This comment lays out a framework that should allow corporations to strategically defend themselves against frivolous and meritless 10b-5 class action suits invoking Basic's Fraude-on-the-Market ("FOM") presumption of reliance. Part I of this comment discusses the current landscape of securities class action litigation. It explains how and why the suits are initiated and discusses the outcome of Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II). Part II discusses the framework for the proposition of this comment. It provides a brief history of significant cases and incorporates several recent cases that have opened the door to the possibility of implementing fee-shifting clauses. It concludes with a comparison to other contractual provisions currently being implemented by corporations and also analyzes fee-shifting provisions under federal preemption. Part III explains why implementing fee-shifting provisions solves many of the key concerns raised by Halliburton II. Part IV discusses several implications and possible future actions that are readily recognizable regarding fee-shifting provisions.
Response or Comment
Steven W. Lippman, Comment, A Corporation’s Securities Litigation Gambit: Fee-Shifting Provisions that Defend Against Fraud-on-the-Market, 49 U. Rich. L. Rev. 1321 (2015).