Abstract

http://ssrn.com/abstract=439503
 
 

Citations (19)



 
 

Footnotes (56)



 


 



What Counts as Fraud? An Empirical Study of Motions to Dismiss Under the Private Securities Litigation Reform Act


Adam C. Pritchard


University of Michigan Law School

Hillary A. Sale


Washington University in Saint Louis - School of Law

August 11, 2003

University of Iowa College of Law Legal Studies Research Paper Series, Forthcoming

Abstract:     
This article presents the findings of a study of the resolution of motions to dismiss securities fraud lawsuits since the passage of the Private Securities Litigation Reform Act in 1995. Our sample consists of decisions on motions to dismiss in securities class actions by district and appellate courts in the Second and Ninth Circuits for cases filed after the passage of the Reform Act to the end of 2001. These circuits are the leading circuits for the filing of securities class actions and are generally recognized as representing two ends of the securities class action spectrum. Post-PSLRA, the Second Circuit applies the least restrictive pleading standard to securities claims and the Ninth Circuit applies the most restrictive.

We find some evidence that the Ninth Circuit's post-PSLRA reputation as being a tougher venue in which to win securities fraud class actions is born out by a significantly higher dismissal rate. The differences between the two circuits are also reflected in factors that correlate with dismissal. For example, allegations of violations of accounting principles other than revenue recognition correlate negatively with dismissal in the Second Circuit. This coefficient, however, is insignificant in our regressions for the Ninth Circuit. Allegations of revenue recognition violations are insignificant in both circuits, whether or not the issuer has been forced to restate those revenues. The circuits part ways on other factors as well: the Second Circuit is significantly less likely to dismiss cases with allegations of false forward-looking statements, a surprising result given the stringent standards for such statements imposed by the PSLRA. The Ninth Circuit is significantly less likely to dismiss complaints with allegations of '33 Act violations and the Second Circuit is more likely to dismiss cases brought by the Milberg Weiss firm. When it comes to insider trading, however, the two circuits are both skeptical and the allegations correlate with dismissal in both circuits.

Number of Pages in PDF File: 29

Keywords: Securities litigation, accounting fraud, insider trading

JEL Classification: M41, M44, K22

working papers series


Download This Paper

Date posted: September 1, 2003 ; Last revised: March 4, 2010

Suggested Citation

Pritchard, Adam C. and Sale, Hillary A., What Counts as Fraud? An Empirical Study of Motions to Dismiss Under the Private Securities Litigation Reform Act (August 11, 2003). University of Iowa College of Law Legal Studies Research Paper Series, Forthcoming. Available at SSRN: http://ssrn.com/abstract=439503 or http://dx.doi.org/10.2139/ssrn.439503

Contact Information

Adam C. Pritchard (Contact Author)
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

Hillary A. Sale
Washington University in Saint Louis - School of Law ( email )
Campus Box 1120
St. Louis, MO 63130
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,613
Downloads: 760
Download Rank: 16,174
Citations:  19
Footnotes:  56

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.329 seconds