|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Gone Unnoticed, Does notice provision of the Class Action Fairness Act apply to securities cases?
Israel David and Julie E. Kamps
New York Law Journal. April 7, 2008
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EXCERPT: WHEN it was enacted three years ago, the Class Action Fairness Act of 2005 (CAFA) -- which instituted broad changes to the way nationwide consumer class action lawsuits are litigated -- was viewed by many members of the securities litigation bar as not being particularly relevant to securities class action lawsuits. After all, it was well known that CAFA was principally aimed at so-called 'coupon settlements' of consumer class action lawsuits brought in state courts. Indeed, CAFA expressly carves out securities class actions from several of the statute's core provisions. There is, however, one provision of CAFA that is now rising to the fore as an issue in securities class action litigation. In particular, CAFA contains a provision that requires defendants in certain federal class actions to provide notice to various federal and state officials of any proposed settlement filed with the court. There is some uncertainty as to whether this provision applies to securities class actions. Several commentators noted at the time of CAFA's enactment that the notice provision does not apply to securities class actions, and several post-CAFA securities class actions have settled without the CAFA notice having been provided. Yet, the language of the statute itself offers only little, albeit some, support for the proposition that the notice is inapplicable to securities class actions. This article discusses the background of CAFA, examines the uncertainty regarding the applicability of the notice provision to securities class actions, and concludes that, while Congress likely did not intend for the notice provision to apply to securities class actions, practitioners may well want to provide the CAFA notice as a matter of caution. |
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