|  | | 2004 News and Press Releases | | |
HEADLINE NEWS:
Legal Opinion Letter, HIGH COURT SHOULD REVIEW RULING ON SECURITIES FRAUD "SAFE HARBOR"
Joseph De Simone, Matthew D. Ingber and Evan A. Creutz, Brown, Rowe & Maw LLP
Washington Legal Foundation. December 3, 2004
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EXCERPT: A recent decision of the United States Court of Appeals for the Seventh Circuit, Asher v. Baxter International Incorporated, 377 F.3d 727 (7th Cir. 2004), may dramatically alter the landscape of federal securities litigation and the content of corporate disclosures. Judge Frank Easterbrook, writing for a unanimous court, rejected defendants' attempt to rely on the protection of the "safe harbor" provision of the Private Securities Litigation Reform Act ("PSLRA") on a motion to dismiss prior to discovery. He found that it was impossible to determine, based on the pleadings alone, whether defendant Baxter International ("Baxter") had issued "meaningful" cautionary statements to accompany its forward-looking projections. This reasoning appears to conflict with the decisions of several other appellate courts, and may significantly erode the protections afforded to corporations sharing future projections and plans with the investing public. Before the enactment of the PSLRA, abusive shareholder litigation curtailed the willingness of corporate managers to disclose information to the marketplace. H.R. Conf. Rep. No. 104-369, at 42- 43. To combat this "chilling effect" and to "enhance market efficiency by encouraging companies to disclose forward looking information," Congress enacted the PSLRA safe harbor provision, which immunizes companies from liability for forward-looking statements that are "accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement." 15 U.S.C. Sec. 77z-2(c)(1)(A)(i) (emphasis added). Since the passage of the PSLRA, scores of federal district courts have granted motions to dismiss based upon this provision. |
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