|  | | 2004 News and Press Releases | | |
HEADLINE NEWS:
'Inspire': Fifth Circuit Rejects Group Pleading Doctrine
John A. Neuwirth
New York Law Journal. November 30, 2004
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EXCERPT: Plaintiffs have long utilized the technique of "group pleading" to ensnare company officers and directors as defendants in securities fraud actions without having to plead specific facts regarding what role each defendant played in the alleged misleading statements or omissions. But with the passage of the Private Securities Litigation Reform Act in 1995 (the PSLRA), the viability of the group pleading doctrine -- which permits plaintiffs to rely on a presumption that statements in prospectuses, registration statements, annual reports, press releases or other group-published information, are the collective actions of the officers and directors of a company -- has become a major source of debate among the district courts. Recently, in Southland Securities Corp. v. INSpire Insurance Solutions Inc., 2004 WL 626721 (5th Cir. March 31, 2004) (INSpire), the U.S. Court of Appeals for the Fifth Circuit handed down what appears to be the first appellate court ruling on the issue, finding that the group pleading doctrine cannot withstand the PSLRA's pleading requirements…. The Group Pleading Doctrine -- Notwithstanding the pleading requirements of the PSLRA and FedRCivP 9(b), plaintiffs bringing securities fraud actions often do not identify precisely who authored or approved the alleged misstatements in certain types of corporate documents, such as press releases and annual reports. The group pleading doctrine excuses plaintiffs from pleading with particularity in these circumstances by permitting them to link certain defendants to the alleged misstatements simply by pleading that the defendants were part of a "group" that likely compiled or published the documents. |
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