Hastings Law Journal


Wm. Bruce Davis


The private cause of action implied from Securities and Exchange Commission Rule lOb-5 often involves several defendants, with varying levels of culpability. The courts have established that each defendant has the right of contribution from the other defendants. Courts have not resolved, however, what effect a settlement made by a single defendant will have on either contribution claims or a subsequent award in litigation. Without knowledge of the effect of a settlement, it is very difficult for the parties to strike an effective bargain, as they do not know what rights they are trading in exchange for the settlement. This Note examines the effect of contribution in l0b-5 settlements, and suggests that an equitable standard for dealing with such settlements can be defined by consolidating a group of emerging common themes. Finally, the Note concludes with a proposed solution for allocating the amount of settlement by analyzing where to place the risk of poor settlement.

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