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Lawmakers Unveil Bill on Shareholder Suits

May 22, 1997|(Associated Press)

Two lawmakers unveiled a bill to establish uniform national standards for limiting frivolous lawsuits against companies by shareholders. Reps. Anna Eshoo (D-Palo Alto) and Rick White (R-Wash.) said a loophole in the 1995 Securities Litigation Reform Act, which protects executives from lawsuits if they make a corporate earnings prediction or similar forecast that later proves to be wrong, has channeled such suits into state courts. The new legislation would fix that by returning the lawsuits to the federal court system, where a uniform standard would be used to judge their merits, the lawmakers said. The proposal, which would preempt state laws in favor of federal jurisdiction, is strongly supported by high-tech companies--often the targets of such lawsuits because of the volatility of their stock prices. But the Consumer Federation of America and the Government Finance Officers Assn. oppose the bill, calling it special-interest legislation.

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