Copyright (c) 2008 All rights reserved. http://works.bepress.com/jennifer_ohare Recent documents in Jennifer O'Hare en-us Sun, 30 Nov 2008 15:36:03 PST 3600 http://works.bepress.com/jennifer_ohare/8 http://works.bepress.com/jennifer_ohare/8 Thu, 09 Aug 2007 12:46:36 PDT Jennifer O'Hare http://works.bepress.com/jennifer_ohare/7 http://works.bepress.com/jennifer_ohare/7 Thu, 09 Aug 2007 12:45:57 PDT Jennifer O'Hare http://works.bepress.com/jennifer_ohare/6 http://works.bepress.com/jennifer_ohare/6 Thu, 09 Aug 2007 12:45:23 PDT Jennifer O'Hare http://works.bepress.com/jennifer_ohare/5 http://works.bepress.com/jennifer_ohare/5 Thu, 09 Aug 2007 12:44:41 PDT This Article addresses a conflict between the fiduciary duty of disclosure under state law and the anti-fraud provisions of the federal securities laws. In the Securities Litigation Uniform Standards Act of 1998, Congress balanced the federal interest of discouraging frivolous securities litigation against the need of the states to regulate the conduct of corporate directors. In the Uniform Act, Congress preempted most state securities fraud class actions, but also specifically preserved state claims based on the fiduciary duty of disclosure as enunciated by the Delaware courts at the time of enactment. At that time, the Delaware courts had limited the fiduciary duty of disclosure to communications made when the corporation was seeking some sort of shareholder action, such as a shareholder's decision to vote or tender his securities. In other words, the fiduciary duty of disclosure would not attach if a misleading statement appeared in a corporate press release or public document made to the market generally. Congress drafted the so-called "Delaware carve-out" to reflect this distinction: under the Uniform Act, actions based on the fiduciary duty of disclosure are preserved only if shareholder action has been requested by the corporation. After the passage of the Uniform Act, however, the Delaware Supreme Court expanded the scope of the fiduciary duty of disclosure to reach all communications made by directors, whether shareholder action had been requested or not. Thus, following the Malone v. Brincat case, the Uniform Act preempts certain class actions based on a breach of fiduciary duty of disclosure, prohibiting the Delaware courts from holding directors of Delaware corporations liable for even flagrant breaches of their fiduciary duty of disclosure.This Article argues that Congress should amend the Delaware carve-out to preserve all actions based on a breach of fiduciary duty of disclosure, including actions based on misleading communications made to the market generally. It demonstrates that this approach will protect Delaware's strong interest in regulating the conduct of directors of corporations organized under its corporate statute without undercutting the important policies of the Uniform Act. Jennifer O'Hare http://works.bepress.com/jennifer_ohare/4 http://works.bepress.com/jennifer_ohare/4 Thu, 09 Aug 2007 12:43:54 PDT This Article addresses the securities fraud implications of the employee as investor. It first demonstrates that employee investors are particularly vulnerable to securities fraud committed by company management. Company management can capitalize on the employment relationship and communicate directly with their employees, through such media as employee newsletters, employee meetings, and employer e-mails. These communications are often promotional in nature. They may also be misleading. Unfortunately, employees are more likely to believe misleading employer communications because of the natural tendency of employees to trust the senior management of their employer. The Article then demonstrates that the anti-fraud provisions of the federal securities laws do not adequately address the vulnerability of employee investors. In particular, I point out that because employer communications are not publicly made, securities fraud actions are unlikely to be brought, either by the SEC or by private plaintiffs. To fill this regulatory gap, I propose that certain types of employer communications should be disclosed to the Securities and Exchange Commission. Requiring disclosure of employer communications would have a disciplining effect on senior management without chilling the disclosure of information by employers to their employees. Jennifer O'Hare http://works.bepress.com/jennifer_ohare/3 http://works.bepress.com/jennifer_ohare/3 Thu, 09 Aug 2007 12:43:08 PDT This paper addresses the SEC's recent use of the corporate monitor as ancillary relief in its enforcement actions. The corporate monitor represents the latest example of the SEC seeking to shift its enforcement responsibilities to the public companies it regulates. Focusing on the role played by the corporate monitor imposed by the SEC in its enforcement action brought against WorldCom, this paper considers some of the dangers posed by the use of the corporate monitor, such as the whether the appointment of a corporate monitor constitutes impermissible overreaching by the SEC. The paper recognizes that the corporate monitor can be an effective weapon against securities fraud, but cautions that, given the dangers inherent in its use, the SEC should seek a corporate monitor only in rare cases and publish guidance explaining when it will seek this remedy. Moreover, courts should develop clear standards limiting their judicial discretion to order this extraordinary ancillary remedy. Jennifer O'Hare http://works.bepress.com/jennifer_ohare/2 http://works.bepress.com/jennifer_ohare/2 Thu, 09 Aug 2007 12:39:21 PDT This paper assesses the private remedies available under Rule 10b-5 to retail investors who have been defrauded by false corporate disclosures. After comparing the treatment received by retail investors to the treatment received by institutional investors, I identify several areas in which the federal securities laws disfavor retail investors who have been defrauded by false corporate disclosures, including the creation of a two-tiered system of investor remedies for securities fraud. Institutional investors are permitted to pick and choose which law and forum offers them the most attractive chance for recovery, but retail investors typically do not have this opportunity. They are forced to sue under federal law in federal court. I then show that disfavored treatment could lead retail investors to question the fairness of the federal securities laws, contributing to a loss of investor confidence in U.S. markets. I conclude by exhorting policymakers to recognize that the securities fraud class action significantly disadvantages retail investors. Policymakers need to become much more aware of the plight of the defrauded retail investor when considering reforms to private securities fraud litigation and when determining enforcement initiatives. Jennifer O'Hare http://works.bepress.com/jennifer_ohare/1 http://works.bepress.com/jennifer_ohare/1 Thu, 09 Aug 2007 12:30:43 PDT This Article addresses the removal and preemption provisions of the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"). In SLUSA, Congress preempted class actions alleging "an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security." SLUSA clearly applies to preempt the typical state securities fraud action, forcing plaintiffs into federal court where they will be subject to the rigorous procedural requirements of the Private Securities Litigation Reform Act of 1995. Preemption of false corporate publicity cases was expected and, in fact, intended by SLUSA. However, many courts have also extended SLUSA to preempt very different types of claims, including breach of fiduciary duty claims, breach of contract claims, and claims based on state deceptive and unfair trade practices acts. Not surprisingly, plaintiffs have argued that Congress never intended to preempt these types of claims, while defendants have argued just as forcefully that plaintiffs should not be able to circumvent the strong federal policies set forth in SLUSA through artful pleading. There is an obvious policy clash: a concern for federalism versus the prevention of frivolous actions and strike suits. In this Article, I try to clarify how courts should interpret SLUSA's preemption provision. I also discuss the interrelationship between preemption and the removal of actions to federal court, paying particular attention to the well-pleaded complaint rule and complete preemption doctrine. I conclude that SLUSA is not limited to state securities fraud claims. Instead, the statute requires courts to examine the allegations actually made in the complaint to determine if SLUSA is triggered. If the complaint alleges a materially misleading statement in connection with the purchase or sale of a covered security, the class action should be preempted, regardless of the theory of liability chosen by the plaintiff. Because I argue that SLUSA is triggered by the allegations actually made in the complaint, I reject those cases that have looked beyond the complaint to determine if the case is preempted. In addition, I demonstrate that plaintiffs should be permitted to avoid preemption through careful pleading; thus, for example, a plaintiff should be able to avoid preemption if he alleges that the defendant's fraud induced him to hold, rather than purchase or sell, his securities. Finally, I argue that SLUSA's "in connection with" requirement should be narrowly construed. My recommendations are based on statutory interpretation, legislative history, and the goals of the federal securities laws, including SLUSA. They are also founded on an understanding of the important policies that have been implicated by SLUSA. In particular, I argue that the courts have failed to sufficiently consider federalism concerns in interpreting SLUSA, potentially leading to a dangerous expansion of SLUSA's preemptive scope. Jennifer O'Hare Securities Law Corporations