I have some general questions for our resident lawyers. No need for your disclaimers: I’m just an observer, not a party to any of the cases, and I’m just looking for information on common practices and procedures.
A company in the industry I cover as a journalist recently disclosed that it was the subject of an “informal inquiry” from the SEC about its accounting practices and also announced that, after looking for a buyer or partner for the last five months, it hadn’t received any offers it found acceptable.
Immediately after this announcement, its shares dropped by about 40%, and within two weeks several class-action lawsuits had been filed claiming that the executives had tried to pump up the value of the stock with questionable accounting practices before announcing the search for a buyer. As of this morning at least 10 law firms had filed or announced they were filing class-action suits.
My questions:
Is it usual for multiple class-action suits (arising from the same circumstances) to be consolidated?
If so, how does that process take place, generally?
If there is a consolidation, might some parties or law firms choose not to join, and if so, why?
How do shareholder class-action suits generally proceed? What can I expect to see happen in the next few months/years?
What else should I know about class-action suits?
I’ve read two (apparently) independent complaints so far. The later one lifts large sections of the earlier one verbatim, perhaps as much as 75-80% of the whole complaint. This raised another set of (lower priority) questions.
A) Does this mean that the two firms were working together, or at least that the one had permission from the other to re-use the material?
B) If not, is it ethical and/or common to “borrow” the text of another’s complaint in this fashion?
C) Wouldn’t doing so without permission be a copyright violation, or are lawsuits not covered by copyright in the same way as other works?
One requirement of a class action is “typicality”–the Plaintiffs must be similarly situated. Sometimes, they aren’t. For example, if there’s a spill of toxic waste, some people might get ill immediately, while others will have no apparent injuries, but rather an increased risk of cancer later in life. Thus you’d have multiple class actions. Without knowing more of the specifics, I couldn’t say whether these two class actions were likely to be consolidated or not.
Either side can move to consolidate. It can probably take place over a wide range of time, from soon after the initiation of the suit, if it’s immediately apparent that they should be consolidated, to months or even years later, if massive discovery is required to show that this is the right move.
If consolidation in class actions works the same as in standard suits, not really. Courts consolidate cases to promote efficiency, prevent inconsistent verdicts, try similar facts and issues together, etc. If the Judge thinks suit A and B belong together, you can’t really say “Sorry Judge, I disagree, keep me separate.”
Can’t give you any specifics, but almost every “big” lawsuit proceeds as follows: interminable amounts of discovery, which is handled almost entirely without court intervention, along with mountains of motions. After several years, it either settled or has a trial. If the latter, another few years worth of appeals and more dead trees.
In many class actions, the only real winners are the lawyers. A recent one I worked on eventually settled for a piddly $400k, with about 2/3 of that going to fees and court costs. The Plaintiffs got a little over $4k each after many years.
A) I’m not sure. I would think so; this strikes me as unethical otherwise. But keep in mind that much legal language is very technical and precisely worded, so two paragraphs might end up being nearly identical, even if drafted independently. It’s not uncommon, especially in complaints, to cut and paste from a template and substitute in the specifics from the current case. Also, there are a variety of forms available in any law library that lawyers use. It’s possible both attorneys did this.
B/C) Like I said, I’ve never seen this before, so I’m pretty sure it’s not kosher if it’s genuine plagiarism. I know that rulings of the court don’t get copyright, but I’m not sure offhand about pleadings. My instinct would say that they do, but when it comes to law, instinct is pretty worthless.