As noted previously in this blog (November 15, 2007 entry), now-retired Representative Richard Baker introduced the “Securities Litigation Attorney Accountability and Transparency Act” (“SLAATA”) last October. However, no further action was taken with respect to SLAATA in the 109th Congress. This February, Representative Jeb Hensarling, who co-sponsored the bill last year, once again took up the mantle to curb securities class action abuses by reintroducing SLAATA as H.R. 5463.
SLAATA’s most compelling provision is the fee-shifting arrangement which would require that, after a final judgment has been entered against the plaintiff, the plaintiffs’ attorney will pay the defendants’ fees and expenses if (1) the position taken by the plaintiff was not “substantially justified,” (2) imposing fees and expenses would be just, and (3) the cost of such fees and expenses to the defendant is substantially burdensome or unjust.
SLAATA would also require certain disclosures from the plaintiffs and their attorneys designed to determine if any suspicious relationships or other conflicts of interest exist, possibly resulting in the disqualification of the attorney. In addition, where feasible, SLAATA would introduce a competitive bidding process as one of the criteria for selection and retention of plaintiffs’ lead counsel in securities class actions.
Lastly, SLAATA would require a study of fee awards to lead counsel in securities class actions for the prior five years, and subsequently updated every three years, to determine the effective hourly rate for such counsel.
A hearing on SLAATA is expected to occur this spring.