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March 1, 2013Roger B. Greenberg, Thane Tyler Sponsel III

Restoring the Balance of Class Certification Power in the Fifth Circuit: the United States Supreme Court’s Opinion in Erica P. John Fund, Inc. v. Halliburton, Co.

The Fifth Circuit, like other circuits, occasionally finds itself in conflict with the other circuit courts. Oscar Private Equity Investments v. Allegiance Telecom, Inc. and Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co. created one of these conflicts in the context of class certification under Federal Rule of Civil Procedure 23. On June 6, 2011, the United States Supreme Court resolved this conflict with its unanimous decision in Erica P. John Fund, Inc. v. Halliburton Co.

Preparing for Securities Litigation

Securities litigation is, in many respects, different from other types of business litigation. In an effort to bring order and structure to securities litigation, Congress enacted legislation specifically to address securities class actions. The Private Securities Litigation Reform Act (PSLRA) and Securities Litigation Uniform Standards Act (SLUSA) are two major statutes affecting securities class actions. The PSLRA sets out procedures uniquely applicable to securities class actions. In enacting the PSLRA, Congress acknowledged that private securities litigation provides defrauded investors with an important tool to recover losses. Congress nevertheless wanted to curb frivolous claims, vexatious discovery, and lawyer-driven litigation. H.R. Conf. Rep. No. 104-369, pp. 31 -32 (1995). Defending securities litigation is expensive, and Congress wanted to ensure that plaintiffs could not use the threat of protracted litigation as a means of extracting outsize settlements. To achieve this goal, the PSLRA sets exacting standards for alleging fraud. Discovery is restricted until the court has made a preliminary ruling on the merits of the complaint. The PSLRA provides a transparent process for selecting class representatives, mandates sanctions for frivolous suits, and specifies the process for settling cases. Business lawyers, especially in-house lawyers for publicly-traded companies, should take note of these special requirements. This paper is intended to help lawyers who do not regularly handle securities class actions to understand some of the unique aspects of this litigation and to prepare should they or their clients become involved.