Legislation that shields publicly traded corporations from average investors who want to sue when they believe they have been the victims of fraud is a bad idea, even if the stated purpose of such legislation is to cut off litigious stockholders and lawyers at the pass.
Such a measure has been approved by the House and is in the final stages of debate in the Senate. President Clinton should get his veto pen ready.
Supporters, including Sen. Chris Dodd, D-Conn., say the Private Securities Litigation Reform Act is necessary to stop lawyers from filing lawsuits with little merit that can force companies into huge monetary settlements.
Opponents counter that companies don't need more protection. The bill would make it much more difficult for investors _ individuals and government pension plans _ to sue and recover losses in cases of fraud. The burden of proof would be heavier and tighter restrictions on bringing a case would be imposed. The bill would protect companies against a backlash if their predictions about corporate performance fail to materialize. Investors would have to prove they were knowingly misled to be able to sue in such cases. The bill also would limit the amount that could be recovered from accountants and underwriters who failed to blow the whistle on any fraud.
Society of late has been more litigious, many cases propelled by lawyers with their eyes on the deep pockets of corporations. But this bill goes too far.