I am impressed with your site, and the arguments you make for limiting tort reform. However, I did not see anything that relates to a category of tort law that has been highly prone to abuse by certain lawyers, specifically lawsuits against companies that experience rapid drops in stock price. As a veteran of the biotech industry, I can assure you that public companies are always walking on eggshells when it comes to talking about the future. Many firms have been sued, automatically it seems to me, with onerous discovery proceedings and lengthy, expensive legal battles over pre-trial rulings. This tends to occur whenever there is a precipitous drop in the share price - for any reason. The plaintiffs -- generally a class of investors who stand to gain very little on a personal basis -- are represented by what I can only describe as a group of predatory law firms who extort settlements from management teams regardless of any wrongdoing, as an alternative to long, draining fights that distract from running a business. Now there are cases where management teams are guilty of withholding negative information or providing overly optimistic guidance about the future, (think Enron, WorldCom, Adelphia, etc...) and they deserve all the legal trouble they get. But this kind of lawsuit is frequently abused in the biotech business, with most firms in a pre-revenue stage, subject to external forces (FDA, FTC, nature, etc...) beyond their control. Stock prices can fall for reasons that have nothing to do with the firm in question, and even the best management team cannot foresee all eventualities. Do you have any views regarding this type of legal abuse?
Wow. Great email, and on a subject I unfortunately know nothing about. Speaking generally, I -- like everyone else -- abhor the truly frivolous case, especially where the motive for the litigation is simply to extort money because the opportunity exists. These types of shareholder actions, seeking damages for management negligence, as the emailer concedes, have had some validity regarding companies like Enron or Worldcom. It's a risk in any publicly traded company, and I suppose a cost of doing business generally. Again generally, I don't remember the last defendant who thought being sued was justified; no one wants the stress and the financial pressure of defending a lawsuit.
The only thought I have regarding truly frivolous litigations against companies is for the business owners to compel their lawyers to seek an early dismissal of the case. I have a firiend who spent hundreds of thousands of dollars defending a case against my friend's company. He told me about the case, and it was complete nonsense. I recommended that he have his lawyers file a motion for summary judgment, which would force the plaintiffs to show the evidence they had in support of their claim; i.e., to put up or shut up. He could never get the lawyers to file that motion, and his company eventually went out of business. I strongly felt, based on what my friend told me, that the lawyers were simply running up their hourly bills. I still think I was right on that.
