I forgot to say that the derivative suit is not against the company but rather individuals related to the company. This one is directly against Infospace.
As always occurs in these stock related class action lawsuits, a whole bunch of law firms announce law suits against the company in question during a time frame that can be measured in weeks--a month or two at the outside, and then it stops. All of the individual class action lawsuits are consolidated, and several years later a settlement is announced. I've seen cases where the conclusion of a settlement has taken as long as four years to negotiate. These cases are always settled. I've never seen one class action lawsuit of this kind go to trial. In the mailings to members of the "class" announcing the consolidation of the lawsuits and who the lead plaintiff will be, the plaintiffs' lawyers always argue that a settlement is in the best interests of the "class" because of the inherent risks associated with litigation. At the end, they always slip in a note that actual damages may not be all that significant, which is all the more reason to settle because. You see, all the plaintiffs' lawyers want to due is get counted as having filed against the company and then settle as quickly as possible while expending as few of their resources as possible. Their actions are motivated by purely economic concerns: to get their share of a $30 million or so settlement as quickly as possible and with as little capital outlay as possible. Their announcements usually use the same language and charges.
Sadly, for current shareholders, because these settlements are almost always paid by issuance of new stock, the settlement just results in a very small share split, nothing more. The plaintiffs' counsel always has the right to receive shares from the settlement fund first and foremost, and they always sell their shares immediately. I think that at least 95% of these class action lawsuits are worthless and benefit only the lawyers. I also think they are mildly abusive and that the law firms which engage in them should be ashamed. I do not deny that there many abuses in corporate governance, but that mostly there is no justice to be had and that these piddly class action lawsuits over stock price declines usually don't bring anyone justice. Anyone who serves as lead counsel is just being used by the plaintiffs' attorneys as a pawn in a multi-million dollar chess game designed to enrich the plaintiffs' attorneys. |
