Thanks to tough pleading standards mandated by Congress and the U.S. Supreme Court, securities plaintiffs frequently turn to confidential witnesses to beef up their complaints. Relying on informants can help nudge a case past a motion to dismiss—but the practice has also become a minefield for the securities class action plaintiffs bar.
The latest reminder came Friday, in a coda to a proposed securities class action against digital advertising company Millennial Media Inc. U.S. District Judge Paul Engelmayer in Manhattan agreed to allow the plaintiffs to voluntarily dismiss the case, but not before reprimanding the lawyers at length for failing to adequately vet witnesses’ statements or warn them about how their statements would be used.
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