ELLIOTT J. WEISS [*] I INTRODUCTION Seven years ago, Chief Judge Jon O. Newman highlighted inevitable tension in securities class actions: On one hand, there is interest in deterring fraud in securities markets and remedying it when it occurs. That interest is served by recognizing that victims of fraud often are unable to detail their allegations until they have had some opportunity to conduct discovery of those reasonably suspected of having perpetrated a fraud .... On other hand, there is interest in deterring use of litigation process as a device for extracting undeserved settlements as price of avoiding extensive discovery that frequently ensue once a complaint survives dismissal, even though no recovery would occur if suit were litigated to completion. [1] Judge Newman also recognized that notice pleading rules then in force favored first of these interests. He held that complaints alleging securities fraud should not be dismissed--and plaintiffs thus should not be precluded from using discovery process to search for evidence of fraud--unless, in familiar phrase from Conley v. Gibson, 'it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' [2] Two years later, Congress attempted to reverse notice pleading system's pro-plaintiff bias by enacting Private Securities Litigation Act [3] (PSLRA or Reform Act) over President Clinton's veto. Congress took this step after finding that (1) securities class actions generally were initiated and controlled by plaintiffs' attorneys; (2) those attorneys routinely filed class actions alleging securities fraud without regard to any underlying culpability of issuer, and with only faint hope that discovery process might lead eventually to some plausible cause of action; and (3) plaintiffs' attorneys' abuse of discovery process to impose [burdensome] costs on defendants often led the victimized part[ies] to settle claims that had no merit. [4] Congress observed that investors always are ultimate losers when extortionate 'settlements' are extracted from issuers, [5] and that the reluctance of many judges to impose sanctions under Federal Rule of Civil Procedure 11, except in those cases involving truly outrageous misconduct, exacerbated problems posed by abusive securities class actions. [6] The Act's legislative history contains no explicit discussion of either Conley v. Gibson or notice pleading philosophy that has governed civil actions in federal courts since 1938. The pleading and discovery requirements promulgated in Act cannot be reconciled with Conley v. Gibson; they clearly reflect congressional rejection of philosophy of notice pleading in private securities fraud litigation. Section 21D(b)(1) requires every plaintiff alleging securities fraud to identify in her complaint each allegedly misleading statement, to specify ... reason or reasons why statement [was] misleading,' and, with respect to every allegation made on information and belief, to state with particularity all facts on which that belief is formed. [8] Section 21D(b)(2) requires every plaintiff, with respect to each statement or omission alleged to constitute a violation of section 10(b) and Rule 10(b)-5, to state with particularity facts giving rise to a strong inference that defe ndant acted with [scienter]. [9] Section 21D(b)(3)(A) directs courts to dismiss any complaint that does not meet requirements of sections (b)(1) and (b)(2). [10] Section 21D(b)(3)(B) effectively precludes a plaintiff from relying on discovery process to uncover evidence of fraud by directing courts to stay all discovery during pendency of any motion to dismiss. [11] Viewed as a whole, these provisions reflect an effort by Congress to reverse litigation dynamic described by Judge Newman. …