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Senate bill seeks to stem suits

A bill introduced in the Senate today seeks to require that all shareholder suits against corporations with volatile stocks be filed in federal court.

Seeking to stem the tide of shareholder lawsuits filed against corporations with volatile stock prices, a group of U.S. senators today introduced a bill that would require all such actions to be filed in federal court.

The bill, dubbed the Securities Litigation Uniform Standards Act of 1997, is designed to bolster a law passed in 1995 that made it more difficult to bring securities actions in federal court. After its passage, plaintiffs' attorneys responded by bringing more securities suits in state courts.

"There's been an explosion of abusive lawsuits in state courts where those rules don't apply," said Michael Engelhardt, vice president of policy at Technology Network, a Silicon Valley group that lobbies on behalf of the high-tech industry. Under the proposed legislation, Engelhardt added, "you can't evade the reforms by bringing [suit] in state court."

The bill, formally known as S. 1260, is so far supported by 13 senators, including Phil Gramm (R-Texas), Pete Domenici (R-New Mexico), Barbara Boxer (D-California), and Dianne Feinstein (D-California). It closely resembles a House bill sponsored by Rep. Anna Eschoo (D-California) and Rep. Rick White (R-Washington) and supported by more than 100 cosponsors.

The Senate bill introduced today would apply only to shareholder class actions filed against publicly traded companies. High-tech companies and corporations with emerging growth say that because their stock prices are volatile by nature, they are unfairly burdened by such suits. Technology companies are investing considerable resources in lobbying for laws that would make it more difficult for shareholders to sue when the price of a stock drops unexpectedly.