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NEW LIMITATIONS PERIOD FOR SECURITY FRAUD SUITS MAY REDUCE CORPORATIONS' LITIGATION COSTS

 NEW LIMITATIONS PERIOD FOR SECURITY FRAUD SUITS
 MAY REDUCE CORPORATIONS' LITIGATION COSTS
 PITTSBURGH, Jan. 13 /PRNewswire/ -- A recent U.S. Supreme Court decision and a new law signed by President Bush in December may reduce the number of costly but unwarranted lawsuits brought by private investors charging corporations with securities fraud, a spokesman said today.
 "Defending baseless suits is quite costly," said Anthony J. Basinski, a partner in the litigation group of Reed Smith Shaw & McClay. "In fact, the costs of defending these suits rivals the high cost of product liability litigation and environmental liability claims."
 The new statute of limitations on private suits came out of a U.S. Supreme Court ruling last June, which said that private lawsuits filed under the fraud provision of the Securities Exchange Act must be brought within one year after the discovery of the alleged violation and not more than three years after the alleged violation occurred.
 Previously, there had been no uniform time limit on the filing of such suits. Federal courts looked to individual state laws for limitation periods, which varied greatly from jurisdiction to jurisdiction.
 "These suits could be filed many years after an alleged violation," said Basinski. "Sometimes, investors look for a scapegoat to bear the loss of an investment that goes sour over a period of time, and bring suit hoping they can reach a private settlement and obtain large attorney's fees. Such suits are not intended to benefit either the corporation as a whole or shareholders generally."
 The law signed by President Bush in December, which was a compromise amendment written into the Federal Deposit Insurance Corporation Improvement Act of 1991, made it possible to reinstate those dismissed lawsuits that had been filed on or before June 19, 1991. It left standing, however, the one year/three year period for all current security fraud cases.
 The law was inspired, in part, by the perceived unfairness of a mid-stream change in certain cases pending against well-known financial figures such as thrift executive Charles Keating and junk- bond king Michael Milken. In addition to reaching those high profile cases, however, the law will reinstate all manner of security fraud cases, including those brought at the expense of the defendant corporations.
 "Corporations will have to defend the reinstated cases as before," said Basinski, "But the number of new unfounded lawsuits may decline and companies should be able to reduce their costs accordingly."
 -0- 1/13/92
 /CONTACT: Anthony J. Basinski, partner, 412-288-3040, or Jeffrey G. Aromatorio, associate, 412-288-3364, both of Reed Smith Shaw & McClay/ CO: Reed Smith Shaw & McClay ST: Pennsylvania IN: SU:


CD -- PG015 -- 9187 01/13/92 15:58 EST
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Publication:PR Newswire
Date:Jan 13, 1992
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