Wow, Media Sees Dumb Lawsuit for What it Is
In the earlier days of this blog, I used to post links to a lot of insane lawsuits. The lawsuits just keep coming, but I have lost the energy to keep posting such stupidity. And besides, Overlawyered does such a good job and seems to have infinite patience.
But it was worth noting a silly shareholder suit that the media actually seems to have sniffed out for what it is: Pure garbage. For those who are not aware, there are a group of law firms who immediately file suit against any company whose stock drops by more than a few percent. Bill Lerach, soon to be taking up residence in jail, used to keep a whole bullpen of folks on a sort of retainer to hold shares in numerous companies, so he instantly had someone close at hand who could file suit when any stock drops. And since stocks go up and down, often in ways that the company itself has no control over, this leads to a lot of lawsuits.
Recently, the maker of Crocs sandles apparently had an IPO, had its stock price shoot up, and then had its stock price fall back when the company could not sustain its previous torrid growth pace. Al Lewis of the Denver Post takes it from there: (HT Overlawyered, of course)
Anybody who purchased stock in
Niwot-based Crocs Inc. between July 27 and Oct. 31 should not join the
class-action shareholders lawsuit that was recently filed against the
company and its stock-dumping executives.Instead, they should look themselves in the mirror and admit two things:
I look ridiculous in these plastic shoes.
Anybody
who would pay an average of more than $60 a share for a company that
makes ugly plastic shoes deserves to take a hit in the stock market.
He continues:
Crocs and its officers also allegedly
misrepresented or failed to disclose their distribution problems in
Europe and their rising inventory levels, the lawsuit alleges. They
also failed to disclose that sales of their hole-riddled plastic clogs
were suddenly becoming more of a seasonal item. Imagine that! Sandals
seasonal? Who knew?
By the way, if you really want your head to explode, take a minute a think about shareholder lawsuits. A group of shareholders are suing the company for a fall in the stock price. Who do you think pays? Why, current shareholders! Though I do not accept the "logic" of these suits, if one were to accept their logic, then the most guilty party is the stockholder who sold the plaintiffs their stock just before the drop. But these folks are exactly who will NOT owe any money on the suit. They are no longer owners. The people who will pay will be the owners of the stock at whatever time the suit settles, likely many people who bought in after the plaintiffs did. The only real winner when the shareholders pay themselves such a verdict are the lawyers, who rake off 30%. More on this bizarre situation here.
Update: I will have to think about this more, but it kind of reminds me of a prisoners dilemma game in which the prosecutor gets a monetary bonus that increases with longer prison terms.
