Private Securities Litigation: Important Deterrent or Wasteful Churn?

From: RDShatt@aol.com
To: grundfest@stanford.edu, Cox@law.duke.edu, klacroix@oakbridgeins.com
Sent: 12/24/2010 4:30:08 A.M. Central Standard Time

Subj: Private Securities Litigation: Important Deterrent or Wasteful Churn?

Dear Professors Grundfest and Cox, Mr. LaCroix, and Mr. Coffey (address for Mr. Coffey not yet found),

I have read with interest Mr. LaCroix's above referenced post in his blog. You may glean the extent of my interest from my own blog How To Combat Plaintiffs' Lawyers .

I would like to offer some comments.

First, some rhetorical and/or loaded questions: Who and what are the drivers and determinants of the state of the law? Is it plaintiffs' lawyers and their lobbying and other influence with lawmakers, judges and others? Is it judges who have done an adequate policy evaluation of their judicial actions and decisions, insofar as they have discretion regarding the same? Is it academics who have debated the way the law should be and who make recommendations about the same that are accepted by lawmakers and judges? Is it critics, such as The Wall Street Journal?

Also, insofar as plaintiffs' lawyers are the drivers and determinants. to what extent do they exert their influence to achieve a state of the law that benefits themselves to the detriment of the societal interest in how the law operates? How demanding should academics and citizens be of their lawmakers and judges that those persons exert great skepticism about any input the plaintiffs' lawyers have regarding how the law should be and give the plaintiffs' lawyers no benefit of the doubt, including, for example, not finding it an adequate justification that there is "some deterrent effect" from private securities litigation, or that a "private/public partnership" has performed better than "public" alone when there is a choice to beef up with more funding for the "public" effort?

I took particular note of Mr. LaCroix's statement that "there are a large number of sophisticated, well-informed and profit motivated institutional investors that continue to actively participate in securities litigation, some serving frequently as lead plaintiffs." The reason for my interest is that I was once notified of a class action that caused me to send scores of emails to governmental retirement plans and members of the National Institute of Pension Plan Administrators, asking why they weren't "screaming bloody murder." You may read the text of those emails here http://robertshattuck.blogspot.com/2008/11/why-arent-government-retirement-systems.html and here http://robertshattuck.blogspot.com/2008/11/why-arent-retirement-plan-trustees.html . I did not get a single response.

I did not think, at the time, about "pay to play" type stuff going on in securities class action litigation that could keep parties from screaming bloody murder. Trust The Wall Street Journal to enlighten me in February with this item Trial Lawyers Contribute, Shareholder Suits Follow .

On the question of whether individual contibution is needed in order to achieve a better deterrent effect, I have taken the tack of trying to introduce the subject to academics and other professionals in the business ethics field. I have done this mainly through an article I have written that you can find at this link: Does the Civil Liability System Undermine Business Ethics? I have made scant headway in interesting ethics professionals in the subject matter.

Thank you for reading this email.

Sincerely,

Rob Shattuck