Law Commons^™

There Are Plaintiffs And...There Are Plaintiffs: An Empirical Analysis Of Securities Class Action Settlements, James D. Cox, Randall S. Thomas, Lin (Lynn) Bai

Faculty Articles and Other Publications

In this paper, we examine the impact of the PSLRA and more particularly the impact the type of lead plaintiff on the size of settlements in securities fraud class actions. We provide insight into whether the type of plaintiff that heads the class action impacts the overall outcome of the case. Furthermore, we explore possible indicia that may explain why some suits settle for extremely small sums - small relative to the "provable losses" suffered by the class, small relative to the asset size of the defendant-company, and small relative to other settlements in our sample. This evidence bears heavily …

Tattlers And Trail Blazers: Attorneys' Liability For Clients' Fraud, Barbara Black

Faculty Articles and Other Publications

No abstract provided.

Brokers And Advisers-What’S In A Name?, Barbara Black

Faculty Articles and Other Publications

The article addresses two recent developments - the adoption by the SEC of a rule that allows brokerage firms to market fee-based accounts without registering as investment advisers and the increase in brokerage advertising that promotes the image of the broker as a trusted family friend and financial adviser. Professor Black argues that as a result of these developments investors are likely to be misled into believing that their brokers are investment advisers, with the fiduciary obligations the law requires of them, instead of brokers, whom the law generally treats as salespersons. She proposes two recommendations: (1) that brokers should …

The Elusive Balance Between Investor Protection And Wealth Creation, Barbara Black, Jill Gross

Faculty Articles and Other Publications

The enactment of federal securities legislation in the 1930s codified the principle that investors should be shielded from securities fraud, but scholars and policymakers continue to debate the appropriate balance between protecting investors and encouraging capital formation. Congressional activity of the past decade reflects this tension. In the 1990s, Congress enacted two major pieces of legislation to restrict securities fraud class actions because of its belief that frivolous class actions were a drain on entrepreneurism. In 2002, after the EnronIW orldCom et al. corporate scandals, reflecting perhaps a sense that the earlier legislation had tipped the pendulum too far, Congress …

Is Securities Arbitration Fair To Investors?, Barbara Black

Faculty Articles and Other Publications

Most disputes between customers and their brokerage firms are resolved through arbitration as a result of the Supreme Court's holding in Shearson/American Express, Inc. v. McMahon. McMahon was part of two larger trends of the Supreme Court: the Court's general pro-arbitration trend and its efforts to remove private securities fraud claims from federal court. Many investor advocates viewed McMahon as anti-investor, a view that continues to have support today.

This is an assessment of the current securities arbitration process from the perspective of an investor advocate. In my view, investors may fare better in arbitration than in litigation. Accordingly, the …

Entering The U.S. Securities Markets: Regulation Of Non-U.S. Issuers, Barbara Black

Faculty Articles and Other Publications

The U.S. securities markets offer the greatest opportunities for businesses that wish to raise additional capital or expand their shareholder base. Large non-U.S. corporations regularly tap the U.S. market for infusions of capital, and the securities of many non-U.S. corporations are listed on the New York Stock Exchange or traded on NASDAQ. Smaller non-U.S. entities, however, may be deterred from entering the U.S. markets because of concerns about the burdens of U.S. securities regulation. These concerns are legitimate: a decision to enter the highly-regulated U.S. securities markets should not be made lightly. For non-U.S. private issuers, perhaps the greatest difficulty …

The Irony Of Securities Arbitration Today: Why Do Brokerage Firms Need Judicial Protection?, Barbara Black

Faculty Articles and Other Publications

In 1987 the securities industry achieved a major victory. Until then, because of the Supreme Court's 1953 holding in Wilko v. Swan that agreements to arbitrate federal securities claims contained in customer agreements were unenforceable, customers could sue brokerage firms and their salespersons in court, frequently before juries amenable to sizable verdicts, including punitive damages.

Illustrating a classic example of “be careful what you wish for,” brokerage firms no longer find arbitration entirely to their liking. Increasingly they turn to the courts to resist arbitration, to interfere with ongoing arbitration, or to undo the results of arbitration.

Unfortunately, both federal …

Economic Suicide: The Collision Of Ethics And Risk In Securities Laws, Barbara Black, Jill Gross

Faculty Articles and Other Publications

The first part of this article looks at whether there are any legal principles derived from regulation or the case law to support an "economic suicide" claim. The second part of the article reviews arbitrators' awards to determine whether arbitrators do, in fact, decide favorably on economic suicide claims. The article also looks at some arbitrators' awards that appear to recognize an economic suicide claim to identify any factors that may lead arbitrators to award damages to the claimant. Finally, in the third part, we address whether policy considerations support an extension of recognized brokers' duties to include a duty …

Hong Kong's Reformed Broker Contribution Rules, Lin (Lynn) Bai

Faculty Articles and Other Publications

Lynn Bai of the Hong Kong Securities and Futures Commission outlines the new risk-based calculation method for brokers' contributions to the stock clearing fund.

Establishing A Securities Arbitration Clinic: The Experience At Pace, Barbara Black

Faculty Articles and Other Publications

In the fall of1997 Pace University School of Law established one of the first law school clinics to provide student assistance to small investors who have disputes with their broker-dealers. What follows is a brief account of the clinic's educational objectives, an analysis of the initial organizational issues, and a report on the clinic's operation during its first two years. I am writing this in the hope that it will provide guidance and assistance to other law schools that contemplate establishing a securities arbitration clinic.

This is a nuts-and-bolts article written from the perspective of an experienced law professor who …

Strange Case Of Fraud On The Market: A Label In Search Of A Theory, Barbara Black

Faculty Articles and Other Publications

Part I of this Article will briefly discuss fraud on the market as a label attached to different factual situations, analyzing Blackie v. Barrack and Shores v. Sklar as two paradigms of the label's application. Part II will discuss the Supreme Court's recent decision in Basic. It concludes that the Court did not analyze definitively fraud on the market, thus leaving open the possibility that a pure causation approach is an appropriate explanation of fraud on the market. The treatment and application of fraud on the market in the lower courts is next analyzed in three groups: those applying Blackie, …

The Second Circuit's Approach To The "In Connection With" Requirement Of Rule 10b-5, Barbara Black

Faculty Articles and Other Publications

This Commentary examines the evolution of the "in connection with" requirement within the Second Circuit, focusing on cases decided in the 1985-86 term. It attempts to illustrate the direction the Circuit has taken in dealing with complex issues of securities fraud.

Racketeer Influenced And Corrupt Organizations (Rico)—Securities And Commercial Fraud As Racketeering Crime After Sedima: What Is A "Pattern Of Racketeering Activity"?, Barbara Black

Faculty Articles and Other Publications

Congress enacted the Racketeer Influenced and Corrupt Organizations Act (RICO) in 1970 in order to stem the infiltration and corruption of legitimate businesses by organized crime. During the 1970's, civil litigants virtually ignored the statute, but in the 1980's the utility of RICO's civil provisions has come to be generally recognized. Attorneys representing the victims of securities and commercial fraud now routinely add a claim alleging a RICO violation. Ii It is the attractiveness of the remedy - the successful plaintiff's recovery of treble damages and attorney's fees - that has led to this ever increasing use of RICO.

To …

Fraud On The Market: A Criticism Of Dispensing With Reliance Requirements In Certain Open Market Transactions, Barbara Black

Faculty Articles and Other Publications

The still-developing fraud on the market theory is the primary method by which securitiesf raudp laintiffs have attempted either to relax or eliminate the troubling reliance and causation requirements. Professor Black examines this emerging theory and suggests that the traditional common-lawfraud concepts that focus on reliance and causation still have validity and continue, even in this context, to offer appropriate
limitations on liability. The Article analyzes cases that have reduced or ignored this reliance element and explains why the legal concepts from which the fraud on the market theory evolved demand stricter adherence to reliance in certain markets but not …

Application Of Respondeat Superior Principles To Securities Fraud Claims Under The Racketeer Influenced And Corrupt Organizations Act (Rico), Barbara Black

Faculty Articles and Other Publications

Part I of this article outlines RICO's statutory scheme, reviews the common law doctrines under which a principal may be liable for the acts of its agent and the policies behind these doctrines, and examines RICO decisions raising the issue of vicarious liability. Part II examines non-RICO federal cases and identifies relevant factors determining the appropriateness of applying respondeat superior and agency principles to federal statutes. Finally, Part III analyzes the specific provisions of RICO in light of the factors identified in Part II. The article concludes that these factors do not support the imposition of liability on defendants other …

Is Stock A Security? A Criticism Of The Sale Of Business Doctrine In Securities Fraud Litigation, Barbara Black

Faculty Articles and Other Publications

This Article criticizes the use of the sale of business doctrine in securities fraud litigation. The Article first discusses the Supreme Court's efforts at defining a security, from its early investment contract analysis in SEC v. W.J. Howey Co., to Forman and other recent opinions. Part II analyzes the leading federal cases on the sale of business doctrine and examines problems in applying the doctrine. Next, part III examines alternative bases, within established Rule 10b-S jurisprudence, for dismissing the claims of purchasers of stock in close corporations. Finally, the Article asserts that, because the sale of business doctrine is inconsistent …