February 4, 2011

Around the Web

A couple of items from around the web.

(1) Professor John Coffee has a New York Law Journal column (Jan. 20 - subscrip. req'd) on the upcoming year in securities litigation. The column discusses the Halliburton and Matrixx cases pending in the U.S. Supreme Court, as well as the New York AG's suit against E&Y for "allegedly assisting Lehman to cosmetically redecorate its balance sheet."

Quote of note: "[T]he [Matrixx] case poses the first opportunity in over 20 years for the Court to reconsider or rephrase its basic standard for materiality. Even a modest redefinition of that standard will destroy forests to print the law review articles and practitioner commentaries that will predictably follow. The road to Hell is paved with good intentions and law review articles."

(2) Whether securities class actions benefit shareholders is a perennial debate. In a recent study published in the Financial Analysts Journal, two professors from Maastricht University (Netherlands) conclude that it is a mixed picture, depending on whether the case is based on a violation of the duty of loyalty (e.g., illegal insider trading) or the duty of care (e.g., known lack of internal controls). While in the short run "the filing of a class-action lawsuit is a materially adverse corporate event," the authors conclude that cases based on violations of the duty of loyalty are more likely over the long run to lead to positive management and governance changes and a higher stock price.

Quote of note: [Perhaps predictably, commentators chose to read the study's mixed results in different ways, which led to an amusing post from Bruce Carton.] "I saw the follow headlines about a week apart: 1. 'Study Shows Benefits of Securities Class Actions' (January 7, 2011); 2. 'Securities Class Actions Mostly Punish Shareholders, Study Finds' (November 30, 2010). Sure, different studies can reasonably reach different conclusions about the benefits or harm of securities class actions ... but these articles are about the same study!!! As the fellas say on ESPN's Monday Night Countdown, 'C'Mon Man!'"

Posted by Lyle Roberts at February 4, 2011 10:24 PM | TrackBack
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