If we are able toobtain an electronic copy of a complaint, we are able to process it and post it on the sitequickly. However, if we obtain only a paper copy of a complaint, it takes longer because we needto process the document to make it Internet-ready. Further, some complaints aredifficult to obtain in any form. Back to Top
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6.- Do we plan to add different types of cases to the Clearinghouse?
A: We are in the process of adding materials to our database in the area of state courtsecurities class actions and plan to expand our coverage of such actions. We do not have anycurrent plans to expand the site to cover different types (i.e. non-securities) of classactions or other types of litigation. Back to Top
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7.- Can I obtain a paper copy of a document that is posted on the site?
A: While most documents that are posted on the site are able to be downloaded and printed for free, we do not have the resources to mail or fax paper copies of documents to individuals. Notice the some documents posted in the site are encrypted. When a file (document) is encrypted you are unable to do anything but what the author of that document allows you to do. For this reason, you are in most cases able to view the document only. (Please read: I am unable to print and/or download PDF court documents. What is happening?) Back to Top
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8.- Can we give individuals advice about such topics as whether an individual has enough evidence to bring a class action or whether or not an investor should join the class in a particular case?
A: No. While we will answer general questions about the Clearinghouseitself, we are not able to answer questions which require giving legaladvice. Back to Top
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9.- Does the Clearinghouse modify documents before posting them?
A: No. We do not modify the text of documents before postingthem to the site. An error in the original document will also appearon the posted document with a "[sic]" symbol behind it. We do sometimesmodify the spacing or layout of a document. Back to Top
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10.- What is a securities class action?
A: A securities class action is a case brought pursuant to Federal Rule of Civil Procedure 23on behalf of a group of persons who purchased the securities of a particular company during a specifiedperiod of time (the class period). The complaint generally contains allegationsthat the company and/or certain of its officers and directors violated one or more of the federal orstate securities laws. A suit is filed as a class action because the members of the class are sonumerous that joinder of all members is impracticable. For a case to proceed asa class action, there should be a well-defined commonality of interest in the questions of law and factinvolved in the case. Further, the plaintiffs must establish that a class action is superior toother available methods for the fair and efficient adjudication of the controversy and that theprosecution of separate actions by individual class members would create a risk of inconsistent andvarying adjudications. Back to Top
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11.- Are there laws which protect individual investors against fraud by company management?
A: The Securities Act of 1933 and the Securities ExchangeAct of 1934 are the main federal laws which prohibit such conduct. The text of these statutes is available at the website for the Center forCorporate Law run by the University of Cincinnati College of Law. The URL is: http://www.law.uc.edu/CCL/sldtoc.html. In addition, the states have securities laws, known as blue sky laws, whichare also designed to protect individual investors. Back to Top
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12.- Where can I find more information about securities class actions?
A: A section of the Clearinghouse is devoted to securities-relatedreports, articles, and written testimony. The URL is: http://securities.stanford.edu/research.html.The following report posted on the Clearinghouse is useful for answeringa variety of questions: Securities Litigation Reform: The First Year's Experience A Statistical and Legal Analysis of Class Action Securities Fraud Litigation Under the Private Securities Litigation Reform Act of1995 by Joseph A. Grundfest and Michael A. Perino. Back to Top
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Website content inquiries. If I have a question ...
Press inquiries or for information about the content on this site, please contact Kamal Hubbard khubbard@law.stanford.edu. For assistance with functionality of this site, please contact scac@law.stanford.edu.
Press inquiries or for information about Cornerstone Research materials on this site, please contact John Gould at jgould@cornerstone.com. Questions about settlements research please contact Ellen Ryan at ERyan@cornerstone.com. Questions about litigation activity indices and research please contact Alexander Aganin at aaganin@cornerstone.com
IMPORTANT: We do try to provide assistance when we can. We cannot, however, give legal advice.
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How to submit documents to the Clearinghouse ...
There are several ways to send us documents to be posted: E-mail attachment: Several e-mail software packages enable you to attach a computer file to an e-mail message. If you have such software, you can attach your file to an e-mail addressed to Securities Class Action Clearinghouse at: scac@law.stanford.edu Diskette or CD Send a diskette or CD by any means reasonably calculated to result in delivery by the third day following the court filing to: Securities Class Action Clearinghouse
Stanford University School of Law
Crown Quadrangle
Stanford, CA 94305-8612 Please use a cardboard mailer or other means to protect the diskette from physical damage during transport. We also accept paper copies of documents as well. However, we favor and appreciate obtaining an electronic file of the document. Back to Top | Back to Home page
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