The House overwhelmingly approved a bill today that would require most shareholder lawsuits against public companies to be filed in federal court, a shift that would place limits on such actions.
The Securities Litigation Uniform Standards Act, which passed by a 340-83 vote, is strongly favored by technology companies, which have complained that it was too easy for shareholders to sue them in state courts for volatile stock prices.
Proponents say the revised law is necessary to protect the growing number of publicly traded high-tech companies from being sued in every state, which they argue could stifle the industry.
The law "will defend the companies of the new economy from lawsuit abuse, while still providing for strong protection for consumers," said Reed Hastings, president of the bipartisan Technology Network.
Passed by the Senate in May, the bill has been endorsed by the Securities and Exchange Commission, and President Clinton is expected to sign it. Some minor differences between the House and Senate versions of the bill will have to be hammered out in a conference committee.
The securities litigation bill is the first measure backed by the high-tech industry to be passed by Congress this year. Legislation to raise the cap on foreign worker visas also is expected to be passed by the House before Congress adjourns in October. However, Clinton has said he won't sign the bill unless there are stiffer penalties against companies that use the visas to lay off U.S. workers and replace them with foreign counterparts.
The legislation would change a 1995 securities law that made it more difficult for plaintiffs to file in federal court. The act imposes "uniform standards" regarding shareholder lawsuits brought by 50 or more people and filed in state courts against nationally traded public companies.
"High-technology companies have been particularly vulnerable to such suits because many of these companies are young and highly dependent on market financing," William Archey, president of the American Electronics Association, said in a statement. "These are the companies whose innovative work serves as a locomotive for the American economy. They deserve to be encouraged to continue to push forward the frontiers of technology."