"Positive Political Theory" and the PSLRA

In a still unfinished draft paper, Professors Emerson H. Tiller and Albert Yoon (both from Northwestern University School of Law) attempt to "examine the role of legislative reform on judicially created legal doctrines relating to private securities litigation."

The paper is titled Private Securities Litigation and the Courts: Positive Political Theory and Evidence and is available here.

The study examines "the effect of the Private Securities Litigation Reform Act of 1995 on the use of the "Group Pleading Doctrine" and "Fraud on the Market" theory. It does so in the context of the so called "Positive Political Theory," which according to the authors examines "the general question of how Congress can influence the use of legal doctrines within a judicial hierarchy."

The authors suggest:

Positive political theory is a useful lens to analyze private securities litigation and the effects of the PSLRA. In the context of private securities litigation, the theory suggests that federal district court judges (1) are influenced by their policy preferences in deciding on a defendant's motion to dismiss as to whether the plaintiff-investors have met the pleading requirements of Rule 9(b) and the PSLRA - essentially a decision about whether the plaintiffs will be given the leverage to force a large financial settlement with the defendant; and (2) make summary motion decisions on pleading requirements in anticipation of the likely response of the overseeing circuit court of appeals.

They have some interesting statistical interpretations regarding the impact that the political party of the president that nominated a particular judge may have on typical securities litigation motion practice at the end of the article, though they appear to be works in progress.