This note will examine the historical background and development of the Birnbaum rule and will consider the Supreme Court's reasoning in its first examination of that rule. Taking the position that the Birnbaum rule is generally a useful one, this note nevertheless suggests that the rule should be applied more flexibly in the future in order to achieve its twin objectives of admitting valid claims and excluding nuisance suits. Particularly questioned will be the Court's failure to delineate and consider separately the validity of the substantive portion of the Birnbaum rule; the Court's wholehearted acceptance of the rule, which casts doubt upon most of its exceptions; and the fact that many deserving plaintiffs will be foreclosed from maintaining 10b-5 actions by the Court's position in Blue Chip.
Douglass A. North,
Federal Securities Law—Fraud—Supreme Court Affirmation of the Birnbaum Rule—Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975),
51 Wash. L. Rev.
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