Legal News

Securities Litigation: The Next Booming Practice Area?

By Ashby Jones

A thought, on this sad day of the Great Cadwalader Sacking: Maybe the trick to staying employed as an associate at a law firm is to wheedle yourself into whatever big securities-fraud case your firm is working on. Chances are it’ll be going on for a while and, in any event, if you find yourself without a job, your knowledge of all things 10b-5 might look quite attractive on a resume.

We base that last statement in part on a new report released by Cornerstone Research and Stanford Law’s Securities Class Action Clearinghouse. The report describes a mini-boom in securities litigation, especially those pertaining to the beleaguered financial-services sector. In the first six months of 2008, according to the study, the financial services sector produced 63 class-action filings, more than the total number from all of last year.

“Pretty much all of the big players have been sued,” Stanford law professor Joe Grundfest (pictured) told Legal Times. His advice to lawyers: “Tool up on your knowledge of credit markets.”

The Legal Times article notes that the uptick isn’t just in quantity. The median loss associated with suits filed since the beginning of the year reached $243 million, a level that hasn’t been reached since a spate of class actions between 2000 and 2002.

Grundfest downplays the significance of the last year’s Tellabs ruling to the current crop of suits, feeling that a case with tough facts (from the defense’s perspective) a year ago might still survive a motion to dismiss. He concedes, though, that the recent behavior of the overall market may aide defense attorneys. Given that financial institutions tanked in quick succession, he feels plaintiffs may have more trouble demonstrating that losses were the result of deception.

“These losses were market-wide phenomena,” Grundfest says. “The fact that a lot of people did not understand the risks they were taking will be used to argue that mistakes were made but fraud was not committed.”

Full post as published by Law Blog - WSJ.com on July 30, 2008 (boomark / email).