Determining the Proper Pleading Standard Under the Private Securities Litigation Reform Act of 1995 After In re Silicon Graphics

Abstract

This Comment argues that the interpretation given to the PSLRA's heightened pleading requirements by the Ninth Circuit in In re Silicon Graphics contradicts both the plain language and the legislative history of the PSLRA, and therefore congressional reform or Supreme Court interpretation of the Act is necessary to allow the Act to have its intended impact. Part II discusses the difference between the substantive and procedural pleading requirements under Rule lOb-5 of the Securities Exchange Act and the interpretation of these requirements by the federal circuit courts prior to the enactment of the PSLRA. Part III discusses the legislative history of the PSLRA. Part IV discusses the split between the federal circuits in their interpretations of the PSLRA. Part V discusses the impact of the recent decisions interpreting the PSLRA, in particular the In re Silicon Graphics decision, on private plaintiffs, the capital markets, and the federal courts in general. Finally, Part VI argues that a case similar to In re Silicon Graphics will be accepted by the Supreme Court for certiorari, and that upon review the Court will take a plain language approach to interpreting the PSLRA and hold that while recklessness survives as an adequate state of mind for the imposition of liability under the PSLRA, mere allegations of motive and opportunity will no longer suffice to meet the procedural requirements of Rule lOb-5 securities fraud actions.