The year 1995 marked a critical turning point in cyber history.Netscape's public offering not only paved the way for illustratingthe kind of riches (however sometimes illusory) that lay ahead forthe savvy investor. Beyond that, the Internet was transformingitself from a tool for the military to one for, among other things,allowing movie fans to avoid standing on line for tickets.

Also that year, Congress passed the Private LitigationSecurities Reform Act--in part, to provide the brave new SiliconeValley start-ups with some degree of protection from shareholderwrath when not every sow's ear turned into a silk purse.

The Reform Act raised procedural hurdles for bringing securitiesclass actions to federal court and pleading standards in an attemptto end the so-called "race to the courthouse" in which plaintiffslawyers brought allegedly frivolous lawsuits as soon as stockprices fell.

In a review of shareholder claims settlement history in theact's 10th anniversary year, Washington-based Cornerstone Researchnoted that securities class-action settlements reachedunprecedented levels in 2005, growing to an all-time high of $3.5billion, compared with the previous year's tally of $2.9 billion.(And that is not counting the $6.1 billion settlement for WorldComlitigation and $7.1 billion-and-counting for Enron claims.)

Not only did the number of cases settled rise to 124 from 113,but the average settlement size rose to $28.5 million.

According to Cornerstone, most striking is the upward trend inthe midpoint settlement amount, which they believe is more of anindicator of the typical kind of case. Last year, half of allsettlements exceeded $7.5 million, compared with $6.3 million theyear before.

Laura Simmons, a principal in Cornerstone Research, said "neverbefore have we observed such a large single-year increase in themedian settlement amount."

Analyzing 735 cases that have settled since the passage of thereform act, the study found several other leading factors that tendto influence settlement amounts

"For example, when the SEC also took action against thedefendants in the form of an administrative proceeding orlitigation release, the median settlement amount was $10.3 million,versus only $5.5 million when the SEC did not take action," thereport noted.

However, there are some shifts in the wind in the form of fewerfilings in the past year and more dismissals overall in the postPSLRA era.

Last year, plaintiffs filed 209 cases in federalcourts--substantially below the 10-year average, according to astudy conducted by NERA Economic Consulting.

"It also represented the lowest number since 1997, when thetotal was depressed by a move to state courts to avoid PSLRAlimitations," the study noted--referring to "standard filings,"which exclude cases against analysts and mutual fund market timingcases.

(While other sources, Cornerstone and PricewaterhouseCoopers,report slightly different filing totals for 2005--179 and 168,respectively--all three reports show declines from 2004 levels inthe 15-to-17 percent range.)

Among the factors possibly contributing to the drop are theimpact of Sarbanes-Oxley reforms and a less volatile stock marketin the past few years, experts said.

"The most likely explanation for the remainder of the drop issimply random year-to-year variation," the study said.

Dismissal rates have doubled since PSLRA, accounting for 19.4percent of the dispositions for cases filed between 1991 and 1995,compared with 40.3 percent between 1998 and 2003. But since some ofthe dismissals were such that they could be refiled when betterprepared, that doubling could be a chimera, according to NERA.

"There is no indication that dismissal rates have continued torise after an initial adjustment to the tougher pleading provisionsof PSLRA," NERA's study said.

One area where Congress succeeded in passing the PSLRA was thelaw's aim of involving institutional investors as leadplaintiffs--but it has taken time. The figure for such cases rosefrom 14 percent in 2000 to 38 percent five years later.

"Controlling for other case characteristics, cases with aninstitutional investor lead plaintiff settle for a statisticallysignificant one-third more," NERA noted.

While the impact of PSLRA on company fortunes may bequestionable, one positive factor on the landscape is the potentialimpact of the 2005 Supreme Court decision of Dura Pharmaceuticalsv. Broudo, which requires plaintiffs to prove that the purportedfraud was the sole cause of a stock price's decline and not otherintervening factors.

"Dura will therefore cut back on plaintiff damage awards in somecases, but the decision's full impact is impossible to predictuntil we see how the lower courts interpret the decision'slanguage," said Joseph Grundfest, a former SEC member now holding aStanford law professorship.

John Rafferty, vice president and national D&O manager forThe Hartford, said that, in hindsight, PSLRA has proved to be a"speed bump that temporarily slowed the overall number of filingsand case settlements."

The act encouraged the plaintiffs' bar to align with largeinstitutional investors in pursuit of their litigationstrategy.

"Interestingly, by seeming to protect corporate America, thePSLRA may have provided a false sense of armor that emboldenedcertain directors and officers to engage in or overlook aggressiveaccounting or bad behavior," Mr. Rafferty said.

The Sarbanes-Oxley Act--enacted seven years later in theaftermath of the Enron and WorldCom debacles--provided some balancein the equation on the part of Congress. "The jury is still out onwhether the laws together will strike the right balance," hesaid.