[Congressional Record Volume 141, Number 105 (Monday, June 26, 1995)]
[Senate]
[Pages S9089-S9097]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                PRIVATE SECURITIES LITIGATION REFORM ACT

  The Senate continued with the consideration of the bill.


                           Amendment No. 1475

  (Purpose: To establish procedures governing the appointment of lead 
            plaintiffs in private securities class actions)

  Mrs. BOXER. Mr. President, I send an amendment to the desk on behalf 
of myself and Senator Bingaman, and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from California [Mrs. Boxer], for herself and 
     Mr. Bingaman, proposes an amendment numbered 1475.

  Mrs. BOXER. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 98, strike line 3, and all that follows through 
     page 100, line 22, and insert the following:
       ``(2) Appointment of lead plaintiff or plaintiffs.--Not 
     later than 90 days after the date on which a notice is 
     published under subparagraph (A) or (B) of paragraph (1), the 
     court shall determine whether all named plaintiffs acting on 
     behalf of the purported plaintiff class who have moved the 
     court to be appointed to serve as lead plaintiff under 
     paragraph (1)(A)(ii) have unanimously selected a named 
     plaintiff or plaintiffs to serve as lead plaintiff or 
     plaintiffs of the purported plaintiff class, and--
       ``(A) if so, shall appoint such named plaintiff or 
     plaintiffs to serve as lead plaintiff or plaintiffs of the 
     purported plaintiff class; or
       ``(B) if not, after considering all relevant factors, 
     including, but not limited to financial interest in the 
     relief sought, work done to develop and prosecute the case, 
     the quality of the claim, prior experience representing 
     classes, possible conflicting interests, and exposure to 
     unique defenses, shall select and appoint a named plaintiff 
     or plaintiffs to serve as lead plaintiff or plaintiffs of the 
     purported plaintiff class.
       ``(3) Selection of lead counsel.--The lead plaintiff or 
     plaintiffs appointed under paragraph (2) shall, subject to 
     the approval of the court, select and retain counsel to 
     represent the class.''.
       On page 102, strike line 3, and all that follows through 
     page 104, line 22, and insert the following:
       ``(2) Appointment of lead plaintiff or plaintiffs.--Not 
     later than 90 days after the date on which a notice is 
     published under subparagraph (A) of (B) of paragraph (1), the 
     court shall determine whether all named plaintiffs acting on 
     behalf of the purported plaintiff class who have moved the 
     court to be appointed to serve as lead plaintiff under 
     paragraph (1)(A)(ii) have unanimously selected a named 
     plaintiff or plaintiffs to serve as lead plaintiff or 
     plaintiffs of the purported plaintiff class, and--
       ``(A) if so, shall appoint such named plaintiff or 
     plaintiffs to serve as lead plaintiff or plaintiffs of the 
     purported plaintiff class; or
       ``(B) if not, after considering all relevant factors, 
     including, but not limited to financial interest in the 
     relief sought, work done to develop and prosecute the case, 
     the quality of the claim, prior experience representing 
     classes, possible conflicting interests, and exposure to 
     unique defenses, shall select and appoint a named plaintiff 
     or plaintiffs to serve as lead plaintiff or plaintiffs of the 
     purported plaintiff class.
       ``(3) Selection of lead counsel.--The lead plaintiff or 
     plaintiffs appointed under paragraph (2) shall, subject to 
     the approval of the court, select and retain counsel to 
     represent the class.''.

  Mrs. BOXER. Mr. President, let me explain my amendment. My amendment 
deletes language in the bill which instructs the judge to make the 
largest investor in a securities class action suit the lead plaintiff 
in that suit. To me, on its face, as a nonlawyer, this is an amazing 
proposition. The richest investor gets to be the lead plaintiff.
  My amendment is designed to give the little investor, people with 
IRA's, Keoghs, a 401-K plan, the chance to be the lead plaintiff.
  My amendment is simple, reasonable, fair and, I believe, democratic. 
This bill assumes the wealthiest investor is somehow better suited to 
represent smaller investors in the suit.
  Mr. President, class action securities lawsuits are supposed to 
protect the average and the small investor--not only the largest 
investor. Of course we want to protect them as well. But clearly we are 
concerned about the small investor. In fact, class action lawsuits are 
the only practical chance that the small investor has to recover if he 
or she has been defrauded.
  Why do I say that? The small investor, let us say, has been defrauded 
out of $500 or $1,000 or $5,000. That small investor simply cannot 
afford to bring an individual action against a fraudulent party. It 
would cost way more than even the $5,000 to do so, maybe even more than 
the investor's total net worth, just to recover the small investment.
  So in practical terms, class actions are the small and average 
investor's only chance to recover. This bill, S. 240, without my 
amendment, would

[[Page S9090]]

deny them control over their own lawsuits. It would put the largest 
investor in control.
  I said my amendment is democratic. I say that because it allows the 
members of the class to decide who will pick their representative 
called a ``lead plaintiff.'' The lead plaintiff will then represent the 
class, control the litigation, and hire lawyers to serve as class legal 
counsel.
  The candidates for lead plaintiff are all named plaintiffs who file 
motions with the judge saying they want to serve as the lead plaintiff.
  My amendment, and the bill, require that notices be placed in a 
widely circulated national business-oriented publication or wire 
service, which then gives notice to all the class members that there is 
a class action. That way, every member of the class has an opportunity 
to be named the lead plaintiff.
  Under my amendment, the court will appoint as lead plaintiff anyone 
unanimously selected by the named plaintiffs who have filed lawsuits. 
And that seems to me the way it ought to be. Everybody has an 
opportunity to decide who will be the lead plaintiff. I think it is 
fundamentally undemocratic to do it otherwise--to do what this bill 
does, to prevent the members of the class from picking their lead 
plaintiff; to require that the largest investor be appointed.
  Under my amendment, only if the plaintiffs cannot agree unanimously 
among themselves on the lead plaintiff would the court decide who the 
lead plaintiff should be. So, first we have all the plaintiffs decide 
who they want. If they reach unanimous agreement, it is so done. If 
they do not, then the judge or the court would decide who the lead 
plaintiff would be.
  Again, the bill without the Boxer amendment requires that the judge 
appoint the largest investor. Again, my amendment merely says if the 
plaintiffs at first do not agree, the judge, after considering all 
relevant factors, shall select the lead plaintiff.
  The court, under the Boxer amendment, could very well pick the 
largest investor. But the court does not have to at that point. So, if 
everybody agrees on the lead plaintiff, it is done. If they cannot 
unanimously agree, then the court will select, and they can certainly 
look at who the largest investor is, but that should not be the only 
criterion.
  My bill requires the court to consider all relevant factors in 
selecting a lead plaintiff or plaintiffs. These factors include--and 
they are in my amendment--but are not limited to the following:
  First, the financial stake that the lead plaintiff would have in the 
lawsuit. So we agree with the chairman. Let us take a look at that.
  Second, how much work and money he or she has expended on the suit 
thus far. We think it is important for the judge to see who has made 
the biggest investment so far.
  Third, the quality of that work.
  Fourth, the quality of their individual claim.
  Fifth, whether they have any potential conflicts.
  Sixth, whether the defendants would have any unique defenses to this 
lead plaintiff--which I will describe later.
  So, again I say to my friends, as Senator Bryan has said, this is not 
an exciting issue. No one is glued to their TV sets saying, ``Gee, we 
have been looking forward to this all day, Senator Boxer.'' But clearly 
a lot is at stake. If you are a small investor and automatically the 
largest investor is picked, even if that large investor has a conflict 
of interest--and I will go into that--you are going to really take it 
in the neck. You are going to be out of luck, and I am going to explain 
this.
  It could be that the defendants are accused of having targeted the 
elderly. This is not uncommon. I made that point today. I am glad my 
colleagues agree that senior citizens are the targets here. Would the 
largest investor be the best plaintiff in a fraud against targeted 
senior citizens, small investors? Not necessarily. And this is where 
maybe some people will wake up and will take notice.
  Let us look at the Keating case, a case my colleagues on the other 
side of this issue keep telling us not to bring up. I have news for 
them, we are going to bring it up because it is on point and it is on 
target.
  Listen to this. Keating was sued by small investors who bought his 
securities. One of the largest investors eventually became a defendant 
in the small investor lawsuit. If this bill had become law it would 
have been clear that the judge should appoint that large investor as 
the lead plaintiff. Talk about foxes in charge of the chicken coop. 
Many of the biggest investors in Keating's junk bonds were friends of 
Keating and associates of Michael Milken, including Executive Life 
Insurance Co. of California, and a Minneapolis brokerage company called 
Offerman & Co. These relationships were not public when the lawsuit was 
filed. Under this bill Offerman & Co. would have been put in charge of 
the Keating class action. That would have meant that Keating's friends 
and junk bond cronies would have been in the position to stifle the 
lawsuit.
  I say thank God this bill was not law and the small investors were in 
charge. They eventually uncovered the hidden relationship. But they 
never could have uncovered those relationships at the point at which 
the judge was deciding who the lead plaintiff should be, and he would 
have had to pick the largest investor.
  Here is the thing. The largest investor became a codefendant and 
eventually paid $55 million to the small investor. If this bill had 
been the law of the land, the largest investors would have been in 
control of the suit. They would have been the lead plaintiff in the 
suit. And I say the Keating case is just an isolated example.
  Mr. SARBANES. Will the Senator yield?
  Mrs. BOXER. I am happy to yield to my friend.
  Mr. SARBANES. Mr. President, this is an extraordinarily important 
point which the Senator from California is making. In fact, the SEC in 
commenting on this provision of the bill that is before us said, and I 
quote them:

       One provision of section 102 requires the court generally 
     to appoint as lead plaintiff the class member that has the 
     largest financial interest in the case.

  Exactly the provision the Senator is addressing.
  The SEC then says:

       While this approach has merit, it may create additional 
     litigation concerning the qualification of the lead 
     plaintiff, particularly when the class member with the 
     greatest financial interest in the litigation has ties to 
     management, or interest that may be different from other 
     class members.

  As I understand it, you permit having the largest financial interest 
to be a factor to be considered by the judge if all the plaintiffs 
cannot get together on who the lead plaintiff should be. Then the judge 
has to pick a lead plaintiff, and the Senator concedes the one factor 
to be looked at would be financial interest. But the bill as written 
provides the presumption to the large financial interest plaintiff 
which carries with it the risk, as the SEC points out, where the lead 
plaintiff may have ties to management or interest that may be different 
from other class members.
  As the Senator points out, they later found that out in the Keating 
case. Well, you say they will find it out in the beginning. They cannot 
find it out in the beginning. In fact, the bill as written denies the 
discovery in the early stages unless you already have a reasonable 
basis for doubting the lead plaintiff. This whole thing is structured 
in such a way that a lead plaintiff who has ties to the defendant, a 
party that has ties to the defendant, can end up being the lead 
plaintiff.
  Mrs. BOXER. My friend is right on target, and as usual presents the 
point magnificently. This is a total outrage. It is a total outrage 
because at the time when the judge will decide who the lead plaintiff 
could be, they say there is a rebuttable presumption, but it is really 
irrebuttable because of the high standard that has to be met. It will 
be the largest investor. And after I yield to my friend from Nevada, I 
am going to show you another case on point so that we show the Keating 
case and how it would have worked to have the people who eventually 
wound up paying the small investors under this bill be the lead 
plaintiff. There would not even have been a case, if that had been the 
law. I shudder to think about the miscarriage of justice.
  Here we are today. You know one of the reasons I think so. We are 
making our points here. Obviously, we can tell by the votes that so far 
we were not carrying the day except my one amendment that requires a 
report. We are not

[[Page S9091]]

carrying the day. But, by God, let us make the record and let us be 
clear on it so that if there is an explosion, and investors get 
defrauded, and we have another S&L-like scandal on our hands, and 
people are scared to death to invest and all they do is buy Government 
bonds, I think some of us can point to this debate and say we tried; we 
made the record.
  Mr. BRYAN. Will the Senator yield?
  Mrs. BOXER. I am happy to.
  Mr. BRYAN. I want to compliment the Senator. We have heard many times 
during the course of this debate the word ``balance.'' I think what the 
Senator has done in revisiting this particular section of the bill 
represents the essence of balance. As the Senator has pointed out, the 
Senator's amendment does not preclude the consideration of wealth, if I 
am reading the Senator's amendment correctly.
  Mrs. BOXER. That is correct.
  Mr. BRYAN. But it simply indicates that where there is not a 
unanimous agreement it is simply a factor. Am I correct?
  Mrs. BOXER. Exactly.
  Mr. BRYAN. Let me say it is my understanding--the Senator can correct 
me if she has a different view--that the very essence of a class action 
is to allow individuals who are very small with relatively modest 
investments to band together, that there is a unity of interest, a 
commonalty of purpose; can band together, and that same commonalty of 
interest may or may not exist with respect to a large security 
underwriting house which may have other dealings with the defendants 
who may indeed have a little self-dealing. ``We will wash your back on 
this one if you will wash our back on the next one.''
  Is that the essence of the Senator's concern?
  Mrs. BOXER. The Senator from Nevada, the former attorney general of 
that State, is so right on point here.
  If a relatively small investor who, let us say, owns a home and a 
car, and is retired and has a $50,000 investment, I say to my friend 
that means so much to that individual. The large investor could be a 
big brokerage house. We have a brokerage house that is worth $50 
billion. They may be the largest investor in this particular company. 
They may have $1 million. That $1 million is a lot more than $50,000, 
but to that large company it is nothing. Whereas, the $50,000 to a 
small investor is virtually everything.
  Today I put in the Record a story of one of my constituents who was 
one of the victims of Keating. She lost $20,000. It was the difference 
between her being dependent or independent. She talked about the pain 
of knowing she just waited for that Social Security check because they 
bilked her out of her money; the savings she needed.
  So the Senator is so right. This bill, I do not know how to put it, 
it is so elitist. I do not like that word, but I cannot think of 
another word. It is not fair, it is elitist. It is looking at a small 
investor as if they were worth nothing.
  I want to give my friends another example. This is a recent example. 
The Wall Street Journal reported only last month that a large Wall 
Street investment bank--and I am going to name the bank because it is 
in the paper; they have a great reputation--Wertheim Schroeder--filed a 
class action against Avon Products for securities fraud. Wertheim 
Schroeder filed a class action against Avon for securities fraud. 
Wertheim was supposed to represent the interests of the small investor. 
But the Journal reported that Wertheim tried to get Avon to settle the 
case by giving Wertheim $50 million to invest. That is no way to 
benefit the small investor, to settle a lawsuit.
  It does not even think about the small investors. This bill would 
prevent those small investors from discovering the secret deal, because 
they would have to know about it before they could use subpoenas to 
find out about it.
  So here is the largest investor who has its own agenda, clearly, and 
that agenda did not benefit the small investors. But under this bill, 
the small investors could not have found that out and automatically, 
therefore, the largest investor would have been the lead plaintiff.
  We talked about the rebuttable presumption so I will not go into 
that. It really is simply not there, because my friend, the Senator 
from Maryland, explained the bill precludes the small investor from 
being able to subpoena or discover a large investor's hidden conflict.
  In other words, if you cannot read about it in the newspapers, forget 
it. Only if the conflict is obvious would the small investor be able to 
prove it, and it is just very unfair. In other words, the rules are 
stacked against the small guy and the rules are in favor of the large 
guy. Now I have shown you two examples, the Keating case and this other 
Avon case, and I am sure there are many more.
  In other words, if the large investor can hide its conflict of 
interest, it is home free, it is going to be the lead plaintiff. Small 
investors will not be able to uncover the conflict. My God, I know we 
want to stop frivolous lawsuits, we all do, but I do not know anyone 
who would say that the suit against Charles Keating was frivolous, but 
we are standing on the floor of the Senate, a few of us, trying to show 
you that it would have totally changed the outcome of that case, and we 
have to be very, very careful.
  Mr. President, I see nothing in the record which supports the thesis 
that the largest investor is more honest or more trustworthy. In fact, 
history suggests there are reasons to believe that the opposite is 
true, and I showed you a few of those.
  In response to my friend from Nevada, I pointed out that a $50,000 
investment from an individual's IRA sometimes is worth much more than a 
huge investment by a huge company.
  I want to make another point----
  Mr. BRYAN. Will the Senator yield for one more question? I know the 
hour is late.
  Mrs. BOXER. Yes, I will be happy to yield.
  Mr. BRYAN. I compliment the Senator for her fine work. As I am 
reading the print before us, I am almost offended with the language 
``the most adequate plaintiff.'' Somehow if you have $10,000 in this 
investment and that is all you have, somehow you are less adequate to 
be the lead plaintiff in the action.
  My question really deals with the origin of this. I sat in on as many 
of the hearings as I could. The chairman was extremely fair in posting 
notice and giving us opportunity to present our arguments and to make 
the point, but I do not recall this being in the original bill. I do 
not recall any testimony offered in behalf of this measure. I do not 
recall any discussion or debate about this at all. Perhaps the 
distinguished Senator from California can enlighten me further on that.
  Mrs. BOXER. My friend is right on target again. The language about 
lead plaintiff was added only 4 days before the committee markup, weeks 
after the last hearing. I see nothing in the committee records that 
supports giving the large investor virtual control over class actions. 
This was added 4 days before markup, and it is very meaningful. I have 
one more point and then I am going to yield to my friend from Maryland, 
but I want him to listen carefully to this as well. We believe on our 
reading, and we have put a lot of legal minds to work on this, that the 
bill makes it possible for the largest plaintiff to sneak into a class 
action and become the lead plaintiff without going through any of the 
requirements that all the other investors have to go through.
  A large investor can hijack a small investor's case. Listen to this. 
It is our understanding that large investors do not even have to file a 
lawsuit in order to take control of the suit. A large investor only has 
to sit back and wait to see if a small investor files a suit, see if 
the suit has merit and then pounce on it. The small investor will have 
invested his or her scarce time and money investigating the case and 
filing it.
  At that point, this bill permits the largest investor to take over 
without even having to file the lawsuit. He does not even have to be a 
party to the lawsuit. It means the largest investor does not have to 
run the risk of rule 11 sanctions of filing a frivolous complaint, 
sanctions that small investors who bring the original complaint are 
subject to by this bill, which a lot of us support.
  But the largest investor is scot-free. This forces the small investor 
to take the risk but rewards the big investor.

[[Page S9092]]

It is to me extraordinary. The bill permits a large investor to control 
the class action and the rights of small investors without having to 
describe in a sworn certification filed with the court how the largest 
investor came to buy the securities that made it the largest investor. 
Small investors who file a lawsuit have to include a sworn 
certification describing how they purchased the security. That is good. 
But why should the largest investor not have to do that?
  Let me bring that home. This means that the largest investor would 
not have to disclose even a sweetheart deal with the defendant that 
might have resulted in his buying the securities, a sweetheart deal 
that should disqualify the largest investor from being the lead 
plaintiff.
  This type of sweetheart deal was very common in the eighties when 
Michael Milken gave preferential shares of junk bonds to his insider 
friends. Like Ivan Boesky--I am bringing up names from the past, not 
because I want to try people again. They went through a lot of pain. I 
am trying to make a point, if we do not learn from the eighties, what 
are we doing here? So this bill would put Ivan Boesky in charge of a 
class-action lawsuit. How well do you think Ivan Boesky would have 
represented small investors? It would have put Boesky in a position to 
take over lawsuits against Michael Milken.
  Mr. SARBANES. Will the Senator yield on that point?
  Mrs. BOXER. Yes.
  Mr. SARBANES. I do not think the Senator from California ought to 
express reluctance or apologize for bringing these names out of the 
past in order to remind people what has occurred in this area and the 
tremendous damage and harm that was done to thousands of innocent 
investors. And we are running the risk here--I thought the Senator was 
absolutely right earlier when she said, we are, in effect, writing some 
history here, making a record so that down the road we can look back 
and say, it was at that point that a decision was made that led to 
these terrible consequences.
  One of the articles in U.S. News & World Report was headed ``Will 
Congress Condone Fraud?'' and then the article ends by saying:

       The pendulum had swung too far toward the lawyers, and now 
     it is swinging too far the other way. Unfortunately, some 
     major investor frauds may have to take place before it again 
     moves back toward the center.

  And we are trying to prevent that here and now. We do not want those 
major investor frauds to take place, and it is our contention that many 
of the provisions that we are trying to change will make it possible 
for that to happen. That is why I think that the points the Senator 
from California is making are so extremely important. Things of these 
measures have consequences, and the consequences may be very harmful 
and detrimental. Her reference back to earlier abusers is very much on 
point in underscoring that fact.
  Mrs. BOXER. I want to thank my friend, the ranking member of the 
committee, and my friend from Nevada. But it is painful to bring back 
these issues. To me, it is extraordinary that we are giving insiders, 
real insiders who may have had a sweetheart deal with a company, the 
chance to be the lead plaintiff.
  That is really hard to swallow. And I think the Boxer amendment is 
very fair. It basically says let us have fairness and justice to this 
section of the bill. We do not discriminate against the largest 
investor or the smallest investor. We say let all the plaintiffs get 
together and unanimously pick their lead plaintiff. If they cannot 
agree, let us have the judge take a look at it. Let us have him or her 
take into account who the largest investor is. Let us have him or her 
take into account the legal work that has been done and then we will 
have him or her choose who the lead plaintiff will be.
  So, Mr. President, I truly hope that this debate has been 
enlightening to any of those who have listened to it. Let us not turn 
the clock back to the 1980's. Let us not get into a situation where 
small investors are so scared that they start putting their dollar 
bills under the mattress. We want the moneys out there. We want them to 
invest their moneys for economic growth. But let us not skew the system 
so much against them they feel they do not have enough protection.
  I reserve whatever time I have remaining. I will yield the floor at 
this time.
  The PRESIDING OFFICER. The Senator reserves the remainder of her 
time. The Senator from New York is recognized.
  Mr. D'AMATO. Mr. President, I find it interesting that we talk about 
preserving the system to help the little people. Let me tell you 
something. What is actually taking place is the small investors are 
being used, and they are not representatives of any class. The only 
class they are representatives of is the greed and avarice of the 
attorneys who are milking the system and are spending the millions of 
dollars they make from the settlements right now. The lawyers are 
financing the public interest groups, which are lobbying to keep this 
system. It is the lawyers protection act to enrich themselves. That is 
what this amendment is.
  Let us look at the lead plaintiffs, the big law firms in New York and 
California that are manufacturing most of these cases. Who do they 
have? Steven Cooperman was named in 14 cases between 1990 and 1993. Is 
he the little guy who got bilked out of $10,000? How many shares does 
he own in how many companies? He is a hired gun. And who is he going to 
select to be his lawyer? I will tell you what he has done 14 times; 14 
times he has decided between 1990 and 1993 to take the same firm. 
Sheldon Shore, 10 times, same firm. Mr. Shore, do you think he really 
represents the working people? I bet he did not even know there was a 
suit until he got a call because his name is in a computer and that 
stock dropped 6 points, and then he gets right on in there and he 
brings a suit.
  Now, that is not what the legal system is supposed to be about. Do 
you want to go through them again? Rodney Shields, seven; David 
Steinberg, seven; William Steiner, six; Ronald Kassover, five. We are 
talking about just a small handful of people who have been involved in 
suits multiple times in 3 years. It is a racket. It is not the little 
homeowner. It is not the pensioner investing for his retirement.
  So what do we try to do? We try to say let us stop the race to the 
courthouse by a bunch of quick scam artists. Let us see to it that the 
people who have a real stake, if there are some shenanigans going on, 
let us see to it that the small investor with a real stake is given 
control over the suit. This legislation protects the small investor by 
creating a rebuttable presumption that the person who has the largest 
financial stake should lead the case.
  And who do you think we are talking about? You think we are talking 
about an investment banking firm? A securities firm? No.
  My colleagues say they have knowledge of securities areas, in fact 
some of them have worked in securities. If you worked in the securities 
area, do you know that 51 percent of all of the funds that are invested 
are by institutional investors? And guess what? Half of that, $5.5 
billion is in pension funds--pension funds. Those are the little guys. 
They have every nickel and dime they have earned for their retirement 
in there, and I think those pension fund managers, the institutional 
investors should be consulted when lawsuits are brought. And if they 
have a position in a company and they have invested hundreds of 
millions and they represent tens of thousands, hundreds of thousands of 
small investors, I want them to lead the case and I do not want Mr. 
Cooperman and the other guys over there picking the class.
  You better believe I wish to change it. I am sick and tired of having 
a system that rips off the American people so a handful of lawyers can 
get rich. They do not give two hoots and a holler about the small 
investor. Let us stop them from taking over the lawsuits. Do not come 
in here telling us that with this legislation we are trying to protect 
the fat cats. I want a system where if there is an institutional 
investor, and they have got some losses, that they have an opportunity 
to come to the Court, and by a rebuttable presumption they have an 
opportunity to be picked as lead counsel.
  Now, let me ask you, the only time that you have all the plaintiffs 
line up and agree on the lawyer is when these seven or eight plaintiffs 
race in to the

[[Page S9093]]

courtroom at the same time--and they all say to the judge: Guess what, 
we all want the same law firm. Is that fairness? S. 240 creates a 
rebuttable presumption that the Court should look at the size of the 
financial interest, by the way, all the other standards under the 
Federal code of procedures. They still have to meet any challenges, but 
the lawyer who represents the pension fund should at least be given 
that presumption that they are the best counsel to keep the interests 
of the small investor.
  And by the way, if everyone agrees--and it would seem to me that all 
the small investors would want to be represented by somebody who would 
have a stake in the case. I want true plaintiffs, and if it is that 
person who has lost their life savings of $25,000, they are certainly 
going to want that pension manager who has a real stake on behalf of 
tens of thousands of similar people to be there to be supervising, to 
be watching.
  I look at this legislation, and I see that the amendment that is 
crafted talks more about the lawyers--the plaintiffs counsel. It says 
the judge should consider the work done to develop and prosecute the 
case. We are talking about 90 days in which this has been filed when 
the judge is going to have to make a decision. I would like to know 
what work is done by a plaintiff within 90 days.
  The judge should also consider the quality of the claim, prior 
experience representing the classes and possible conflicting interest. 
This is the lawyers protection amendment. This is not a class action 
amendment. This is not an amendment designed to see to it that the 
little guy is really represented. This is to continue the same kind of 
charade as exists now. And as well-intentioned as my colleague might 
be--and I believe she is very well intentioned--I believe that what 
this amendment will do is just allow another way for the entrepenurial 
lawyer to get around the door and race to the courthouse to stake his 
claim and keep control of the case--not on behalf of the truly 
aggrieved but on behalf of the fat law firms who want to get fatter. 
There are only a handful of these firms, but that handful has been a 
plague, that handful has kept the securities industry from doing what 
it does best, which is to provide capital for jobs, provide creativity, 
let firms experiment, let them go forward, let them do what they can do 
best without being unduly harassed.
  For those who break the law, for those who commit fraud, we have kept 
a strong SEC presence at every turn. We have provided that those who 
truly commit fraud will have no way out, whether it be through the so-
called aiding and abetting, although, if you knowingly commit, you are 
not an aider and abettor, you are a perpetrator under this act and will 
be held liable.
  I yield the floor.
  Mrs. BOXER addressed the Chair.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. BOXER. Mr. President, I listened very carefully to my chairman, 
and I have to tell you I did not hear him give me any reasons to be 
against this amendment. He said this amendment protects lawyers. Well, 
I have news. If I wanted to do that, I would have just struck this 
whole section which other colleagues had wanted to do, but I did not do 
that. I said yes, I think my chairman has a point. We ought to look at 
the largest investor, and we have put it in here very clearly so the 
judge can consider the larger investor.
  So I really take exception to the fact that this is keeping business 
as usual. We are not keeping business as usual. And my friend does not 
address the point of the examples that we gave on the Keating case, the 
examples we gave on the Avon case, where the largest investor happens 
to be involved in a sweetheart deal which never could have been 
discovered by the time the attorney was appointed.
  Now, I agree with my friend, if you are talking about a pension plan, 
that is fine; that pension plan would probably be appointed under the 
Boxer amendment, because if the pension plan comes on board and is one 
of the plaintiffs and files a suit and holds out and does not agree 
with the appointment of the lead plaintiff, then the pension plan would 
go before the judge and, under the Boxer language, no doubt would be 
selected.
  So I have not heard my friend argue against the basic premise of the 
Boxer amendment, which is this: Just because you are the richest does 
not make you the best. Just because you are the richest does not mean 
that it is fair to appoint you as the lead plaintiff. I do not think 
anything my friend said really attacks the basic premise of the Boxer 
legislation.
  Now, I have to say that my friend talks about this bill as if it is 
supported by the SEC. I have the latest comments of the SEC. Yes, they 
support certain parts of the bill, as do I, and as does my ranking 
member and the Senator from Nevada. But it has a number of problems. 
And they raise the issue of lead plaintiff, and they say this could 
have merit but there are some unintended consequences here. And I would 
say that the Senator from California, the Senator from Maryland, and 
the Senator from Nevada are raising these unintended consequences. We 
will continue to do that tomorrow when we have our time, when Senator 
Bingaman has asked me for some time.
  Mr. President, again, there are lawyers on both sides of all of these 
issues. There are lawyers on both sides. So to me, what is important 
is, who is against this bill? Virtually every consumer organization in 
America: community colleges, the Association of Retired Persons, the 
American Bar Association, the American Council on Education, the 
Association of the Bar of the City of New York, the Association of 
Jesuit Colleges and Universities, Citizen Action. And I mentioned the 
consumer's groups: the Consumer Union, Consumers for Civil Justice, 
Consumer Federation of America, Council of Independent Colleges, the 
Fraternal Order of Police, International Association of Machinists and 
Aerospace Workers, Investor's Rights Association of America, Municipal 
Treasurer's Association of the United States--and Canada, I might add--
the National Association of County Treasurers and Officers, the 
National Association of State Universities and Land Grant Colleges, and 
National Council of Senior Citizens. I read the letter from the 
California branch of that group today. They said it is the most 
antisenior citizen piece of legislation to come before the Congress in 
years. There is the North American Securities Administrators. And it 
goes on and on.
  So I hope that some of these amendments will be voted up.
  Mr. SARBANES. Will the Senator yield?
  Mrs. BOXER. I am glad to yield.
  Mr. SARBANES. I want to agree with the Senator from California when 
she said that nothing the Senator from New York said really negates her 
amendment. I think she is absolutely right. What we just saw was 
another example of what is taking place in the course of considering 
this legislation. An amendment was offered, which is focused fairly 
narrowly in its scope, directed at correcting a flaw in the legislation 
that is before us. The counter argument that then is made to the 
amendment is the whole universe. We go right back to the basic argument 
that, well, something is amiss here and we need to correct it. We have 
conceded we want to correct some things. But how far should the 
correction go? If you overcorrect, you are creating another problem.
  Now, the problems the Senator from New York referred to when he cited 
the so-called professional plaintiffs--there are provisions in the bill 
to get at those. This amendment does not touch those provisions. There 
is a provision called no bonus to the named plaintiff, which has been 
going on, which we do not think ought to be happening. The lawyer 
cannot pay brokers for referring clients. That is in this bill. That is 
going to be prohibited. No one is seeking to take that provision out. 
Requiring the plaintiff to file a sworn certificate that he did not buy 
the stock in order to file the lawsuit, and requiring notice to class 
members that the lawsuit has been filed, they can ask the judge to take 
over the suit.
  Those are all provisions designed to get at the kind of problem which 
the Senator from New York cited.
  Now, the amendment of the Senator from California addresses a 
different issue. Those professional plaintiffs can be knocked out by 
all of those provisions that I am talking about. The

[[Page S9094]]

question now comes down to whether, when you pick the lead plaintiff, 
you ought to establish this presumption. And as the Senator says, it is 
supposedly a rebuttable presumption; but if you read carefully, it 
amounts to an irrebuttable presumption that it ought to be the 
wealthiest plaintiff.
  I want to commend the Senator for offering this amendment. She does 
not preclude giving it to the party with the largest financial 
interest. In fact, it is permitted for the judge to consider that as 
one of the factors to be weighed. But it is not made the sort of 
dominant factor. I think it would bring a much greater balance and 
equity to the problem of selecting the lead plaintiff.
  All of the horror stories that were outlined by the Senator from New 
York are addressed by other provisions that are in the legislation. 
Those are provisions that we are not seeking to amend in the 
consideration of this legislation.
  Mrs. BOXER. I thank the ranking member again for his support on this. 
As a matter of fact, I say to my friend and my chairman that we say, 
first and foremost, the judge should look at the financial interests of 
the parties. So we, by virtue of listening, at first say absolutely it 
ought to be looked at. I agree, if it is a pension plan and there are 
no conflicts and all the rest, that would be fine. We are trying to 
protect small investors from a situation that actually would have 
developed in the Keating case and developed in the Avon case, where the 
largest investor had a clear conflict of interest, and you know that 
can only lead to injustice. I am putting it mildly.
  Again, I make a plea to my colleagues to look at these amendments as 
they come before us, because I am just concerned that if this moves 
forward in the condition it is in, we are going to be revisiting it.
  I urge my colleagues to be on the side that I think is the 
appropriate side, which is fairness, justice for individual investors, 
who may have their whole life, in a way, tied up in these investments.
  My friend from New York, in his way--and he is very strong in his 
beliefs, and I respect that--said it is the fat cats that are being 
protected in the Boxer amendment. Well, that is laughable. The bill 
says the richest investor shall be the lead plaintiff. What the Boxer 
amendment says is, well, maybe sometimes. But there is nothing 
inherently god-like about the richest person. I think we should respect 
those who may not be rich but who are hanging on everything we do--
maybe not tonight because maybe they cannot follow the argument--but 
believe me, if they are unfortunate and they have an experience like 
the Keating people did, they will be hanging on everything we did.
  Mr. SARBANES. I want to say to the Senator that the assertion of 
making the argument is that the pension funds are going to come forward 
in order to be the lead plaintiff. The fact of it is that, as the bill 
is written, there is nothing that assures that the pension funds will 
come forward. In fact, pension funds have been notorious for hanging 
back in terms of being the lead plaintiff.
  So when this proposition is put forward in the legislation and it is 
then asserted or interpreted that this means the pension funds will 
come forward to be the lead plaintiff, there is no reason to suppose 
that will be the case. In fact, the lead plaintiff may well be an 
investor with a great financial interest in the litigation who has ties 
to management.
  Mrs. BOXER. Right.
  Mr. SARBANES. As exactly happened in the Keating case, as I 
understand the Senator from New York, or as other interests that may be 
different from the broad range of the class members.
  So it is very important to understand that. I think the Senator from 
California, as I understand it, in effect, has said, let all the 
plaintiffs decide amongst themselves, or, alternatively, let the judge 
decide; and the judge, in deciding, should consider this list of 
factors. But it is up to the judge to make the decision. So you do not 
try to predetermine the outcome, as I think has been done in the 
legislation before us.
  Mrs. BOXER. Mr. President, how much time is remaining?
  The PRESIDING OFFICER. The Senator from California has 5 minutes 46 
seconds.
  Mrs. BOXER. I retain that time.
  Mr. D'AMATO. Mr. President, the hour is growing late and I do not 
intend to use all of my time.
  Let me first make an observation that the person or entity who has 
the greatest financial interest, does not necessarily mean rich people. 
It does not mean that we want a fat cat.
  Indeed, if we are talking about someone who is acting as a manager, 
we are talking about a class of people who, for the most part, are 
exactly the people who I would presume my colleague from California is 
interested in protecting, those people who have lost their entire 
investment portfolio, their 401 K., or their IRA. They are the people 
who I am concerned about.
  Now, this amendment, if passed would knock out one of the most 
critical provisions of S. 240. We call it the most adequate plaintiff. 
Who is the most adequate plaintiff for the class? One of the areas of 
abuse which was pointed out time and time again was the strike suit 
lawyers who file these class actions by racing to the courthouse to 
file a complaint and using a whole host of professional plaintiffs to 
file the lawsuit.
  I have to believe that the lawyer will continue to encourage that. 
Right now, an entrepreneur lawyer can draft a complaint, select one of 
his many ready prepared plaintiffs, and I have read the list, and race 
off to the courthouse to file the complaint. Nine out of ten times the 
first lawyer who arrives at the courthouse with the complaints in hand 
will be chosen to represent the rest of the class. This is the 
lucrative race that lawyers stand to make between 30 to 35 percent of 
multimillion dollar coerced settlements. Do we want to continue that or 
do we want to stop that practice? Nine out of ten times the so-called 
named plaintiff has no idea that the suit has been filed. My colleague 
has not put any provisions in her amendment that will stop that race. 
We have. We have.
  The professional plaintiff has no idea what is in that complaint, 
never mind pretending that this is the type of lead plaintiff who 
actually is aggrieved. They are not aggrieved. They have been working 
in cahoots with a cast of characters who are defrauding the public.
  This is not the way our legal system should work. Plaintiffs who have 
been harmed, or have been defrauded should be able to file lawsuits to 
recover damages. Professional plaintiffs should not be allowed to clog 
up this system. S. 240 contains a provision to take care of these 
pernicious problems. It attempts to allow institutional investors who 
account for 51 percent of the market and who manage $4.5 trillion of 
pension funds to serve as lead plaintiffs. Maybe they have not served 
in this capacity before because they have not had a chance, because 
they have not been fast enough to race into the courthouse and they 
only read about the lawsuits after they are filed and lead counsel has 
been appointed. Make no mistake about it, and it is not the intention 
of my colleague to bring this about, but this amendment will help 
perpetuate this system--the race to the courthouse.
  By giving institutional investors an opportunity to more fully 
control and be involved in litigation, the class will have meaningful 
representation. We will have an institutional representative who 
represents hundreds of thousands of aggrieved parties control the case 
instead of someone who is looking for a quick buck and who is not 
helping the class but is helping himself. The members of the class can 
only wonder what happened when they get a check for 22 cents in the 
mail. I will tell you what happened, the lawyer made $8 million and the 
class got 22 cents. Now, that is not right, but that is what is going 
on.
  Now, what about the selection of a person who has a great financial 
interest or who represents the class that has the largest financial 
interest through a pension fund, an institutional investor.
  We say there will be a presumption, a rebuttable resumption, and if 
there is no deficiency, the court will choose the counsel who 
represents the largest financial interest to lead the class. If

[[Page S9095]]

they do not meet the standards pursuant to the Federal rules of civil 
procedure, they will not be able to serve as lead plaintiffs.
  There are a number of those provisions. Although the hour is late I 
will read a few of those Federal procedures.

       Prerequisites to a Class Action. One or more members of a 
     class may sue or be sued as representative parties on behalf 
     of all only if, first, the class is so numerous that joinder 
     of all members is impractical; second, there are questions of 
     law or fact common to the class; third, the claims of 
     defenses of the representative parties are typical of the 
     claims of defense of the class, and fourth, the 
     representative parties will fairly and adequately protect the 
     interest of the class.

  That is called for in law.
  The amendment offered today seeks to change the standard for 
selecting lead plaintiff. This amendment provides for those seeking to 
serve as lead plaintiff to decide unanimously who should serve as lead 
plaintiff. If there is no unanimous agreement, the court will pick the 
lead plaintiff based on certain factors. Those factors have nothing to 
do with the class. They are incredible.
  They talk about how many times you brought class action suits, what 
the legal work to date has been. It says ``financial interest in the 
relief sought,'' and after that, it is just a critique of lawyers who 
have brought these actions.
  I cannot understand why we would put these considerations in--for the 
people to be chosen as the plaintiffs. I say this, because this was 
probably drafted by LeFrac and Company.
  Mrs. BOXER. Will the Senator yield to me?
  Mr. D'AMATO. No, I will not. I have listened patiently.
  The PRESIDING OFFICER. The Senator from New York has the floor.
  Mr. SARBANES. The Senator ought to yield to the author of the 
amendment.
  Mr. D'AMATO. Section (B) is more interested in developing the 
qualities that one would look for as a lawyer, than the qualities of a 
good lead plaintiff.
  Now, let me say why I say that, and I mentioned it before: (B) after 
considering all relevant factors including but not limited to financial 
interest in the relief sought, the section I am concerned with starts 
with work done to develop and prosecute the case.
  Well, that the plaintiff is not doing. That plaintiff is not 
developing and prosecuting the case. ``The quality of the claim.'' The 
plaintiff has not brought this claim; a lawyer brings the claim on 
behalf of these plaintiffs, it is up to the lawyer to assess the 
quality of the claim.
  ``Prior experience''--listen to this--that is why I say I believe 
this is the lawyer's protection amendment. ``Prior experience 
representing classes.'' That does not seem to me to be looking out for 
the small investor. That seems to me to be selecting a lawyer. Why 
should a small investor interested in representing the defrauded class 
have prior experience representing classes, unless he is a professional 
plaintiff. That is why I ask, how did this amendment come about?
  I do see some good criteria in this amendment, possible conflicting 
interest. That is excellent. And, exposure to unique defenses. That is 
in the legislation. The same thing we have. Also for lead plaintiffs to 
serve as lead plaintiff of the appointed plaintiff class. I might more 
adequately suggest it should say pick the lawyer, because in the final 
analysis, it is the lead plaintiff, it is the plaintiff who is 
assigned, who picks the lawyer.
  That is what I am concerned about. I am concerned about this 
amendment perpetuating the same scheme. Do I want to protect the little 
guy? Absolutely. I have told my colleague that if there are ways--and 
we have cooperated in the past to do this--to give greater protection 
to those who are aggrieved, I want to do it.
  That is one of the reasons we have entered, at my colleagues' behest, 
the provisions giving the ability to those people who have $200,000 or 
less and who sustain up to 10 percent, the ability to recover their 
losses. We do not just shut the door on the little guy.
  My colleague mentioned a woman who lost $25,000 and had no recourse, 
this bill would provide to that person an opportunity to recover those 
funds.
  I yield the floor.
  Mrs. BOXER addressed the Chair.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. BOXER. Mr. President, I find it really incredible that my friend 
would say that this language is the lawyer protection act when, in 
fact, three of the six requirements that the judge has to look at are 
requirements that came from your side of the argument; namely they 
should look at the financial interests. In other words, whom is the 
biggest investor? That is my friend's point. We put it in here first. 
He is telling me that the lawyers whom he names want that in this bill? 
I tell you ``no.''
  So I cannot understand how my friend could tell me that this section 
is the lawyers protection act when I put in as the first requirement a 
very important concept that comes from the opposing side. Maybe my 
friend wants to sit and talk to me about what he would accept that the 
judge could look at. If my friend from New York is willing, I would 
take out some of these, if he finds them objectionable, if he will 
support me on this. No one wrote this but me. Did I ask for help from 
my staff? You bet. I am not a lawyer. I have to make sure.
  To me it sounds reasonable to think that the quality of the claim is 
important; that the arguments are laid out well. But if my friend 
thinks that is not a good thing and he will support me, I will take out 
those things he finds objectionable in a New York minute. I would do 
it.
  So, tomorrow we finish this argument up. It is getting awfully late. 
Even I am losing my will to argue at 9 at night. So I would, at this 
time, be very happy to yield back my time, except if my ranking member 
wanted to make a few closing remarks, and I look forward to picking 
this debate up in the morning.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Who seeks recognition?
  Mr. D'AMATO. Mr. President, might I inquire of time remaining to both 
parties?
  The PRESIDING OFFICER. The Senator from New York retains 27 minutes 
and 45 seconds. The Senator from California has 3\1/2\ minutes 
remaining of her time.
  Mr. D'AMATO. Mr. President, I do not intend to use much of my time. I 
think I have made my point. I think we both made our points.
  I believe as an unintended consequence--because I do believe my 
friend, the Senator from California, is interested in trying to protect 
small investors, particularly senior citizens --this amendment would 
not be a service to them. It would continue the race to the courthouse.
  I find particularly difficult to accept that part of the amendment on 
page 3 starting at line 13, ``work done to develop and prosecute the 
case, the quality of the claim, prior experience representing 
classes.'' That is absolutely the kind of language that suggests to me 
this amendment will continue the race to the courthouse.
  If my friends and colleagues find ways to deal with an admitted 
concern of the Securities and Exchange Commission, who, for the most 
part is strongly supportive of what we are attempting to do in this 
bill, but recognizes that there are problems in the system, I will be 
happy to work with them. I might call to the attention of my colleagues 
a letter from the SEC, and I believe my distinguished ranking member, 
Senator Sarbanes, has already called this letter to our attention:

       One provision of Section 102 requires the court generally 
     to appoint as lead plaintiff the class member that has the 
     largest financial interest in the case. While this approach 
     has merit, it may create additional litigation concerning the 
     qualifications of the lead plaintiff, particularly when the 
     class member with the greatest financial interest in the 
     litigation has ties to management or interests that may be 
     different from other class members.

  I hope in the managers' amendment we might be able to address that 
concern with some language. That is a concern I think many of us have. 
It would be good to clarify that all possible conflicts under all cases 
must be avoided.
  We have to be careful because you do not want to unintentionally open 
the door to a different unintended consequence. Certainly I would have 
to strongly oppose my friend's legislation as it presently stands, 
because it would

[[Page S9096]]

continue, as I see it, the race to the courthouse.
  Let me say this, if my colleague from California is prepared to yield 
her time, I will yield all of my time.
  I yield.
  Mrs. BOXER addressed the Chair.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. BOXER. Mr. President, I only have 3 minutes left. I want to make 
a point. This section deals with the plaintiffs. It does not deal with 
the lawyers. And the way I read it, if there has been a repeat of a 
plaintiff, the judge can throw out that plaintiff. So, my friend cites 
a section that deals with plaintiffs, not with lawyers.
  His other point about a rush to the courthouse. If he thinks this 
Senator has a bill that is a rush to the courthouse, we took the 
language out of his bill. Mr. President, 90 days they have to file in a 
newspaper of general circulation. It is boilerplate language. It is the 
same exact timeframe as my friend from New York has. He says I am 
rushing to the courthouse, then he is rushing to the courthouse.
  Again I have to say I know my friend vociferously opposes this. But I 
have not heard anything that makes me feel he has undermined my basic 
argument. If he wants to work on language I am happy to work on 
language.
  I yield to my friend from Maryland.
  Mr. SARBANES. If the Senator will yield, one of the provisions that 
the Senator from New York pointed to, that the Senator has listed, 
prior experience representing classes, could be used by the judge to 
disqualify plaintiff, not to qualify the plaintiff. The very plaintiffs 
you have cited who you said have represented--I do not know, seven 
times or whatever the number was--who were just buying professional 
plaintiffs.
  Mr. D'AMATO. Fourteen.
  Mr. SARBANES. All right, fourteen. He could be ruled out by the judge 
by considering that factor. It says, ``after considering all relevant 
factors including prior experience representing classes.'' That could 
be a negative factor as well as a positive factor. It is up to the 
judge. That is the very thing you would argue to the judge.
  You would say to the judge, ``This person should not be the lead 
plaintiff. He has fourteen instances of doing this. He is just playing 
a game with you.''
  And the judge would say, ``Oh, yes, you are right. And under the 
Boxer amendment I am entitled to consider that factor, prior experience 
representing classes, and considering that factor I am not going to 
make this person the lead plaintiff.''
  The Senator from California has in effect taken one of your 
contentions and put it in her amendment.
  Mrs. BOXER. Yes. Yes. The Senator from Maryland is correct. Because 
this section does not talk about lawyers, it talks about the 
plaintiffs.
  Mr. SARBANES. It does not say positively or negatively. That is for 
the judge to weigh.
  Mr. D'AMATO. Mr. President, if I might?
  The PRESIDING OFFICER. The Senator from New York is recognized.
  The Senator from California retains 38 seconds.
  Mr. D'AMATO. I have to tell you that is one of the most novel, 
interesting, intriguing arguments I have ever heard.
  Mr. SARBANES. It is right there in black and white.
  Mr. D'AMATO. I want to salute and take my hat off to my friend from 
Maryland for putting that twist on. Certainly, it is a stretch to read 
this as a disqualification. All relevant factors including but not 
limited to financial interest, work done, prosecution of case, quality 
of the case, prior experience. I suggest no one could really interpret 
this literally and say to the judge, ``You should disqualify someone, 
if they have been in on two or three or four of these cases, from being 
considered as lead plaintiffs, or taking their vote or their 
determination, because they are professionals and have been doing it 
for years.''
  I have to agree with my colleague, could the judge do it? Sure. But I 
have not seen a judge exercise that kind of right to interpretation. Of 
course we have not passed this bill. But that certainly is unique and 
novel as an interpretation. I have to tell my colleague, ``I could have 
some support for this amendment--and maybe we should put this provision 
in a managers' amendment--if it said we are going to look expressly at 
the qualifications to see that there are not professionals leading the 
class.''
  Of course, how do you really tell? You get into how do you define who 
``professional plaintiffs'' are? There may be some people we classify 
as gadflies who bring these suits, not because they have been prompted 
by somebody but because they want to do what is right, to bring the 
case, maybe they have been aggrieved, maybe they do not have a great 
financial stake, but they think others have been aggrieved.
  It is, I think, stretching--even beyond that limit to which most of 
us stretch, including this Senator at times--the credibility of this 
argument, to suggest you are really telling the court to look and see 
whether or not this person has been involved in multiple suits and 
therefore should be dropped.
  I find that difficult to interpret in that manner. But I do say ``It 
is novel. It shows great dexterity.'' And it shows, I believe, why we 
should not even get involved in this.

  Mrs. BOXER. In my 38 seconds, Mr. President----
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. Boxer. In this section the Boxer amendment lists 6 things. They 
are neither positive nor negative. My friend seems to think financial 
interest is a relief sought as a positive. I would think it is a 
negative. I could change it to the number of times the plaintiff has 
represented a class. I am well meaning here. This section does not 
relate to lawyers. Even though my friend said it did does not make it 
so. Just read it. It has to do with who the lead plaintiff is.
  If my friend is serious, we could work this out. We could have a good 
amendment. We could agree to it. We could pass it, and we could I think 
prevent a real problem from developing out there when we find ourselves 
in a situation where a co-defendant winds up as a lead plaintiff. I 
think that would be dangerous.
  I yield the floor.
  Mr. D'AMATO. Mr. President, I am very serious. If we cannot read this 
amendment to say financial interest and relief sought should be 
considered, what are we talking about? If work done to be developed and 
prosecute the case is considered--I mean you can obviously say, ``Well, 
was there a lot of work done, or was not their work done?'' But is that 
something obviously that should be taken into consideration? The 
quality of the claim--are we to say it is good quality? These are 
determinative factors that we will make. Are we using the English 
language or turning it upside down? Are we back to Alice in Wonderland 
now? I mean really, maybe the hour is late. But to suggest that by 
writing ``prior experience representing a class'', one would really say 
we are calling upon the judge to limit those people who serve often, if 
there have been those who have been representing a class over and over 
and in other suits, that would disqualify them. I think that is rather 
preposterous. If that is what the intent is, then we will need to spell 
it out. Maybe we should have spelled this out when we forth this 
legislation. But certainly, as I see it, it is difficult to believe 
that is the intent of this particular amendment.
  Mr. SARBANES. If the Senator will yield, I mean the way the amendment 
is written it is absolutely neutral in terms of whether the judge shall 
consider the factor positively or negatively. It only says these are 
factors to be looked at, and the judge upon looking at the factor could 
weigh in a positive way or weigh it in a negative way. I mean I think 
the Senator has tried very hard to just lay out some items the judge 
should look at. The Senator tried in arguing against it to read it a 
certain way. But the amendment does not read a certain way. It is very 
clear on the face of the amendment.
  Mr. D'AMATO. My friend and colleague, as I read it, these are 
conditions that the court will look at in making a determination. They 
are going to consider these factors. It says it quite clearly. We could 
argue about whether or not they should take them into consideration. 
Reasonable people can disagree.
  Mr. SARBANES. Will the Senator say this amendment with respect to

[[Page S9097]]

considering financial interest in the relief sought--is that a plus or 
a minus?
  Mr. D'AMATO. It is something that has to be considered. Obviously, it 
would seem to me that we should select someone who had a financial 
stake. That would be a factor, a positive factor. If something had been 
done in developing work, that would be a positive factor, and prior 
experience and exposure to unique defenses would be a positive factor. 
Why would you otherwise put these in the amendment? Then possible 
conflicts of interest, we read that as a negative factor, obviously. I 
think though that we go beyond.
  We have had a good debate on this. I am prepared to yield back the 
balance of my time, and we can take this up tomorrow morning.
  Mr. President, I yield the remainder of my time.

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