- With arbitrary power to order capital levels, FDIC is Death Star to community banking [Kevin Funnell]
- “Oh please. We’re not going too easy on [convicted inside trader] Raj Rajaratnam.” [John Carney]
- “Ronald Coase and the nature of shadow banking” [also John Carney]
- “Say-on-pay” as “lawyer-driven” litigation [Pepper Hamilton via Bainbridge]
- I’m a guest on Jim Puplava’s “Financial Sense” podcast [link]
- Wall Street, housing lobby to get their way again: “I’m afraid that the fix is in on housing finance reform.” [Arnold Kling]
- Channeling Bernie Sanders? Thumbsucker on decline of IBM as employer fingers shareholder value theory promoted by ever-so-wicked Chicago school [Washington Post]
- Wells Fargo gets a lending-discrimination class action tossed, but there’ll be others where it came from [Andrew Trask]
Posts Tagged ‘securities litigation’
Banking and finance roundup
- After bank burglarizes Ohio woman, law will give her curiously little satisfaction [Popehat]
- North Las Vegas scheme to seize underwater mortgages through eminent domain raises constitutional opposition [Kevin Funnell]
- “The SAC Insider Trading Indictment” [Bainbridge, WSJ MoneyBeat]
- “He who sells what isn’t his’n/Must buy it back or go to prison.” Most naked short selling driven by fundamentals, study says [Daniel Fisher]
- NY AG Schneiderman to Thomson Reuters: don’t you dare sell early access to the market-moving survey you pay for [Bainbridge]
- “The Confidential Witness Problem in Securities Litigation” [Kevin LaCroix]
- “The puzzling return of Glass-Steagall” [Tabarrok]
- “FATCA: How to Lose Friends, Citizens and Influence” [Colleen Graffy, WSJ via Paul Caron/TaxProf, earlier]
Dual-class shareholder arrangements
Why Elizabeth Warren is wrong about them [Prof. Bainbridge]
Judge Posner and the elusive confidential informant
To allege scienter (intent or knowledge of wrongdoing) in securities fraud cases, lawyers sometimes avow to the court that they have one or more confidential sources who tipped them off to the wrongdoing. If the court accepts this story, they may keep a case alive for which there would otherwise be no or inadequate evidence. Trouble is, the confidential informants can be, if not entirely a mirage, then flimsier on inspection than the court might have assumed. Cory Andrews of WLF tells of a recent ruling by Judge Richard Posner in a case called City of Livonia Employees’ Retirement System v. Boeing:
Seeking hundreds of millions of dollars in damages, plaintiffs filed a putative class action alleging that Boeing Company, along with its CEO and the head of its commercial aircraft division, committed securities fraud in violation of federal law. The district judge dismissed the complaint for failing to allege sufficient facts to properly plead the requisite scienter for fraud. Not to be deterred, plaintiffs promptly filed an amended complaint, but this time with detailed bombshell revelations from a confidential source. Ultimately, however, the allegations in the amended complaint could not withstand even the slightest scrutiny.
As Posner describes it:
The plaintiffs’ lawyers had made confident assurances in their complaint about a confidential source — their only barrier to dismissal of their suit — even though none of the lawyers had spoken to the source and their investigator acknowledged that she couldn’t verify what (according to her) he had told her.
Their failure to inquire further puts one in mind of ostrich tactics —of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing.
Noting that the same law firm [Robbins Geller Rudman & Dowd] had been accused of “similar conduct” in three other reported cases, Posner [on behalf of a unanimous panel] remanded the matter back to the district judge, who would be in a better position to calculate a dollar amount for Rule 11 sanctions.
May 2 roundup
- Pigford and more: why do modern privacy laws so often redound to the benefit of those in power? [Stewart Baker]
- N.H. man who lost life savings at carnival game in exchange for dreadlocked banana concedes he was “foolish” but is considering lawsuit [WBZ, BoingBoing]
- The judicial humorist — I’ve got him on the list [San Antonio strip club case: MySanAntonio, Above the Law, ABA Journal]
- To be for capitalism, be against crony capitalism [Tim Carney, The Atlantic]
- “News Corp. Pays Itself $139 Million For Phone-Hacking Scandal — Minus Legal Fees” [Daniel Fisher]
- What must they think of the Norris-LaGuardia Act of 1932? Brennan Center lists Wisconsin bill providing for stays of injunction pending appeal among “Attacks on Judiciary” [Brennan Center Fair Courts E-lert]
- Federal Trade Commissioner Joshua Wright says it’s time to pin down commission’s vague Section 5 power [Andrea Agathoklis Murino, WLF]
Banking and finance roundup
- After bank trespass, Occupy Philadelphia benefits from jury nullification and a cordial judge [Kevin Funnell]
- Cato commentaries on Cyprus crisis [Steve Hanke and more, Dan Mitchell, Richard Rahn podcast]
- “NY Court Reinstates Foreclosure, Chides Judge For `Robosigning’ Sanctions” [Daniel Fisher] “Impeding Foreclosure Hurts Homeowners As Well As Lenders” [Funnell]
- SEC charging Illinois with pension misrepresentation? Call it a stunt [Prof. Bainbridge]
- “Plaintiff Lawyers Seek Their Cut On Virtually All Big Mergers, Study Shows” [Fisher] As mergers draw suits, D&O underwriting scrutiny escalates [Funnell] “Courts beginning to reject M&A strike suits” [Ted Frank]
- Will Dodd-Frank conflict minerals rules actually help folks in places like Congo? [Marcia Narine, Regent U. L. Rev. via Bainbridge, earlier here]
- “Securities Lawyers Gave To Detroit Mayor’s Slush Fund”; city served as plaintiff for Bernstein Litowitz [Fisher]
Class action confidential
Never mind the (alleged by former employee) lurid sex stuff, says Daniel Fisher, let’s talk about this law firm’s shortcomings in filing securities actions [Forbes]
Judge: plaintiff’s bar leafs through WSJ each morning looking for scandal
“I mean, frankly, I am totally puzzled, given that plaintiffs’ bar in this area uses the Wall Street Journal as their source of clients and cases, right? You guys read it every day, looking for scandal, right? Other people read People Magazine, but you read the Wall Street Journal.” – Judge Naomi Reice Buchwald (S.D.N.Y.), during a proceeding on the LIBOR class actions. [Staci Zaretsky, Above the Law] “And in other news, the Sun rose today.” [@LawyerKitty]
Want your annual meeting to go off with no trouble? Pay up
The Economist on an unplanned (at least one hopes it was unplanned) effect of Dodd-Frank:
THE Dodd-Frank law of 2010 requires a “say-on-pay” vote for shareholders of American companies. Clever lawyers scent a payday for themselves.
One law firm in particular, Faruqi & Faruqi, has filed a series of class-action suits demanding more information about how companies decide what to pay their senior executives. It seeks to prevent its targets from holding their annual meetings until the extra information turns up. One such suit, against Brocade Communications, a Californian company, forced the suspension of the annual meeting last February. Brocade quickly settled. Faruqi’s fees were $625,000. Several other companies, not wanting to delay their meetings, have settled similar suits.
Prof. Bainbridge is reminded of the specialized group of non-lawyers in Japan known as sokaiya, who extract money from target companies by threatening (among other things) to disrupt annual meetings.
Banking and finance roundup
- David Henderson reviews Roger Donway book on Greg Reyes backdated-options prosecution [Econlog]
- Francis Menton on Argentina vs. creditors [Manhattan Contrarian via FedSoc Blog]
- New book, with co-author Lawrence Cunningham, gives Hank Greenberg’s side of the story on AIG [Concur Op, NY Post]
- Are Wall Street’s expert networks a violation of insider trading laws? [David Zaring, Conglomerate via Bainbridge]
- “A Brief Explanation Of The Economics Of Securities Lawsuits” [Daniel Fisher, Forbes] Related: Alison Frankel, Reuters [history of attempts at reform]
- What, a new bank? Yes, the proposed Bank of Bird-in-Hand [Kevin Funnell]
- Rules-based, low-discretion enforcement of Dodd-Frank? If only [Louise Bennetts (Cato), Jurist]