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Shareholder Class-Action Suits On The Wane?
from the feel-bad-for-those-lawyers dept
In the wake of a couple of decisions by the Supreme Court to limit shareholder class-action suits, the WSJ's law blog says that the number of such suits is already falling. In the first half of the year, 59 securities class-action suits were filed, compared to 63 in the same period a year earlier, and an average of 101 every six months between 1996 and 2005. The head of the Stanford law group that compiled the report says it's because there's less fraud going on, thanks to increased enforcement by the SEC and DOJ. What seems more likely, though, is that the stock market has been pretty strong, decreasing the number of big run-ups followed by huge falls in share prices. It's much easier to find pissed-off investors after a stock has tanked, since plenty of them are looking for somebody to blame, and the idea of getting a big settlement to offset their loss is an appealing one. Of course, those settlements really only tend to benefit one party -- and it's not the shareholders.
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Overhyped
As the post points out only the lawyers benefit through class action lawsuits. The victim in a settlement usually gets a discount coupon off the next purchase from that company. This begs the question of why anyone would want to continue to have a business relationship with a company that screwed you.
Just to illustrate my comments with my Sprint complaint. Sprint settled a class action lawsuit that would allow its customers a credit towards a FUTURE bill for improper billing practices. We had discontinued Sprint over other bad service issues. But guess what, we were ineligible to receive a refund for their improper billing. I suppose we could have fought this on principle, but alas we have to make rationale decisions on the value of fighting bad business practices.
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