[Congressional Record Volume 143, Number 139 (Wednesday, October 8, 1997)]
[Senate]
[Pages S10712-S10713]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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               SECURITIES LITIGATION REFORM STANDARDS ACT

 Mr. DOMENICI. Mr. President, I am pleased to cosponsor S. 
1260, the Securities Litigation Uniform Standards Act of 1997 that was 
introduced yesterday by Senator Gramm, Dodd, and myself. We were joined 
by a significant number of the Banking Committee members.
  After an extensive series of hearings which established a pattern of 
widespread abuse of the securities laws by class action lawyers, the 
Congress, in 1995, passed a major overhaul of the class action rules 
for frivolous securities litigation. The law is also designed to 
increase the flow of information to investors.
  The Act will be 2 years old at the end of the year. With benefit of 
these 2 years of experience there is evidence that plaintiffs' lawyers 
have simply moved their frivolous cases to State court to avoid the new 
Federal reforms.
  A study by Stanford Law School professors Joseph Grunfest and Michael 
Perino found that since the passage of the Federal reforms in 1995, 
about 26 percent of class action litigation activity has moved from 
Federal courts to State courts--an unprecedented shift.
  The Stanford study concluded that this shift to State court is 
calculated to ``avoid the substantive or procedural provisions of the 
1995 reform act--the very provision that deter abusive lawsuits.''
  Under State law, plaintiff's lawyers still can engage in practices 
that were prohibited by Congress in 1995.
  State courts still allow ``boilerplate'' complaints; fishing 
expeditions in the name of discovery even before the plaintiffs' 
lawyers establish that they have the barest of facts to support their 
case.
  State courts still allow pet plaintiffs. This is the perverse 
practice by which the lawyer hires the client, not the more customary 
arrangement under which a client hires the lawyer.
  State courts still allow lawsuits simply if the price of the stock 
drops. Congress decided in 1995 that stock volatility is not stock 
fraud.
  State courts still allow lawsuits if a prediction about the future of 
the company doesn't come true--even when the statement is accompanied 
with appropriate warnings that the prediction may not come true and 
that it is a prediction.
  The lack of safe harbors for predictions about the company's future 
muzzle CEO's and chill the flow of information.
  Corporate disclosures reduce the volatility of share prices and 
increase the liquidity of stock. Yet, State courts do not have safe 
harbors for predictions as a result, the information flow to investors 
is limited because State lawsuits are undermining the ``safe harbors'' 
that were crafted in the 1995 Act.

[[Page S10713]]

  There is a tremendous value to corporate disclosures. Forward looking 
corporate disclosures dramatically lower the cost of capital. Firms 
that voluntarily disclose information increase their pool of potential 
investors, and those investors have a more accurate understanding of 
the firms' likely future performance. There is an overwhelming 
consensus in the academic, business and investor communities that these 
factors greatly enhance a firm's ability to attract capital and 
therefore contribute to economic growth.
  The targets of these State-court securities class actions are the 
high-tech leaders of the future. These are the companies producing the 
exciting products, and creating excellent jobs.
  One of these lawsuits can cripple a young high-tech company. During 
our first round of hearings, the general counsel for Intel stated that 
if Intel had been hit with one of these lawsuits in its early days, 
there might not be an Intel today. One of these frivolous lawsuits 
could have put them out of business.
  These lawsuits are destructive, and the 1995 reforms were designed to 
protect innocent companies and to provide more information to 
investors.
  The purpose of this legislation is to make sure that the 1995 act 
works the way that Congress intended.
  The bill creates a very narrow preemption requiring that class action 
law suits involving nationally-traded securities be litigated in 
Federal court. This would ensure that remedies available to purchasers 
and sellers of these nationally-traded securities would be uniform and 
would not vary depending upon the State in which the purchaser or 
seller lives.
  Specifically, the bill only affects class actions in which damages 
are sought on behalf of more than 25 people.
  The legislation only applies to cases involving nationally traded 
securities.
  State regulators retain full authority to bring enforcement actions.
  Private class actions involving nationally traded securities that are 
filed in State court would be moved to Federal court.
  Mr. President, I urge the Senate to expeditiously consider and pass 
this legislation.
 Mr. HOLLINGS. Mr. President, occasionally there comes along an 
individual who inspires everyone with his compassion, dedication, and 
devotion. Alex English is such a person.
  Mr. English was born in Columbia, S.C., amid great poverty. As a 
child, he faced overt racism from many of the city's white residents; 
in his neighborhood, there were few role models he could emulate. It 
would have been easy for Alex English to capitulate to the odds, to 
become a victim of the oppressive poverty and violence that surrounded 
him. But he did not.
  Instead, Alex English became a basketball player. Not just any 
basketball player, but one of the greatest in the world. On Monday, 
September 29, 1997, he was inducted into the Naismith Memorial 
Basketball Hall of Fame. The hall of fame recognized him for his 15-
year National Basketball Association career, during which he made the 
All-Star Team eight times and the All-NBA second team three times. Mr. 
English led the NBA in scoring in the 1985-86 season. Today, Alex 
English is No. 9 on the NBA's all-time scoring list.
  But Alex English's greatest attributes are not his feather-soft jump 
shot or his patented, smooth-as-silk drive to the basket. They are his 
qualities as a warm and generous person. Alex English was first and 
foremost a team player, in life and in basketball. At his induction on 
Monday, he said, ``Team play was the most important thing for me. I had 
players around me who knew their roles; there was no selfishness.'' 
This unselfish attitude and self-effacing manner is rare among today's 
famous athletes.
  On and off the court, Alex English's grace and poise always have 
stood out. Lou Carnesecca, former St. John's coach and 1992 Hall of 
Fame inductee, noted that Alex ``always comported himself so well--with 
class.'' Dr. Jack Ramsay, another Hall of Fame coach, seconded 
Carnesecca's praise. These great coaches are telling us what we in 
South Carolina already know: as a player and person, Alex English is in 
a league of his own.
  We in South Carolina are proud to call Alex English our own. He has 
been inducted into the South Carolina Athletic Hall of Fame and the 
University of South Carolina Hall of Fame, as well as the Colorado Hall 
of Fame. Fortunately for us, Alex also has been quick to acknowledge 
his South Carolina roots. ``I carry all of you with me,'' he said to 
the people of Columbia after his induction on Monday. ``Columbia has 
been a very important part of my career; the people there have always 
treated me very kindly.''
  Alex English continues to reside in Columbia, preferring to live 
quietly among old friends rather than ostentatiously. He has not 
forgotten his old teammates at Dreher High School and the University of 
South Carolina. He is known to his neighbors and friends as a 
humanitarian, philanthropist, businessman, and ambassador of goodwill. 
He gives generously of his time and money. As George Glymph, Alex 
English's high school coach said, ``When the good Lord wanted a role 
model for the ultimate professional, family man, warrior, he made 
Alex.'' Because of Alex English's contributions, his community--our 
community--is a better place.
  At his induction, Alex English told the press, ``I love the people of 
Columbia dearly.'' Alex, the feeling is mutual.

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