THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, March 9, 1995 TAG: 9503090440
SECTION: FRONT PAGE: A6 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 71 lines
Culminating a five-year effort, the House passed major changes to federal securities laws Wednesday aimed at restricting fraud lawsuits filed by shareholders.
The bill, the ``Securities Litigation Reform Act,'' passed by a strong 325-99 margin after eight hours of debate that stretched over two days. The margin exceed the votes needed to override a presidential veto, which has been hinted by the White House.
House Speaker Newt Gingrich, R-Ga., called the margin astonishing, ``given all the resources of the trial lawyers'' opposing the bill.
Liberal Democrats, joining consumer groups in claiming that the bill damages investors' rights, tried to dilute it with six amendments, all handily defeated. Two amendments proposed by moderate Democrats were approved by a voice vote.
The securities-litigation reform bill is one of three ``Contract With America'' measures that would make far-reaching changes in the nation's civil legal system.
``This is a historic moment for those who believe that we need common-sense liability reform,'' said Rep. Jack Fields, R-Texas, who shepherded the bill through his House telecommunications and finance subcommittee.
Critics contend the measure is a wish list for corporate interests.
``Is the purpose really to get rid of frivolous lawsuits, or is it to protect their buddies on Wall Street?'' asked Rep. Melvin Watt, D-N.C.
Accountants and high-technology firms contend they're being hammered with an increasing number of securities fraud lawsuits, which can cost millions of dollars to resolve. To discourage so-called nuisance lawsuits, the bill would:
Prohibit attorneys from paying fees or other compensations to investors as an inducement to lending their name to a lawsuit.
Enact a modified ``loser pays'' rule, in which a judge could order plaintiffs who lose a securities fraud case to pay the legal expenses of the winning side if the investor's case was without merit.
Revise the definition of reckless behavior by executives for the purposes of securities-fraud suits.
In numerous congressional hearings and news conferences, Republicans said securities-fraud lawsuits had become a major problem for new technology companies, a number of which were sued because of a sharp drop in their stock prices.
``Meritless lawsuits are crippling our high-technology industry,'' said Rep. Anna Eshoo, D-Calif., whose district encompasses Silicon Valley.
The measure is fiercely opposed by consumer groups, state securities regulators and local government officials, who argue it will deny justice to defrauded investors.
``The bill succeeds in curbing frivolous lawsuits only by making it equally impossible to pursue rightful claims against those who commit securities fraud,'' said Phillip A. Feigin, Colorado's securities commissioner and president of a state securities-regulators group. ILLUSTRATION: HOW THEY VOTED
A ``yes'' vote is a vote to pass the bill.
Herbert H. Bateman, R-Va. Yes
Owen B. Pickett, D-Va. Yes
Robert C. Scott, D-Va. No
Norman Sisisky, D-Va. Yes
Eva Clayton, D-N.C. No
Walter Jones Jr., R-N.C. Yes
by CNB