Institute for Legal Reform: Issues Resource Center: Securities Litigation

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Securities Litigation

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Securities Litigation

About Securities Litigation

Following the increase in value of many securities in the 1980s and 1990s, plaintiffs’ lawyers used downturns in stock prices as opportunities to file shareholder class action lawsuits. By the early 1990s, securities litigation abuse was widespread. Some securities lawyers would file “strike suits,” in which plaintiffs recruited by lawyers would buy a few shares of a company's stock for the sole purpose of bringing a securities class action lawsuit within days after the share price declined, despite little or no evidence of any corporate wrongdoing.

The plaintiff lawyers’ lawsuits often have opened the door for abuse of the discovery process, and many companies have settled securities lawsuits rather than face plaintiff lawyer expeditions into their corporate files, much less risk multi-million-dollar jury awards.

Securities Class Action Litigation: The Problem, Its Impact, and the Path to Reform

Private securities class action lawsuits present a serious threat to the health of U.S. businesses, the prosperity of American families and the strength of our nation’s global competitiveness, according to an analysis released July 24, 2008 by ILR.