Via Kirkendall, Joseph Nocera profiles the legal career of William Lerach (Jun. 28, Jun. 27). (“The Lawyer Companies Love To Hate”, NY Times, Jul. 2). Larry Ribstein correctly quibbles:
[The 1995 Private Securities Litigation Reform Act] was not just, and maybe not even mostly, intended to make securities cases harder to “win,” as Nocera said, but harder to bring. This is an important distinction, since a main problem with class actions is the extent they are used to bludgeon (or, less charitably, blackmail) firms into settling cases that probably can’t be won, but that can cause plenty of trouble along the way. The plaintiff’s lawyer in effect “wins” the case by surviving a motion to dismiss, which is harder to do post PSLRA. Moreover, even apart from the motion, the case is likely to have more weight if big shareholders, rather than the lawyers and their stable of career suers, are behind it.
This distinction between eliminating nuisance cases and hobbling good cases is a big reason why Lerach and others are flat wrong about the effect of the PSLRA in inviting Enron.
Moreover, Nocera’s interview with Lerach makes clear why Lerach doesn’t like the Act — whatever his success post-PSLRA, he likes being able to bring weak cases. Lerach calls it his “business model.” He says it’s useful in training lawyers. One can’t tell from newspaper page how fully Lerach’s tongue was inserted in his cheek when he came up with that one.
See also Peter Burrows, “Payback Time for Lerach?”, Business Week, Jun. 30 (via Schaeffer).
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