THE IMPACT OF THE PRIVATE SECURITIES LITIGATION REFORM ACT (PSLRA) ON THE DRIVEN BRANDS CLASS ACTION LAWSUIT

If you suffered losses Driven Brands stock, contact Driven Branks stock loss lawyer Timothy L. Miles about a Driven Brands class action lawsuit

INTRODUCTION

In response to the PSLRA, institutional investors have stepped forward to serve as lead plaintiffs in securities class actions

The Driven Brands class action lawsuit will be governed by the Private Securities Litigation Reform Act (PSLRA), which was passed in 1995, and has had a profound impact on securities class actions, like the Driven Brands lawsuit, investors, and public pension funds. This article provides an analysis of the genesis and passage of the PSLRA and examines its overall effect on securities class actions. Additionally, it highlights the critical role played by public pension funds since the enactment of the PSLRA.

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Driven Brands class action lawsuit

Prior to the PSLRA, securities class actions such as the Driven Brands class action lawsuit were subject to low-pleading standards and lacked uniform rules regarding lead plaintiffs and lead counsel. This led to settlements that were often significantly lower than those seen today. Institutional investors were not motivated to participate as lead plaintiffs due to the low stakes involved. However, these practices gained national attention in the wake of the 1994 elections, leading to the emergence of the idea for the PSLRA.  Do not be surprised to see an institutional investor with significant losses appointed lead plaintiff in the Driven Brands class action lawsuit.​

CONGRESSIONAL REFORMS AND THE GENESIS OF THE PSLRA

​Following the 1994 midterm elections, Republicans in Congress focused on sweeping reforms, including changes to securities class actions like the Driven Brands class action lawsuit. Congressional hearings shed light on the role of so-called "professional plaintiffs" and the concern that they were primarily interested in being the first to file a case, rather than the outcome. Lawyers were criticized for settling cases with little work on behalf of defrauded investors.
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The Senate produced a report highlighting Congress's concerns, including the fact that securities class actions were largely driven by lawyers rather than genuine investors. Congress incorporated several provisions into the PSLRA to address these issues:

1. Heightened Pleading Standard: The PSLRA raised the pleading standard, requiring specific details about each misleading statement and the reasons for their misleading nature. This standard applies to scienter as well, requiring plaintiffs to allege facts demonstrating that defendants knew the statements were false or were reckless in their falsity.
2. Motion for Lead Plaintiff Deadline: The PSLRA eliminated the "first to file" rule for appointing lead plaintiffs, favoring the member of the purported class with the largest financial stake in the relief sought. This change aimed to increase the participation of institutional investors as lead plaintiffs.
3. Automatic Discovery Stay: To address the improper use of early discovery by class action attorneys, the PSLRA mandated an automatic stay of all discovery during the pendency of a motion to dismiss. This prevented parties from engaging in discovery until after the denial of a motion to dismiss.
4. Safe Harbor Provision: The PSLRA created a safe harbor for forward-looking statements, providing protection from liability for immaterial misstatements, those accompanied by sufficient cautionary language, or those made without actual knowledge of their falsity.
5. Ninety-Day Lookback Period: The PSLRA limited damages in securities class actions to the difference between the price paid for the shares and the average trading price measured over the course of the ninety days after the final corrective disclosure.
6. Sanctions: The PSLRA included provisions for sanctions to discourage frivolous filings and attorneys' improper decision-making on behalf of clients. Courts are required to conduct a sanctions inquiry upon final adjudication of a case, although sanctions are rarely imposed in practice.

PRESENT DAY PSLRA APPLICATION - ROLE OF INSTITUTIONAL INVESTORS AND PENSION FUNDS

​One of the key objectives of the PSLRA was to encourage institutional investors, including public pension funds, to serve as lead plaintiffs in securities class actions such as the Driven Brands class action lawsuit. This objective has been largely achieved, with a significant increase in pension fund participation in securities litigation.

By 2002, pension funds led 27.2% of all cases, and between 2010 and 2012, this percentage increased to 40%. Institutional investors and pension funds often have the largest losses and the experience and power to direct securities class actions in the best interests of the class members. This shift has reduced concerns over so-called lawyer-driven litigation.
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The involvement of public pension funds as lead plaintiffs has brought tangible benefits to class members in securities class actions like the Driven Brands lawsuit. Studies have shown that cases led by institutional investors are associated with a lower probability of dismissal and higher settlement values. Public pension funds, with their fiduciary duty to recover funds lost due to corporate fraud, are well-positioned to protect the interests of absent class members and direct litigation in line with the spirit of the PSLRA.

SECURITIES CLASS ACTIONS SHIFT TO PLAINTIFF-DRIVEN LITIGATION

​​The PSLRA's heightened pleading standard has raised the bar in securities litigation.  Today, the lead plaintiff in the Driven Brands lawsuit will have to have substantial support plead with particularity each allegation. As more cases are led by public pension funds, specialized plaintiffs' litigation firms have emerged, investing in comprehensive investigations prior to filing actions. These firms often rely on confidential witness statements, which bolster scienter allegations and provide key information during the notice period.

FUTURE OF THE PSLRA

​The PSLRA has become ingrained in securities class actions like the Driven Brands class action lawsuit, with the case law adopting its heightened pleading requirements. The lead plaintiff provisions will continue to define securities class actions, particularly regarding who should serve as lead plaintiff. Recent decisions highlight the ongoing importance of public pension funds and institutional investors in the lead plaintiff process.

The PSLRA has been successful in recovering billions of dollars for defrauded investors. As long as public pension funds are willing and able to answer the call, the objectives of the PSLRA will be met, and investors will have a powerful tool to combat fraud.

As a result, it is more than likely an institutional investor will step forward to lead the Driven Brands class action lawsuit.

CONTACT A DRIVEN BRANDS STOCK LOSS LAWYER TODAY IF YOU SUFFERED LOSSES IN DRIVEN BRANDS STOCK ABOUT A DRIVEN BRANDS CLASS ACTION LAWSUIT

​If you suffered losses in Driven Brands stock, contact Driven Brands stock loss lawyer Timothy L. Miles today for a free case evaluation about a Driven Brands class action lawsuit. Call today and see what a Driven Brands stock loss lawyer could do for you if you suffered losses in Driven Brands stock.  The call is free and so is the fee unless we will or settle your case. 

Driven Brands stock loss lawyer Timothy L. Miles

Nashville attorney Timothy L. Miles is a nationally recognized shareholder rights attorney raised in Nashville, Tennessee. Mr. Miles has dedicated his career to representing shareholders, employees, and consumers in complex class-action litigation. Whether serving as lead, co-lead, or liaison counsel, Mr. Miles has helped recover hundreds of millions of dollars for defrauded investors,  shaped precedent-setting decisions, and delivered real corporate governance reforms. Judges and peers have repeatedly recognized Mr. Miles’ relentless advocacy for the underdog, as well as his unbendable ethical standards. Mr. Miles was recently selected by Martindale-Hubbell® and ALM as a 2022 Top Ranked Lawyer, 2022 Top Rated Litigator. and a 2022 Elite Lawyer ofthe South. Mr. Miles also maintains the AV Preeminent Rating by Martindale-Hubbell®, their highest rating for both legal ability and ethics. Mr. Miles is a member of the prestigious Top 100 Civil Plaintiff Trial Lawyers: The National Trial Lawyers Association,​Class Action:  Class Action: Top National Trial Lawyers, National Trial Lawyers Association (2023), a superb rated attorney by Avvo, a recipient of the Lifetime Achievement Award by Premier Lawyers of America (2019) and recognized as a Distinguished Lawyer, Recognizing Excellence in Securities Law, by Lawyers of Distinction (2019); a Top Rated Litigator by Martindale-Hubbell® and ALM  (2019-2022); America’s Most Honored Lawyers 2020 – Top 1% by America’s Most Honored (2020-2022).  Mr. Miles has published over sixty articles on various issues of the law, including class actions, whistleblower cases, products liability, civil procedure, derivative actions, corporate takeover litigation, corporate formation, mass torts, dangerous drugs, and more.  Please visit our website or call for free anytime.

CONTACT                                                      
The Law Offices of Timothy L. Miles
Tapestry at Brentwood Town Center
​300 Centerview Dr., #247
Brentwood, TN 37027
​​Phone: (855) 846-6529