This Article examines the contentious and recurring issue of how courts should handle confidential witnesses in securities litigation who recant the information attributed to them in complaints or deny that they ever provided such information to plaintiffs’ counsel and/or investigators. The use by plaintiffs of confidential witnesses has become ubiquitous in recent years, as a primary unintended effect of the Private Securities Litigation Reform Act of 1995. That legislation raised the bar for pleading securities fraud and established an automatic stay of all discovery and other proceedings during the pendency of a motion to dismiss, absent application of one of two narrow exceptions. The vise-like combination of these features forces plaintiffs to plead their cases with particularity while barring them from obtaining discovery to bolster their scienter and other allegations until all motions to dismiss have been resolved. In response, plaintiffs have turned to confidential witnesses, who typically are current or former employees of the defendant. These witnesses provide information anonymously for use in complaints, mainly because they are fearful of retaliation by defendants. In a recent series of high-profile cases, courts have been confronted with allegations that plaintiffs’ confidential witnesses either have recanted the information attributed to them, or denied ever providing such information. This Article examines the contrasting approaches taken by courts to alleged recanting, and provides some specific recommendations for avoiding or resolving this problem in the future.

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