SEC Chairman Paul Atkins’ bid to curb “frivolous” shareholder complaints signals a new level of hostility toward investors and lawyers typically viewed as the Wall Street cop’s allies, and the effort has struggled to get off the ground as companies are slow to adopt mandatory arbitration clauses for shareholders. 

Championed as a way to boost IPO activity, Atkins’ push to funnel claims away from courts and into private arbitration marks a departure from how the 90-year-old Securities and Exchange Commission views its role as a regulator, shareholder lawyers and an investor advocate said. 

…

The SEC, now run solely by a GOP chairman and commissioners, unveiled its new stance on mandatory arbitration as a “clarifying” policy statement without noting any consideration of public input. 

The agency under the second Trump administration has frequently telegraphed its priorities through roundtable discussions instead of going through formal rulemaking. With the arbitration policy, Atkins is taking aim at shareholder litigation despite another safeguard in place to raise the bar for pleading securities fraud class action suits, the 1995 Private Securities Litigation Reform Act. 

“Most things that have come out of this SEC, they are solutions in search of a problem,” said Laura Posner, a partner in the securities litigation and investor protection practice at Cohen Milstein Sellers & Toll PLLC. “One of the things that the PSLRA, when it was passed 30 years ago, was actually quite effective at doing was ensuring that frivolous litigation does not move forward past the motion to dismiss stage.” 

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Others argue that defending cases as individual arbitration actions would place a considerable burden on companies that choose to go that route, presenting logistical concerns that would otherwise be minimized in a consolidated class action, as well as a potentially larger price tag. 

“I don’t think it’s going to save you any money,” Posner said. “Institutional investors will still bring their claim in arbitration, and they’re not going to settle for 10, 15, 20 cents on the dollar. When they bring individual actions, they will be demanding higher percentages of their damages.” 

For now, it seems that public companies or those seeking to go public are exercising caution around mandatory arbitration and instead opting to tackle shareholder class actions in court. 

“We’ve been talking not only to corporate counsel, but also to issuers directly, to D&O insurers, to underwriters and accountants,” Posner said. “Pretty uniformly, at least from those who are sophisticated, they are advising and being very careful in their recommendations to clients about not proceeding down this road.” 

SEC policy shifts, rulings on investor class status and actionable company statements, and discussions about the future of artificial intelligence set the pace in 2025 and may have a lasting effect in securities cases in 2026.

A Securities and Exchange Commission pivot allowing companies to issue stock with the condition that disputes must be arbitrated remains one of the year’s most talked-about developments in securities litigation. Mandatory arbitration brings the potential to upend that area of practice by handing corporations a new means of avoiding class actions, while raising the specter of mass filings to arbitrators.

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Companies that adopt arbitration provisions will lose advantages they have in court, including legal rules, the discovery stay, and the high pleading standard, said plaintiffs’ attorney Carol Gilden of Cohen Milstein Sellers & Toll PLLC. “Plus, lawsuits can still be brought in federal court against underwriters and accountants.” 

Unlike a class action, arbitration won’t give companies “total peace,” she said. “I would not expect mandatory arbitration to be embraced by companies on a widespread basis.” 

The Private Securities Litigation Reform Act prompted a sea change in securities class actions that reshaped the plaintiff’s bar and empowered institutional investors to take charge of cases.

The Private Securities Litigation Reform Act was once feared as the death of the securities class action.

Thirty years later, securities class actions are alive and kicking, even if getting there required law firms to change their business models and for a new type of plaintiff to come forward.

. . .

Remaking the Plaintiff’s Bar

Daniel Sommers, a partner at Cohen Milstein Sellers & Toll, was only a few years into what would be a decades-long career as a plaintiff’s attorney when the PSLRA passed.

“It was a new world,” he said. “The landscape of securities class actions had been radically changed.”

Before the PSLRA, the first to file a case would gain the lead plaintiff position. That race to the court was typically won by retail investors who held only a few shares of a company, Sommers said.

These plaintiffs would “have less incentive to supervise the lawyers to push the case along; many of them weren’t particularly sophisticated; they weren’t incentivized or suited to aggressively monitor the litigation and monitor the counsel,” said Sommers.

The PSLRA upended this system by stating that the person or entity with the largest financial stake in a case would be the class representative.

. . .

Putting an Institutional Investor in the Driver’s Seat

Empowering institutional investors led to other changes.

. . .

Sommers also recognized a difference in who the lead plaintiff is.

“There’s no comparison between someone who purchased ten shares of x, y, z company on one hand and a large state-wide pension fund with hundreds of billions of dollars under management,” said Sommers.

Cadence Bank has reached a $5.25 million deal to end negligence claims it faced in multidistrict litigation over the May 2023 breach of file transfer application MOVEit, a consumer affected by the breach has informed a Boston federal judge.

In a motion Wednesday, plaintiff Tammy Pratt asked U.S. District Judge Allison D. Burroughs to grant preliminary approval to the deal on behalf of a class of those notified by Cadence that their personally identifiable information was in files affected by the MOVEit data breach.

Pratt said Wednesday that the settlement agreement, which the parties executed on Dec. 15, is “fair, reasonable, and adequate as it provides immediate and guaranteed relief in the face of difficult, extensive, and expensive litigation that poses a significant risk that plaintiff and the settlement class might recover nothing from Cadence should litigation continue.”

Under the terms of the proposed settlement, class members can submit claims for reimbursement of ordinary losses up to $2,500, extraordinary losses up to $10,000 or an alternative $100 payment.

The deal was designed to give equal treatment to those who hadn’t incurred out-of-pocket losses and those who incurred expenses in connection with the breach requiring individualized compensation, the motion states, noting that the structure is similar to other court-approved allocation plans in other data breach cases.

Cadence is among over 100 commercial and government entity defendants facing liability in the multidistrict litigation stemming from the May 2023 breach.

. . .

The plaintiffs are represented by Kristen A. Johnson of Hagens Berman Sobol Shapiro LLP, E. Michelle Drake of Berger Montague PC, Gary F. Lynch of Lynch Carpenter LLP, Douglas J. McNamara of Cohen Milstein Sellers & Toll PLLC, Karen H. Riebel of Lockridge Grindal Nauen PLLP and Charles E. Schaffer of Levin Sedran & Berman LLP.

Attorneys for President Donald Trump urged a federal judge to rule that Trump is entitled to presidential immunity from civil claims that he instigated a mob’s attack on the U.S. Capitol to stop Congress from certifying the results of the 2020 election.

The lawmakers’ lawyers argue Trump can’t prove he was acting entirely in his official capacity rather than as an office-seeking private individual. And the U.S. Supreme Court has held that office-seeking conduct falls outside the scope of presidential immunity, they contend.

“President Trump has the burden of proof here,” said plaintiffs’ attorney Joseph Sellers. “We submit that he hasn’t come anywhere close to satisfying that burden.”

U.S. District Judge Amit Mehta didn’t rule from the bench after hearing arguments from Trump attorneys and lawyers for Democratic members of Congress who sued the Republican president and allies over the Jan. 6. 2021, attack. At the end of the hearing, Mehta said the arguments gave him “a lot to think about” and he would rule “as soon as we can.”

Rep. Bennie Thompson, a Mississippi Democrat who chaired the House Homeland Security Committee, sued Trump, his personal attorney Rudolph Giuliani and members of the Proud Boys and Oath Keepers extremist groups over the Jan. 6 riot. Other Democratic members of Congress later joined the litigation.

WASHINGTON – A man who transported patients to medical appointments is suing his former employer, alleging he was unlawfully fired after failing a criminal background check despite — he says — years on the job without incident.

James Blakney says he was abruptly fired last year after working for nearly three years transporting patients to and from medical appointments. According to a lawsuit filed in D.C. federal court, Blakney had passed three criminal background checks during his employment.

The lawsuit names Missouri-based Medical Transportation Management Inc. (MTM), which subcontracts with Maryland-based OnTime Transportation. Blakney began working for OnTime and MTM around June 2021, according to the complaint.

Blakney claims MTM maintains a zero-tolerance policy for violent convictions or charges — regardless of how old they are or an employee’s job performance — and argues that policy violates the D.C. Human Rights Act.

The suit alleges the policy has a discriminatory impact on Black workers.

“We did our time. We did everything,” Blakney said. “We shouldn’t have to keep going through this over and over again… especially after 15, 20 years that the case is over and done with.”

Advocates say broad criminal background bans can disproportionately affect Black applicants.

Sarah Bessell of the Washington Lawyers’ Committee for Civil Rights and Urban Affairs says that while Black residents make up about 50 percent of D.C.’s population, they account for a significantly larger share of felony convictions.

“That means a blanket criminal background policy is going to have an outsized impact on Black workers,” Bessell said.

The agency is unlawfully giving up on fighting disparate impact discrimination—meaning it’s “open season” on employees.

In August of 2022, just after Prime Day, Leah Cross started working as an Amazon delivery driver in Colorado. She took the job because she had long heard that it was a decent and paid well. She thought it would be a way to get her foot in with a reputable company that offered good benefits. But in the end, “It was kind of the complete opposite of my experience there,” she said.

What Cross found soon after starting was “shocking,” she said. The company gave her quotas so high that she was making over 200 stops a day; each stop could include delivering to a dozen homes. She was closely monitored by video cameras, and if she started to lag behind the company’s targets, a supervisor would call her. She was working 10-to-12-hour days, but the quotas meant that she didn’t have any time for necessary breaks. One day early in her employment at Amazon, she stopped to get menstruation products and got a disciplinary call from a dispatch officer. Normally, that would have resulted in a write-up, but she got away with a verbal warning.

The inability to take bathroom breaks became a particular problem. If she stopped at a bathroom along her route, she would receive calls from supervisors asking where she had gone and if she was lost. Higher-ups told her that in order to meet the company’s quotas, she would have to buy “devices,” she recalled—she ended up getting a funnel that facilitated urinating into a water bottle. She tried to hold her bladder for as long as possible, but once it became “a dire situation,” she said, she had to close the van doors and urinate into a bottle in the back, carefully avoiding the surveillance cameras. She started bringing a gym bag packed with supplies: bottles to hold urine, trash bags to dispose of them, and extra clothes in case she peed on what she was wearing. “It kind of felt like you were loading up to go to war just to deliver some packages,” she said. Sometimes she would open the van doors after she was done only to be confronted by a waiting customer looking for a package, flooding her with embarrassment.

Cross’s inability to take regular bathroom breaks led to kidney issues and yeast infections. Even today, she deals with the aftereffects, having to remind herself that at her job at a nursing home she can use the bathroom whenever she needs to. “It’s something I still got to work on and get over,” she said.

In May 2023, Cross filed a complaint with the Colorado Civil Rights Division, a state-level agency that processes workplace discrimination claims under state law as well as on behalf of the Equal Employment Opportunity Commission, the sole federal agency tasked with enforcing private sector workers’ rights. She alleged that Amazon discriminated against her and other delivery drivers by imposing such demanding quotas that they were forced go without bathroom breaks, a practice she alleged had a disparate impact on people with vaginas who struggled to pee into bottles. “Disparate impact” is a legal standard that requires courts to look at the impact, not the intent, of laws to determine if they are discriminatory. To find that Amazon had discriminated on a disparate impact basis, the agency wouldn’t need to uncover evidence of deliberate discrimination against women; even a universal policy like denying all workers bathroom breaks could be discriminatory if it disproportionately harmed a protected class of workers under Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on race, color, religion, sex, and national origin. Cross’s claim was later transferred to the EEOC. The agency told her in December 2024 it was “very interested” in moving forward with her case. Cross described herself as a wallflower, not eager to bring a spotlight to herself, but she knew that bringing the case would represent “something much greater than just my life.”

But in late September, Cross was notified by the EEOC that her charge was being closed. It wasn’t for a lack of evidence of discrimination; it didn’t have anything to do with the merits of her allegation at all. The agency had, contra years of precedent, its own statute, and settled law, decided to abandon all disparate impact discrimination charges and litigation.

. . .

Disparate impact cases involve employer policies or practices that appear to be neutral but result in a discriminatory outcome without having any relevance to the job itself. Think of a height and weight test to be a firefighter, a poor substitute for a strength test that excludes women, or mandatory medical exams for retail jobs that systematically shut out people with disabilities who could otherwise perform the work. Proving that something violates the disparate impact standard doesn’t require proving that there was intent to discriminate, which is a high bar to clear, just that the outcome was unnecessarily discriminatory.

. . .

In doing so, the agency is likely violating the law, said Jenny Yang, a partner at law firm Outten Golden and former EEOC chair, and Joseph Sellers, a partner at Cohen Milstein. The Supreme Court has consistently found that Title VII of the Civil Rights Act prohibits disparate impact discrimination, dating back to a 1971 case. Then Congress overwhelmingly passed the Civil Rights Act of 1991, which codified disparate impact discrimination as prohibited by Title VII. “This is clearly established law,” Sellers said.

To have the agency abandon it, then, is “probably unlawful,” Sellers said. Under statute, the agency must look into all claims workers file. Executive orders don’t have the legal authority to change or enact law, and disparate impact has been written into law for 34 years. “The agency has made a blanket decision that is at odds with its statutory mandate to enforce the law,” Yang said.

“There’s never been a wholesale refusal to process disparate impact claims before,” Sellers said. “This is entirely new and extraordinary.”

. . .

Without the EEOC pursuing these claims, and with many workers unable to carry them forward on their own, it “permits these long-standing practices that may not be justified as a matter of law to continue,” Sellers said. Employers, no longer fearing enforcement from the EEOC, won’t have an incentive to fix discriminatory policies. They might even fear incurring the wrath of the Trump administration if they collect data and try to remedy any potentially discriminatory practices. Hiring practices that disproportionately keep Black people or women out, or workplace policies that unnecessarily harm Latinos or people with disabilities, will remain unchecked. Companies will say to themselves, “This is not something we have to worry about,” Lopez said, “because who’s going to come after us?

Thirty years ago this month, Congress overrode a presidential veto to enact a law that changed the landscape of shareholder class action lawsuits. How the Private Securities Litigation Reform Act will continue to change that landscape remains a live issue as courts continue to wrestle with the question of how investors can prove that they’ve been injured by alleged corporate malfeasance.

The PSLRA was passed into law on Dec. 22, 1995, in an effort to address what some lawmakers saw as abusive litigation tactics by shareholders who were allegedly filing frivolous lawsuits for quick payouts.

Whether and to what extent it has cut down on such lawsuits continues to be a hotly debated matter between the plaintiff and defense bars, and those debates are playing out in the courts.

The law came into effect under a cloud of controversy, having been adopted over the objections of then-President Bill Clinton, who vetoed the legislation over fears that it would “have the effect of closing the courthouse door on investors who have legitimate claims.”

But since the PSLRA’s adoption, institutional investors like pension funds have emerged as powerhouse plaintiffs in shareholder class action lawsuits, in part due to a provision in the law that directs judges to consider appointing the plaintiff with the greatest financial stake to lead the case.

Those institutional investors have been able to use their growing influence over the class litigation process to push for high-dollar settlements, according to investor-side attorney Daniel Sommers of Cohen Milstein Sellers & Toll PLLC.

According to Institutional Shareholder Services, over 90% of the largest securities class action settlements entered into since the PSLRA came into effect were in cases led by institutional investors.

Cornerstone Research has reported that between 2015 and 2023, securities class actions settled for an average amount of $50.7 million, while a 2008 paper by Elliott J. Weiss in the Vanderbilt Law Review said pre-PSLRA settlements “rarely” topped $20 million.

“There’s no question that there’s a connection between the emergence of institutional investors as lead plaintiffs and larger recoveries,” Sommers said.

He said institutional investors often have in-house counsel who can supervise their involvement in litigation and often require outside counsel to provide detailed analysis of potential new cases, leading to them only taking on cases that are strongest on their merits and could include large settlements.

Sommers said that winning large recoveries for wronged investors “is consistent with one of the principal goals of the PSLRA — encouraging meritorious cases with significant investor harm while at the same time discouraging weak cases with little investor harm.”

. . .

But courts have been “articulating and rearticulating” what the heightened pleading standard requires ever since the PSLRA was enacted and the Supreme Court has itself already addressed the issue in 2007’s Tellabs Inc. v. Makor Issues & Rights Ltd. , Sommers said.

“It really is so fact bound and so subject to interpretation by a particular district court judge that I don’t think that there’s sort of any broader legal analysis or changes in interpretation of the statute that can be or will be made,” he said.

Whether plaintiffs can meet the heightened standard needed to defeat a motion to dismiss is important because, under the PSLRA, discovery doesn’t kick off until a judge rules on that motion.

A Washington federal judge on Thursday appointed Hagens Berman Sobol Shapiro LLP and DiCello Levitt LLP as interim co-lead counsel over consolidated claims that Zillow paid kickbacks to brokers for referrals to its own mortgage services, among other anticompetitive conduct using company agents. 

U.S. District Judge James L. Robart in a Wednesday order consolidated cases brought by lead plaintiffs Alucard Taylor in September and Araba Armstrong in November. Judge Robart ordered the two law firms to serve as interim co-leads in a separate Thursday order.

 …  

The Taylor plaintiffs are represented by Jerrod C. Patterson and Steve W. Berman of Hagens Berman Sobol Shapiro LLP and Douglas James McNamara of Cohen Milstein Sellers & Toll PLLC. 

Pesticide companies Syngenta and Corteva are facing damages claims of more than $1.2 billion and $883 million claim, respectively, according to class certification bids filed by farmers looking to represent the hundreds of thousands of pesticide buyers allegedly harmed by rebate programs that paid distributors to forgo cheaper generics.

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“The central question—whether Syngenta engaged in anticompetitive conduct to exclude lower-priced generics—is common to all class members and can be proven with classwide evidence,” the farmers said in the Syngenta brief. “The evidence shows Syngenta executed an illegal, multi-year scheme with national distributors and retailers to foreclose generic entry and create a de facto monopoly for products containing at-issue [active ingredients].”

Like the Federal Trade Commission and state attorneys general have alleged in their suits, the farmers in the multidistrict litigation have alleged Corteva and Syngenta use loyalty programs to artificially extend their patent monopolies over certain pesticides by offering payments to distributors that agree to limit their sales of cheaper generic products.

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In the certification bids first filed under seal last month, the farmers moved to name two classes against each pesticide company. One class would represent damage claims under the in-play state laws while the other would cover a nationwide class seeking injunctive relief.

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The farmers are represented by Quinn Emanuel Urquhart & Sullivan LLP, Lowey Dannenberg PC, Cohen Milstein Sellers & Toll PLLC, Korein Tillery LLC and Pinto Coates Kyre & Bowers PLLC.