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Sent: 12/12/2009 9:19:13 A.M. Central Standard Time
Subj: Inquiry of DRI Corporate Counsel committee
Ladies and Gentlemen,
In my blog How To Combat Plaintiffs' Lawyers, I record my involvement with several securities law class action lawsuits in which I contend that, if securities purchasers (on the open market) have sustained financial losses by reason of misrepresentations that officers, accountants, and others have purveyed, corresponding windfall gains have accrued to lucky sellers who happened to sell before the misrepresentations became publicly known. Those lucky sellers are not parties to the litigation and walk away with their windfall gains. To extract funds from the corporation for the losses effectively redistributes the losses (increased by plaintiff and corporate defense attorney fees), such redistribution being in somewhat random ways and being made among the unlucky purchasers (some effectively getting their losses increased, some decreased), and also among other securities holders who did not have a loss from the misrepresentation (but wind up with an effective loss because of such redistribution).
I know some would say that inappropriately tries to look too much through the corporate form. Nonetheless the funds for any liability the corporation has to pay could have been distributed to security holders in some pro rata way, and that gives, I think, some legitimacy to the concept of "effective loss".
My inquiry to you is, all things considered, do you agree that the law should make the foregoing redistribution of losses (where lucky selling security holders have walked away with windfall gains and don't have to give those back)? If you think the law should not make that redistribution of losses, do you think there are any valid legal, equitable or procedural arguments that could be made to a court that would avoid or mitigate the amount of such redistribution of losses?
In answering my inquiries, I hope you will take into account your role as corporate counsel and how you view your obligation to protect the interests of security holders in the litigation and advance arguments to the court to try to protect those interests.
If you wish to read my blog posts related to my involvement and objections in securities class action lawsuits of the type in question, see these links: http://robertshattuck.blogspot.com/2007/11/november-2007-tyco-class-action.html (Tyco); http://robertshattuck.blogspot.com/2008/04/letter-to-judge-thompson.html (Xerox); http://robertshattuck.blogspot.com/2008/11/why-arent-government-retirement-systems.html (Monster, Inc.).
I hope I hear from you.