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| 2001 News and Press Releases |
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HEADLINE ARCHIVED:
Securities Fraud Plaintiffs Bear A Heavier Burden Of Demonstrating That They Can Adequately Represent A Class After The Reform Act - Part I
By: Miranda S. Schiller and Haron W. Murage
The Metropolitan Corporate Counsel. November 2001
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Excerpt: In an unusual interlocutory appeal under Rule 23(f) of the Federal Rules of Civil Procedure, the Fifth Circuit Court of Appeals recently held that the Private Securities Litigation Reform Act of 1995 (the "Reform Act")1 imposes a heavier burden on plaintiffs seeking to be certified as class representatives in securities fraud actions than previously had been held to apply by certain other courts. According to the Fifth Circuit, the Reform Act "mandates that class representatives, and not lawyers, must direct and control litigation" in order to demonstrate that they can adequately represent a class. In Berger v. Compaq Computer Corp.,2 the Fifth Circuit reversed and vacated a federal district court's order certifying four plaintiffs as adequate representatives under Rule 23. Currently pending before the Fifth Circuit is a petition for an en banc rehearing, in which plaintiffs and defendants have teed up the question of whether the panel in Compaq erred in holding that the Reform Act heightens the standard for obtaining class certification in securities fraud actions. Plaintiffs argue, among other things, that Compaq creates a new and inappropriately high standard for establishing adequacy in class actions that is inconsistent with Rule 23(a)(4) of the Federal Rules of Civil Procedure. Compaq appears to be the first case in which a class certification order in a securities fraud action has been reviewed under Rule 23(f),3 and the first case in which an appellate court has addressed the Reform Act's impact on the Rule 23 adequacy inquiry.
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