CEOs Seek Securities Law Reform

Top executives from 97 California high-tech companies and 84 other firms around the country urged congressional leaders to support nascent legislation to stem frivolous securities lawsuits. A letter from Apple Computer’s Gilbert Amelio, Intel’s Andrew Grove, Oracle’s Larry Ellison, Sun Microsysten’s Scott McNealy and others seeks a new law that would require all securities cases against nationally traded companies to be filed in federal court. Their action would build upon the Private Securities Litigation Reform Act of 1995, which made it more difficult for shareholders to accuse companies of investor fraud when their stock prices dipped or their earnings failed to meet expectations. But a study by two Stanford Law School professors has found that since the federal rules were enacted, state courts have become the venue of choice because it is easier for suits to proceed there. “High-tech companies have been targets of these abusive suits because they are growth companies and historically, there has been some fluctuation in their stock price,” said Michael Timmeny of the American Electronics Assn., which mobilized the same companies last year to defeat Proposition 211, which would have made it easier to file securities lawsuits in California.