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Securities Class Action Clearinghouse launched

For several months, Stanford's law school has been in the forefront of an effort to require counsel in pending securities fraud class action cases to make information about pending litigation available on the World Wide Web. On Dec. 6, the school made a giant leap toward that goal when it launched the Securities Class Action Clearinghouse (

The clearinghouse gives individual and institutional investors unprecedented access to class action securities fraud litigation documents not otherwise available to the public. A beta version of the site has been on the Web since summer, while the kinks were worked out. However, the clearinghouse was officially launched last Friday.

"The Securities Class Action Clearinghouse is a window on the future of litigation in the age of the Internet," said law Professor Joseph Grundfest, a former commissioner of the Securities and Exchange Commission and director of the clearinghouse project. "Justice Louis Brandeis once observed that 'sunshine is the best disinfectant.' If there are problems with securities fraud or with litigation practices, then the Internet may prove to be a beneficial source of electronic sunshine for the investment and litigation process," he said.

In the past, investors and their attorneys had to search each individual district court for documents, said Michael Perino, assistant director of the law school's law/business program. "It was way too labor intensive for anyone to undertake," he said.

Now staff at the Law School and Crown Library do the legwork. Once notices of litigation are made public, as required by the Private Securities Litigation Reform Act passed by Congress a year ago, Stanford collects related documents from lawyers involved in the cases and other attorneys in the geographic area and posts the information on the website.

If the judges in the U.S. District Court for the Northern District of California have their way, counsel in class action securities fraud cases filed in the district will be required to post copies of major litigation documents, such as complaints and motions, on the Internet at the same time they are filed as paper documents with the court. On the day Stanford's clearinghouse was launched, the judges proposed for comment a rule that would require such electronic posting. Stanford's clearinghouse is the first website that would satisfy the requirements of the proposed rule, which is expected to be approved by late January.

"What we hope to do in the future is to migrate that proposed rule to other districts that have a significant amount of securities class action activity," said Perino. "With a concentration of high-tech companies that are subjects of securities class action lawsuits, the Northern District of California has more filings than any other district in the country."

For its part, the Securities and Exchange Commission plans to post a list of qualified "Designated Internet Sites" on its existing home page.

"If this venture works, more investors could have access to this type of information on a truly national scale," Steve Wallman, SEC commissioner, said at a joint press conference in San Francisco last Friday.

Currently, the Stanford site includes the full text of approximately 64 class action securities fraud complaints filed since Congress passed the 1995 Private Securities Litigation Reform Act. Summaries and analyses of complaints are arranged alphabetically by name of company sued, date of filing and jurisdiction. It also lists opinions and orders, docket sheets and settlement-related documents. Moreover, it provides access to SEC stock price performance information on companies named in securities class action complaints.

Grundfest said the clearinghouse will help the SEC monitor developments in litigation, help Congress evaluate the need for further amendments to federal securities laws, assist judges in learning about relevant developments in cases pending in other courts, and provide the media with more timely information about securities litigation issues.

Perino and Grundfest noted that the clearinghouse also will serve as a valuable academic tool.

"It is valuable as much for its research and teaching potential as for anything else," Grundfest said. "We're now able to teach our students through the application of a database that has never before existed. The analysis and study of the legal system has typically been limited to the study of judicial decisions, but decisions only describe a very small percentage of the litigation process. This database will seek to capture the full information flow in a new area of the law," Grundfest added.


-By Elaine Ray-

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