Opinion ID: 161559
Heading Depth: 3
Heading Rank: 2

Heading: The Private Securities Litigation Reform Act (PSLRA)

Text: 52 The enactment of the PSLRA in 1995 marked a bipartisan effort to curb abuse in private securities lawsuits, particularly the filing of strike suits. 16 Greebel v. FTP Software, Inc., 194 F.3d 185, 191 (1st Cir. 1999). The PSLRA 17 thus mandates a more stringent pleading standard for securities fraud actions in general, and for scienter allegations in particular. The PSLRA requires that a complaint asserting a violation of Section 10(b) of the Act shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding a statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. 15 U.S.C. 78u-4(b)(1). The PSLRA also heightens the standard for pleading scienter with the following requirement: 53 In any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. 54 15 U.S.C. 78u-4(b)(2) (emphasis added). 55 According to the Conference Committee Report, the PSLRA was intended to eliminate some of the abuses experienced in private securities litigation, such as the routine filing of lawsuits . . . whenever there is a significant change in an issuer's stock price, the abuse of the discovery process to impose costs so burdensome that it is often economical for the victimized party to settle, and the manipulation by class action lawyers of the clients they purportedly represent. See H.R. Conf. Rep. No. 104-369, at 31, reprinted in 41 Cong. Rec. H13692 (daily ed. Nov. 28, 1995). The Conference Committee thus adopted a very stringent pleading standard for securities plaintiffs, purportedly higher than any federal court had imposed up to that point in time, as a means to discourage spurious securities lawsuits. See id. at 41 (Regarded as the most stringent pleading standard, the Second Circuit requirement is that the plaintiff state facts with particularity, and that these facts, in turn, give rise to a 'strong inference' of the defendant's fraudulent intent. Because the Conference Committee intends to strengthen existing pleading requirements, it does not intend to codify the Second Circuit's case law interpreting this pleading standard.). 56