Tuesday, October 21, 2008

Trevino Bravo on Securities Litigation under the Guise of ERISA

Georgetownlogo Georgetown law student Clovis Trevino Bravo has posted on SSRN her article: ERISA Misrepresentation and Nondisclosure Claims: Securities Litigation under the Guise of ERISA?

Here is the abstract:

In the wake of recent corporate scandals and dramatic market downturns, many employees whose retirement savings plans were heavily invested in the stock of their employer have seen their account balances substantially depleted. To recover for their losses, plan participants have filed lawsuits under the Employee Retirement Income Security Act (ERISA) alleging that plan fiduciaries made misrepresentations or failed to disclose material information about the suitability of investing in the company stock. These suits are generally derivative or companion cases to securities class actions based on the same allegations of misrepresentations or nondisclosures. Even though there is a significant overlap between the ERISA and the securities suit, the procedural and substantive rules governing the two actions are substantially different.

This Article responds to the substantial need to identify these differences side by side and to examine whether ERISA fiduciary misrepresentation and nondisclosure claims amount to securities litigation in disguise, and if so, whether these claims should be allowed to proceed in the absence of the procedural safeguards imposed by the Private Securities Litigation Reform Act (PSLRA).

I have predicted recently the U.S. economic collapse will inevitably lead to a significant increase in the number of these types of ERISA stock drop suits.  Unless the PSLRA is amended or other safeguards are added under ERISA, there is every reason to believe that these types of ERISA claims may become the new securities litigation claims of this decade.



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