The Private Securities Litigation Reform Act of 1995 (PSLRA) provides that a “covered person” who settles a private action is discharged, through the issuance of an appropriate bar order, from all potential claims for contribution that might be brought in the future by other persons (such as by non-settling defendants). Non-settling defendants, in turn, receive the benefit of the PSLRA’s favorable judgment reduction provisions.1
However, the PSLRA appears to be silent concerning what settlement discharge and judgment reduction provisions should apply in the event of partial settlements by defendants who are not “covered persons.” Although the PSLRA specifies that all defendants “in any private action arising under [the Exchange Act]” are covered persons, that is not the case with regard to defendants in actions arising under Section 11 of the Securities Act of 1933 (Securities Act).2 In the latter case, the only defendants who are expressly “covered persons” are “outside director[s] of the issuer of the securities that are the subject of the action.”3
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