Behavioral economics (or, the application of empirical psychology to economics) has been around for more than a decade, and its teachings have begun to influence both policymaking and legal strategy. So it makes sense that at some point, someone would try to apply it to class action practice.

In her article "Behavioral Science and Scienter in Class Action Securities Fraud Litigation," Miami Business professor Ann Morales Olazabal makes a first attempt at applying some of the insights from behavioral economics to securities fraud cases. Her specific concern is what the past decade’s findings say about … Continue Reading

Two years ago, I wrote about the difficulties defendants face when securities plaintiffs invoke confidential witnesses in their complaints. The case that prompted that discussion, City of Livonia Employee Retirement System v. Boeing Corp., now has a sequel. As it turns out, both parties appealed the opinion below: the plaintiffs because the court below had dismissed their case with prejudice, and the defendants because the court had not imposed sanctions consistent with the PSLRA.

Judge Posner wrote the opinion for the three-judge panel. He began with a brief (and very informative) summary of the relevant provisions of the PSLRA. In … Continue Reading

Back in January, NERA Economic Consulting published yet another interesting paper, entitled Dynamic Litigation Analysis: Predicting Securities Class Action Settlements as a Case Evolves, by Dr. Ronald Miller.

Using the data NERA has collected on securities class actions over 20 years, Dr. Miller comes to some interesting conclusions about motions practice in securities cases. Most notably:

  • Few securities class actions are resolved at the summary judgment stage.
  • The filing of a motion to dismiss has little effect on settlement value of securities cases, but the granting of dismissal can reduce the value of a settlement by up
Continue Reading

Blue Coat Systems, Inc. was a web security firm that, in 2008, tried to break into the growing field of wide-area network optimization by acquiring a company called Packeteer, Inc. The move was supposed to secure long-term growth, but arguably had the opposite effect.

On May 27, 2010, Blue Coat issued some financial results and held a conference call with industry analysts. While Blue Coat had met its its previous financial projections, its forward- looking guidance was not as optimistic as in previous calls. The analysts (and their readers) apparently worried, because the next day Blue Coat shares lost a … Continue Reading

The Supreme Court has handed down its first class-action related opinion of the 2012-13 Term, Amgen Inc. v. Connecticut Retirement Plans & Trust Funds. And while that opinion represents a loss for the defendants in the specific case, it’s not as big a problem for securities defendants in general.

Amgen involved an alleged securities fraud committed by Amgen Inc., a biotechnology company. As the Ninth Circuit’s opinion lays out the alleged misstatements:

First, Amgen supposedly downplayed the FDA’s safety concerns about its products in advance of an FDA meeting with a group of oncologists. Second, Amgen allegedly concealed details

Continue Reading

For many, the start of a new year is not just a time to look ahead, but also a nice landmark for looking back. So it is with class-action litigators. In the past month, there have been at least four different "Year End Reviews" of class actions. (I’m not counting my own, which are more top ten lists than anything else.)

So how do these various reviews stack up? Pretty well, actually.

Baker Hostetler’s 2012 Class Action Year End Review
Where to find it: Here.
What’s to like: It’s a comprehensive look at class … Continue Reading

On Monday, the Supreme Court heard arguments in two different class actions, united by a common problem.

The first, Comcast Corp. v. Behrend, asked whether a trial court should hold plaintiffs to the Daubert standard for expert testimony at class certification, a question that has divided federal circuits for several years. Due in part to a difficult record below (Comcast had not actually registered a Daubert objection), the Justices argued back and forth about whether there was an issue to decide at all, and, if so, what it was. At one point, Justice Kagan remakes in frustration:


Continue Reading

In 1998, the class action plaintiffs’ firm Milberg Weiss filed sued Computer Associates for violating the federal securities laws by lying about its revenues in order to increase its stock price. In a perfectly unremarkable development, it was appointed co-lead counsel of the consolidated class. (Various firms had filed a total of eleven complaints.) Over the next four years, the pressure on Computer Associates mounted. Thirteen more complaints were filed, and the US Attorney’s office (EDNY) and SEC launched a joint investigation of the firm.

So Computer Associates decided to settle the case. After seven months of mediation with … Continue Reading

 It turns out that Elizabeth Chamblee Burch is not the only law professor currently worried about adequacy in securities class actions. Boston University law professor David H. Webber has an article in the Northwestern University Law Review on The Plight of the Individual Investor in Securities Class Actions.

While Professor Burch was concerned with whether or not institutional investors were adequate representatives on their own, Professor Weber is more concerned with whether they can ever represent individual investors. In particular, he sees three conflicts that may be insurmountable:

  1. Derivatives trading. Institutional investors tend to engage in derivatives trading;
Continue Reading

 Georgia Professor Elizabeth Chamblee Burch has an essay out for the University of Cincinnati’s Corporate Law Symposium, in which she argues that institutional investors may have problems serving as adequate class representatives in securities class actions.

As she acknowledges, this is a counter-intuitive position, but that hardly makes it wrong. We have grown used to thinking of institutional investors as "good" class plaintiffs [] ever since the passage of the PSLRA, when Bill Lerach began to recruit them as named plaintiffs in securities class actions. But, as Professor Burch explains,

a divide often exists between institutional and

Continue Reading