Proposition 211: Securities Litigation Referendum (B) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

In 1996, Silicon Valley companies and their leaders organized a successful campaign to defeat the ballot initiative that would circumvent federal law and made claims of securities fraud, which the company believed were largely frivolous, it is easier to win. Approximately 1,300 federal class actions securities fraud were filed between 1988 and 1996, resulting in settlements averaged $ 7.3 million. Lawsuits alleging securities fraud as a result of inflated revenue projections firms were usually filed after a sharp fall in prices on the stock. High technology firms, which are often volatile stock prices were the main target of lawsuits. Several law firms led by Bill Lerach, which specializes in these claims, and some of them think that the stable shareholders who would submit to the Court as soon as the company's share price has fallen significantly. Even if the defendant company was confident that no fraud had been committed, and that the lawsuits were frivolous, the defendants were forced to settle in order to avoid lengthy and costly court battle. In 1995, high technology, accounting and other firms have succeeded in Congress to pass a federal law limits the circumstances under which such claims are successful. Restrictions on the federal level, bar the plaintiff sought to use the state laws as a basis for their lawsuits. To strengthen its position under state law, bar the plaintiff qualified referendum, Proposition 211, for the November 1996 ballot in California. If passed by voters, would not only claims of securities fraud, it will be easier to win, but in virtually all public companies in the United States may be subject to legal action. "Hide
by David P. Baron, Chris W Power: Stanford Graduate School of Business 16 pages. Publication Date: 01 Oct 1997. Prod. #: P23B-PDF-ENG