Judge Robert Keeton has ruled that a provision requiring that he appoint a lead plaintiff within 90 days violates the separation of powers doctrine, finding that Congress did not have constitutional authority to place a deadline on a court decision requiring the exercise of judicial discretion. The provision in question is part of the "lead plaintiff" provisions of the Private Securities Litigation Reform Act ("PSLRA"). Seeking to reform the practice of class action lawyers recruiting and controlling class representatives with a minimal financial stake in litigation, Congress enacted the lead plaintiff provisions to encourage institutional investors with a large stake in securities litigation to represent the class and exercise effective management and supervision of class lawyers. In the case before Judge Keeton, Kai Chan, a purchaser of common stock in PRI Automation, Inc., brought a class action suit against PRI and various directors and officers alleging that PRI violated the Securities and Exchange Act of 1934. More than one plaintiff has sought to be named "lead plaintiff." Judge Keeton asked "any interested member of the Bar of this Court" to comment on six questions he raised concerning the constitutionality of the PSLRA.
Responding to this request, NELF contended that none of these provisions are constitutionally infirm. Under lead plaintiff provisions of PSLRA, a plaintiff filing a new putative class action must "cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class" of the pending action. The notice must advise the class that "any member of the purported class may move the court to serve as lead plaintiff of the purported class." The PSLRA creates a rebuttable presumption that the "most adequate plaintiff . . . is the person or group of persons" who has sought the role, otherwise meets the requirements of rule 23 of the Federal Rules of Civil Procedure, and "in the determination of the court, has the largest financial interest in the relief sought by the class." Within 90 days after the notice is published, the court "shall appoint as lead plaintiff the member or members of the purported class that the court determines to be most capable of adequately representing the interests of the class members." It was this 90-day requirement that Judge Keeton found to be “an unconstitutional intrusion on the judicial functions of a United States District Court.” NELF is awaiting a decision on the other questions raised by Judge Keeton.