In securities litigation, complaints that refer to and quote statements from confidential insider sources have become the norm. These insider sources are often former employees of the defendants, who are described in the complaint as “confidential witnesses,” e.g., confidential witness 1 (CW1), confidential witness 2 (CW2), and so forth. The phenomenon of the confidential witness is a byproduct of the substantially heightened pleading requirements set forth in the Private Securities Litigation Reform Act (PSLRA) and imposed by decisions, such as Tellabs v. Makor Issues & Rights. However, the practice of relying on confidential witnesses places enormous strains on plaintiffs, the witnesses and the judicial system.

This article explores the reasons for using confidential witnesses, the required disclosures regarding the confidential witness at the pleading stage, and ways in which courts have confronted the messy factual issue of a “recanting” confidential witness.

Why Are Confidential Witnesses Necessary?

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]