Appeals Court Raises Bar For Securities Class Status

Law360, New York (May 17, 2007, 12:00 AM EDT) -- Upping the ante for aggrieved investors, an appeals court has ruled that plaintiffs in securities fraud cases must defend the merits of their lawsuit before being granted class action status.

The U.S. Court of Appeals for the Fifth Circuit Wednesday revoked class certification for shareholders suing former executives of bankrupt Allegiance Telecom, ruling the plaintiffs must first prove a link between their loss and the alleged fraud.

“Given the lethal force of certifying a class of purchasers of securities … we now in fairness insist that...
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