False Forward-Looking Statements and the PSLRA's Safe Harbor
46 Pages Posted: 3 Mar 2010 Last revised: 5 Apr 2010
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: Suggested Citation