The law, passed by Congress in 1995, makes it more difficult for disgruntled shareholders to sue companies when their stock drops. Such class action lawsuits have become commonplace and cost the industry hundreds of millions of dollars a year.
The ruling in the much-watched SGI (NYSE:SGI) case means that in order to sue for stock fraud, plaintiffs must now show corporate officers intentionally lied about optimistic financial forecasts that turn out to be wrong.
Before the law, plaintiffs merely had to simply show the forecasts were misleading. The ruling is the second significant victory for Silicon Valley companies fighting to stay out of court.
On Thursday, Congress passed a law that will protect high tech companies from the class actions expected in the wake of Y2K failures.
More details to follow.