15 USC 77 - Private securities litigation

View all text of Subchapter I [§ 77a - § 77aa]

§ 77z–1. Private securities litigation

(a) Private class actions

(1) In general

(2) Certification filed with complaint

(A) In general

Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that—

(i) states that the plaintiff has reviewed the complaint and authorized its filing;

(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff’s counsel or in order to participate in any private action arising under this subchapter;

(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;

(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;

(v) identifies any other action under this subchapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve, or served, as a representative party on behalf of a class; and

(vi) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff’s pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).

(B) Nonwaiver of attorney-client privilege

(3) Appointment of lead plaintiff

(A) Early notice to class members

(i) In general

Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class—

(I) of the pendency of the action, the claims asserted therein, and the purported class period; and(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.

(ii) Multiple actions

(iii) Additional notices may be required under Federal rules

(B) Appointment of lead plaintiff

(i) In general

(ii) Consolidated actions

(iii) Rebuttable presumption(I) In general

Subject to subclause (II), for purposes of clause (i), the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this subchapter is the person or group of persons that—

(aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i);(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.(II) Rebuttal evidence

The presumption described in subclause (I) may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff—

(aa) will not fairly and adequately protect the interests of the class; or(bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class.

(iv) Discovery

(v) Selection of lead counsel

(vi) Restrictions on professional plaintiffs

(4) Recovery by plaintiffs

(5) Restrictions on settlements under seal

(6) Restrictions on payment of attorneys’ fees and expenses

(7) Disclosure of settlement terms to class members

Any proposed or final settlement agreement that is published or otherwise disseminated to the class shall include each of the following statements, along with a cover page summarizing the information contained in such statements:

(A) Statement of plaintiff recovery

(B) Statement of potential outcome of case

(i) Agreement on amount of damages

(ii) Disagreement on amount of damages

(iii) Inadmissibility for certain purposes

(D) Identification of lawyers’ representatives

(E) Reasons for settlement

(F) Other information

(8) Attorney conflict of interest

(b) Stay of discovery; preservation of evidence

(1) In general

(2) Preservation of evidence

(3) Sanction for willful violation

(4) Circumvention of stay of discovery

(1) Mandatory review by court

(2) Mandatory sanctions

(3) Presumption in favor of attorneys’ fees and costs

(A) In general

Subject to subparagraphs (B) and (C), for purposes of paragraph (2), the court shall adopt a presumption that the appropriate sanction—

(i) for failure of any responsive pleading or dispositive motion to comply with any requirement of Rule 11(b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation; and

(ii) for substantial failure of any complaint to comply with any requirement of Rule 11(b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred in the action.

(B) Rebuttal evidence

The presumption described in subparagraph (A) may be rebutted only upon proof by the party or attorney against whom sanctions are to be imposed that—

(i) the award of attorneys’ fees and other expenses will impose an unreasonable burden on that party or attorney and would be unjust, and the failure to make such an award would not impose a greater burden on the party in whose favor sanctions are to be imposed; or

(ii) the violation of Rule 11(b) of the Federal Rules of Civil Procedure was de minimis.

(d) Defendant’s right to written interrogatories

(May 27, 1933, ch. 38, title I, § 27, as added Pub. L. 104–67, title I, § 101(a), Dec. 22, 1995, 109 Stat. 737; amended Pub. L. 105–353, title I, § 101(a)(2), title III, § 301(a)(5), Nov. 3, 1998, 112 Stat. 3230, 3235.)