Class-action attorneys are characterized as corporate blackmailers just after the money instead of helping victims. What do you think?
A: That’s a fallacy. My law firm has gotten very good recoveries in cases for shareholders. We recently recovered $26 million for FirstWorld Communications investors who purchased the stock in the IPO. That represented a significant amount of their damages.
Class-action settlements are really unlike every other case out there because they have to be approved by the court. If a judge thinks the settlement is too low, or the attorneys’ fees are too high, they have significant discretion to refuse the settlement or any aspect of it.
Q: Do you see yourself as an adversary of corporations?
A: I don’t think so. Businesses are owned by investors, and we represent the investors.
Q: Why do shareholder class actions so rarely make it to trial?
A: There’s a lot at stake in shareholder class actions. There’s a lot of money involved. I think that, in many instances, the company does not want to roll the dice at trial because damages can be devastating.
Q: Ernst & Young recently won a verdict in a class-action securities case. Will that embol den companies to go to trial?
A: Any victory for defendants will embolden them to some degree. There are aspects of accounting that make it easier to defend a securities case that has the accountants as the defendants. Accounting standards are complex and not necessarily all fixed in stone. Therefore the judgment of the accountant comes into play. The defense that auditors bring to the table is often that their accounting treatment in any given transaction is reasonable.
Q: What’s your role in how businesses function?
A: To help keep the public markets honest and transparent to the investor. We bring integrity to the public markets, which is a lot of what our U.S. economy is based on. Our role is to advocate for investors who have lost money for reasons related to fraud. Companies are aware that if they are not forthright in their public disclosures, there are people aligned with the investors who will aggressively pursue them.
Q: President Bush recently signed into law the Class Action Fairness Act, which is intended to reduce the number of class-action suits. (The law requires most class actions to be filed in federal court, where there are greater barriers) What do you think of it?
A: I’m pro-consumer, and I am pro-investor. I think that it is not fair to close the courthouse doors to investors and consumers because, in many instances, they’re defenseless. The person who lost $100 in a consumer transaction or $1,500 in a securities transaction has a very difficult time bringing that case against a large company. Class-actions are a unique device that allow the little man some equal footing with large corporate wrongdoers.
Q: What’s the most satisfying case you’ve worked on?
A: A securities case against Samsonite. Midstream through the litigation they hired lobbyists to change the Colorado Securities Act. Had that proposed change been enacted, our case would have had to be dismissed. We were able to quash it before it was passed. Later the case was settled for around $24 million. Plus we required Samsonite to implement governance policies to make it a better-run corporation for investors.
Q: The most disappointing case?
A: It was a case against Jerry McMorris. We sued his former trucking company. We represented the people who drove and loaded trucks. They were not paid their final paychecks prior to the company going bankrupt. The federal judge gave us summary judgment on all aspects of the case. It was appealed, and the U.S. Court of Appeals for the 10th Circuit decided to send it directly to the Colorado Supreme Court. We lost, and we couldn’t get the wages back.
Q: When did you decide to get into this area of law?
A: When I was in law school in San Francisco, I clerked for David B. Gold, an attorney who was an absolute pioneer in the area of securities litigation. That’s when I realized I’m the kind of person who would be more comfortable representing investors than corporations.
Edited for space and clarity from an interview by staff writer Greg Griffin.
