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PUBLIC LAW 104-67

HOUSE OF REPRESENTATIVES BILL NO. 1058 OF 1995 - H.R. 1058

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Private securities litigation reform laws were enacted in 1995 following congressional passage of House of Representatives Bill No. 1058 [hereinafter referred to as “H.R.1058”].  (See Exhibit A, #1a)  This bill was introduced on February 27, 1995 by Representative Thomas Bliley. (See Exhibit A, #3a, page 1)  At this time, Representative Bliley served as chair of the House Committee on Commerce, the first Congressional Committee to review H.R. 1058.  (See Exhibit A, #3a and #10)  After the House of Representatives amended the bill, it was sent to the Senate for review.  (See Exhibit A, #2, page 160) 

 

The Senate proposed amendments but the House disagreed with the amendments and requested a conference.  (See Exhibit A, #5c) The purpose of a Conference Committee is to bring together legislators, called “conferees,” from the Senate and the House of Representatives in an attempt to reach a compromise on a bill’s language which is acceptable to both. After the Conferees met, a Conference Report was published and both Houses agreed to the final amendments.  (See, generally, Exhibit A, #6)  The bill was forwarded to the President for his approval. 

 

On December 19, 1995, President William J. Clinton vetoed H.R. 1058.  (See Exhibit A, #7)  Both the Senate and the House of Representative overrode the President’s veto and the “Private Securities Litigation Reform Act of 1995” was enacted on December 22, 1995 as Public Law 104-67.  (See Exhibit A, #1 and #5e)

 

The Conference Report provided an extensive background discussion that you may find helpful.  (See Exhibit A, #6, pages 31, et seq.)  For example, this Report stated the following regarding the need for H.R. 1058:

 

Congress has been prompted by significant evidence of abuse in private securities lawsuits to enact reforms to protect investors and maintain confidence in our capital markets.  The House and Senate Committees heard evidence that abusive practices committed in private securities litigation include: (1) the routine filing of lawsuits against issuers of securities and others whenever there is a significant change in an issuer’s stock price, without regard to any underlying culpability of the issuer, and with only faint hope that the discovery process might lead eventually to some plausible cause of action; (2) the targeting of deep pocket defendants, including accountants, underwriters, and individuals

who may be covered by insurance, without regard to their actual culpability; (3) the abuse of the discovery process to impose costs so burdensome that it is often economical for the victimized party to settle; and (4) the manipulation by class action lawyers of the clients whom they purportedly represent.

 

            . . .

 

            This Conference Report seeks to protect investors, issuers, and all who are associated with our capital markets from abusive securities litigation.  This legislation implements needed procedural protections to discourage frivolous litigation.  It protects outside directors, and others who may be sued for non-knowing securities law violations, from liability for damage actually caused by others.  It reforms discovery rules to minimize costs incurred during the pendency of a motion to dismiss or a motion for summary judgment.  It protects investors who join class actions against lawyer-driven lawsuits by giving control of the litigation to lead plaintiffs with substantial holdings of the securities of the issuer.  It gives victims of abusive securities lawsuits the opportunity to recover their attorneys’ fees at the conclusion of an action.  And it establishes a safe harbor for forward looking statements, to encourage issuers to disseminate relevant information to the market without fear of open-ended liability.

(See Exhibit A, #6, pages 31 and 32)