Companies often face securities fraud class actions when negative news causes a significant drop in their stock price. These cases can make it challenging for investors to obtain compensation. The Fortrea lawsuit aims to recover damages collectively rather than through individual claims.

Steps in the Legal Process

1. Filing the Original Complaint: Multiple law firms may file similar complaints against the same defendants in securities class actions. The first lawsuit triggers a 60-day deadline for shareholders to step forward as lead plaintiffs.
2. Lead Plaintiff Selection: Investors must file motions to request appointment as lead plaintiff within 60 days of the first notice. The court typically appoints the investor with the largest financial stake in the litigation.
3. Motion to Dismiss: Defendants often file a motion to dismiss the united complaint, which can halt discovery during this period. Courts dismiss approximately 43% of securities class actions at this stage.
4. Discovery and Evidence Gathering: If the court denies the motion to dismiss, the discovery process begins, involving document exchanges, interrogatories, and depositions.
5. Class Certification: Plaintiffs must prove elements such as numerosity, commonality, typicality, and adequacy of representation to certify a class.
6. Summary Judgment and Trial Preparation: Defendants may file for summary judgment based on undisputed facts after discovery ends, providing another opportunity to end the case before trial.

Breaking Down the Private Securities Litigation Reform Act of 1995

The Fortrea class action lawsuit will be governed by Private Securities Litigation Reform Act of 1995 (PSLRA) is a significant piece of U.S. legislation aimed at curbing frivolous or unwarranted securities lawsuits. It was enacted by Congress to address concerns that an increasing number of class action lawsuits were being filed against companies, often resulting in settlements regardless of the merits of the case, due to the high costs and risks associated with litigation.

Key Provisions of the PSLRA:

1. Heightened Pleading Standards: One of the most significant changes brought by the PSLRA is the requirement for plaintiffs to meet higher pleading standards when filing a securities fraud lawsuit. Specifically, plaintiffs in the Fortrea class action lawsuit must specify each statement alleged to have been misleading, the reason why the statement is misleading, and, if an allegation is made on information and belief, the plaintiffs must state with particularity all facts on which that belief is formed. This prevents baseless accusations from proceeding to discovery, which can be costly and time-consuming.

2. Safe Harbor for Forward-Looking Statements: The PSLRA provides a “safe harbor” for companies issuing forward-looking statements, such as earnings projections. Provided these statements are identified as forward-looking and accompanied by meaningful cautionary language that outlines factors that could cause actual results to differ, companies are protected from liability if those projections do not come to fruition. This encourages companies to share information about their future plans without undue fear of litigation.

3. Lead Plaintiff Provision: The Act establishes a process for appointing a lead plaintiff in class action lawsuits, typically the investor with the largest financial stake in the lawsuit. This provision addresses the issue of “professional plaintiffs” who would frequently file lawsuits with little regard for the actual merit, thus ensuring that lawsuits are driven by those with significant losses and a genuine interest in the case. Lead plaintiff motions for the Fortrea lawsuit must be filed with the court no later than August 1, 2025.

4. Limits on Damages and Attorneys’ Fees: The PSLRA imposes restrictions on the amount of damages that can be claimed and limits attorneys’ fees. This helps to ensure that the primary motive for a lawsuit is to address genuine grievances rather than to seek large financial rewards through settlements.

5. Discovery Stay: To prevent the high costs of discovery from being used as leverage to force settlements, the PSLRA imposes an automatic stay on discovery while a motion to dismiss is pending. This means that plaintiffs in the Fortrea lawsuit cannot start the discovery process until the court has determined whether the case has sufficient merit to proceed.

Overall, the PSLRA was designed to strike a balance between protecting investors from fraud and preventing the abuse of the legal system through meritless litigation. By setting higher standards for securities fraud claims and providing protections for companies making forward-looking statements, it aims to foster a fairer and more predictable legal environment for both investors and corporations.

Challenges Faced by Plaintiffs in the Fortrea Lawsuit

Plaintiffs in the Fortrea class action lawsuit must navigate several significant challenges to succeed in their case. The PSLRA and court interpretations create various hurdles.

Proving Scienter and Intent

The PSLRA imposes a stringent standard requiring plaintiffs to demonstrate a “strong inference” of scienter, which refers to knowledge of wrongdoing or reckless disregard for the truth. Courts scrutinize these claims closely, often relying on confidential witnesses to support allegations of intent.

Establishing Loss Causation

Plaintiffs must establish a direct link between the alleged misrepresentations and economic losses. This typically involves identifying “corrective disclosures” that revealed the truth and caused stock prices to decline.

Demonstrating Price Impact

Defendants can challenge class certification by proving a lack of price impact, showing that the alleged misstatements did not affect the stock price. The Supreme Court’s decision in Goldman Sachs v. Arkansas Teacher Retirement System requires courts to evaluate whether generic statements could genuinely influence stock prices.

Meeting Class Certification Standards

Class certification in the Fortrea class action lawsuit will be a critical battleground, as courts will conduct a rigorous analysis of Rule 23 requirements. Hard evidence, rather than mere allegations, must demonstrate that these requirements are met.

Resolution of Securities Class Actions

Securities class actions rarely proceed to trial, with settlement being the most common resolution method. Most cases that survive a motion to dismiss ultimately reach a settlement agreement.

The Role of Mediation

Mediation in securities class actions differs from other legal proceedings due to the substantial stakes involved. Independent mediators facilitate discussions between both parties, helping them reach a mutually acceptable agreement.

Settlement Process and Court Approval

Once a settlement is reached, the PSLRA mandates specific notifications to class members, detailing the proposed distribution amount, potential case outcomes, attorneys’ fees, and other relevant information. Class members can file objections or opt out after receiving notification.

Claims Administration and Payout Timeline

If a settlement is approved, an independent claims administrator will manage the distribution of settlement funds. This process typically takes two to three years to conclude after filing, with administrators potentially making multiple distributions to cover late claims.

Steps to Take to Protect Your Interests