Legal Question Concerning Class-Action Lawsuits

I bought a stock last year, and it was doing very well until they had a problem with some finacial irregularities (which were resolved to everyone’s satisfaction-or so I thought). Anyway, it was nicely recovering-till today-two law firms have launched class action lawsuits against the companie’s management. This drove the stock down a full 20%-I’m mad as hell at these money hungry bastards-can I sue these law firms for reckless endangerment! I think their actions constitute FRAUD-since the stock is still registered, and I belive in this company!

I’m not a legal expert, but I believe you can always file a lawsuit against someone. Of course, the lawsuit might be deemed frivolous, which is probably your question: Would such a lawsuit even make it to court?

A lawsuit against the firms for “reckless endangerment” would not make it to trial, since you could not allege sufficient facts to sustain that cause of action.

Reckless endangerment refers to physically endangering by acting recklessly. They haven’t done that here.

Now, could you meritoriously sue them at all, for anything?

Perhaps. If their class action lawsuit is baseless, and they know it to be so, they may be guilty of misuse of process, or abuse of process.

I don’t know if you, as a shareholder, have standing to initiate such a suit. (Someone smarter than I on these issues can chime in any time, by the way).

But is their lawsuit really baseless?

If the company, or corporate officers, did something wrong to cause these “financial irregularities,” then why shouldn’t a stockholder sue them? And if enough different stockholders were affected by this same wrong thing, why shouldn’t they establish a class? It’s easier and less expensive to sue one time on behalf of 1500 plaintiffs than to sue 1500 times, over and over again, trying to prove the same set of facts. What’s the problem?

I guess the problem is that you believe in the company, and you’d like to see it prosper. I don’t blame you - you still have their stock.

But do you make room for the possibility that these other shareholders don’t believe in the comany any more, think that it did something wrong, and that they should recover money because it did something wrong?

As for the lawyers in this case being “money hungry bastards”… tell me again why you bought the stock in the first place, and why you’re upset at the loss of 20% of its value?

  • Rick

I’m upset because these law firms are endangering MY INVESTMENT! They are stealing from ME! I didn’t authorize these lawsuiots-I want the company to succeed!
I don’t see how these people’s actions benefit anybody but themselves (see archives “TOSHIBA LAPTOP CLASS ACTION LAWSUIT”)-the lawyesr in that case got $150 million-the average “wronged party” got leass than $100.00.

Well, egkelly, not to put too fine a point on it… but someone authorized those lawsuits. Someone who was a stockholder such as yourself, most likely. Are you suggesting he is not entitled to try and recover his damages, just because you want the company to succeed?

  • Rick

Anyone can file a class-action suit, but it takes a judge to authorize it.

If the suit’s been authorized, then I assume that the judge was convinced that evidence of wrongdoing existed. You might want to think of joining it (once you’ve researched it thoroughly.)

If the suit doesn’t get authorized, then I suppose it’s possible that you could file suit against them for the financial damages done–but I doubt that your suit will make it to court, either.

-David