Securities Lawsuit Decision Stands
SAN FRANCISCO (AP) _ A federal court ruling intended to limit some securities fraud lawsuits will not be heard again by the 9th U.S. Circuit Court of Appeals, the court said Wednesday.
A panel of the court ruled in July that such lawsuits must be dismissed at the outset unless they contain detailed evidence of deliberate fraud. The court said a 1995 federal law, passed over President Clinton’s veto, was intended to set a strict standard to discourage meritless suits.
The plaintiffs asked the court to rehear the case, but the court voted 6-3 Wednesday to decline.
The nine-state circuit court includes California’s Silicon Valley, home of companies that have been frequent targets of securities suits.
The July ruling was prompted by a lawsuit against Silicon Graphics Inc., in which the company and six officers were accused by stockholders of hiding bad news about a new product between September and December 1995.
The officers sold large numbers of shares before the information was disclosed and the stock price plunged, the lawsuits alleged.
The court’s ruling was hailed as a victory for high-tech companies and others facing similar lawsuits, but it conflicted with interpretations by the federal Securities and Exchange Commission and most other federal courts, which have declared standards that would let more suits survive pretrial challenges.