The Fifth Circuit showed yesterday that it is possible to apply the PSLRA pleading standards without filling up dozens of pages of F.3d.  The plaintiff-appellant in Brunig v. Clark, — F.3d. — No. 08-20059, 2009 WL 376907 (Feb. 17, 2009), had been the defendant-respondent’s lawyer.  He had agreed to accept as his fee an interest in mineral leases, and later expected sale proceeds, from property owned by his client.  The dispute arose when the client sent the plaintiff a bill for operating expenses on the property and, when the bill wasn’t paid, a notice of default.

Brunig isn’t a class action, it has nothing to do with a drop in the price of any stock, and it isn’t the sort of case that Congress was was worried about when it enacted the PSLRA.  Although Brunig doesn’t say anything about congressional purpose, it does manage to keep a simple case simple, despite the statute.  The complaint, according to the court, is “prolix,” despite being, at fifty-six pages, on the slim side for a securities fraud complaint, at least in my experience.   By comparison with the Brunig court’s handiwork, however, the charge is justified.  In five paragraphs, the court states the elements of the Rule 10b-5 claim, assesses the complaint’s sufficiency as to both the PSLRA particularity requirements (misstatement/omission and scienter), and reverses the district court’s dismissal of the claim.  While it doesn’t break new legal ground, to my mind it doesn’t exclude anything important, either.  With equal efficiency, the court affirms the dismissal of a Securities Act claim and a RICO claim, and reverses a sanctions order.  Compliements to Judge Higginbotham, who wrote for the court.

Tags: 10b-5, particularity, PSLRA, securities, Securities Exchange Act

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