False Forward-Looking Statements and the PSLRA's Safe Harbor

46 Pages Posted: 3 Mar 2010 Last revised: 5 Apr 2010

Ann Morales Olazábal

University of Miami - School of Business - Business Law Department

Date Written: February 10, 2010


Voluntary public disclosure of soft information -- corporate projections and predictions and other forward-looking statements -- is now the norm, following a brief learning curve after the enactment of the PSLRA’s safe harbor for forward looking information in 1995. As a consequence, allegations of false forward-looking statements are also quite standard in today’s class action securities fraud pleading. This work addresses an emerging trend, spearheaded by a Seventh Circuit’s decision in Ashe v. Baxter Int’l, to improperly inject a subjective scienter or intent-like inquiry into consideration of the application of the PSRLA’s safe harbor. Numerous district courts have followed Asher’s lead, employing a variety of semantic maneuvers to circumvent the safe harbor’s straightforward, occasionally distasteful application. Bolstered by a 2009 opinion from the Fifth Circuit, this theoretical disagreement is destined for a circuit split. This manuscript provides a definitive analysis of the Asher-inspired jurisprudential detour, concluding that it is supported neither by the statute and its legislative history, nor any sound policy argument. With this premise established, the article then prescribes intellectually grounded ameliorating measures that can be taken by courts, which face increasingly imaginative and often appealing arguments for avoiding the prophylactic nature of the statutory safe harbor.

Keywords: securities fraud, safe harbor, forward-looking statements, meaningful cautionary statements, risk factors, voluntary disclosure, Private Securities Litigation Reform Act, bespeaks caution doctrine, 1934 Act, 10(b), 10b-5, materiality, reasonable investor, fraud-by-hindsight, fraud on the market

Suggested Citation

Olazábal, Ann Morales, False Forward-Looking Statements and the PSLRA's Safe Harbor (February 10, 2010). Indiana Law Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1562651

Ann Morales Olazábal (Contact Author)

University of Miami - School of Business - Business Law Department ( email )

5250 University Drive, Jenkins 323E
or P.O. Box 248022
Coral Gables, FL 33146
United States
305 284 4508 (Phone)
305 284 3762 (Fax)

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