I want to thank the Chairman for calling this hearing. I am pleased to be an original co-sponsor of this legislation, S. 1260.
Mr. Chairman, first, the core issue here is about stopping class action lawsuits that are designed to make certain lawyers rich at the expense of the private sector. The lawyers aren't creating any wealth by their methods, they are simply appropriating a portion away from the people who have created it through their own hard work.
Second, we know that these suits don't benefit the shareholders. The shareholders collect pennies on the dollar in class action lawsuits. A little overlooked fact is that this bill would not stop an individual from initiating a lawsuit. And this bill does nothing to prevent SEC enforcement action. It only relates to class action suits for nationally traded securities.
Mr. Chairman, as soon as we passed the Securities Litigation bill during the last session, a small cadre of lawyers went to work to undermine it. They tried to change California law and failed. Nevertheless, they decided to bring their brand of cases in state court to avoid the federal law.
What I found most startling about this issue, is that in California state court, one law firm is bringing 80% of the class action lawsuits. In California, the number of state cases is up 25%.
This is not about states rights either. I have a letter from the Governor of California urging us to pass federal legislation - - you don't often see that.
Finally, I have one observation. Any bill that Phil Gramm, Lauch Faircloth, Barbara Boxer and Ron Wyden can all co- sponsor must be a pretty good bill!
Thank you Mr. Chairman.
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