Has Congress Learned Its Lesson? A Plain Meaning Analysis of the Private Securities Litigation Reform Act of 1995

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INTRODUCTION

In the first congressional override of an executive veto since President Clinton took office,1 the 104th Congress officially enacted the Private Securities Litigation Reform Act of 1995 2 ("PSLRA" or "Act") on December 22, 1995.3 Criticism and support of the PSLRA are widespread. Some commentators consider the Act to be the "most comprehensive revision of private litigation under the federal securities laws since the New Deal."4 Others contend that it is little more than a fragile attempt by Congress to enact some measure of tort reform.5

The Joint Conference Committee ("Committee" or "Conference Committee") issued a report ("Conference Report") regarding the PSLRA, stating that the Act's general purpose was to curb perceived abuses in the area of private securities litigation.6 Specifically, the PSLRA was designed to discourage "serious injuries to innocent parties" including frivolous litigation, targeting of deep-pocket defendants, abuse of discovery, and manipulation of clients by class action lawyers.7 In an attempt to effect reform, Congress amended two fundamental pieces of securities legislation: the Securities Act of 1933 8 ("1933 Act") and the Securities Exchange Act of 1934 9 ("1934 Act").

The changes incorporated into federal securities law by the PSLRA, most notably a safe harbor for forward-looking statements,10 are intended to encourage companies to disclose information by limiting the rights of private parties to bring suit. By establishing a safe harbor, Congress enables those companies which meet the statutory criteria to escape potential private causes of action arising from forward-looking statements.

In its Conference Report, the Conference Committee extensively sets forth its legislative intent and its desired judicial interpretation. Whether the Committee's purposes and goals will be realized, however, has yet to be determined. It is unlikely that the Committee's lengthy explanation in its Conference Report will have the force intended, given the evolving trend of the United States Supreme Court to place primary emphasis on the language of a statute, all but ignoring legislative history and intent.11 Additionally, since the Act applies only to private lawsuits and does not cover actions initiated by the Securities and Exchange Commission ("SEC"), the Act will ultimately do little to encourage disclosure.12

This Note will use the PSLRA's safe harbor to illustrate13 how the Act, or at least the Conference Committee's stated intent, falls apart upon critical examination. Part I will consider the evolution of the Supreme Court's tendency to utilize a plain meaning approach when interpreting securities statutes. Part II will explore the Committee's explanation and intended interpretation of the changes which the PSLRA made to the 1933 and 1934 Acts, focusing on the safe harbor provisions. Part III will discuss the apparent ambiguities and problems with the PSLRA's safe harbor.

I. SUPREME COURT INTERPRETATION OF SECURITIES LAWS

In a movement championed by the "intellectually aggressive" Justice Antonin Scalia of the United States Supreme Court, the Court has been reconsidering the role of legislative history in statutory interpretation.14 Early in his tenure on the Court, Justice Scalia made it clear that he was a staunch supporter of the plain meaning approach to statutory interpretation when he refused to join a Court opinion because he felt it contained an irrelevant discussion of legislative history.15 Justice Scalia wrote, "th[e] doctrine [that a statute's plain meaning is less significant than legislative history] ... is to my mind an ill-advised deviation from the venerable principle that if the language of a statute is clear, that language must be given effect-at least in the absence of a patent absurdity."16

Justice Scalia's position on statutory interpretation, dubbed "the new textualism," suggests that the legislative history of a particular statute is immaterial when its language is clear and the Court has discerned its plain meaning. …