The D & O Diary has had numerous posts commenting on the possible reasons for the YTD 2006 decline in the number of securities class action lawsuits (most recent post here). D & O maven and prominent coverage attorney Dan Bailey of the Columbus, OH law firm of Bailey Cavalieri has recently formulated his own explanation for the declining number of suits, in his article “Why Are There Fewer Securities Suits?” (here). Dan’s article is, as usual for Dan’s work, well-written and thorough.
Dan attributes the drop to a number of contributing factors, most of which he views as merely temporary. Among the factors he considers are the recent reduction in stock price volatility, enhanced corporate governance and the Dura decision. He is skeptical that the Milberg Weiss indictment has had much impact on the number of securities suits, and thinks that any diversion of plaintiffs’ lawyers’ attention based upon their filing of options backdating related derivative suits will be purely temporary. Because Dan regards many of the causes of the current lawsuit decline as temporary, he believes that it is “extremely unlikely” that this decrease in shareholder litigation will be permanent and therefore “neither D & O Insurers nor Insureds should overreact to this seemingly temporary reprieve from higher-frequency securities litigation.” He also specifically notes that “an over-reactive softening of the market today in response to this development will likely cause another significant market correction in a few years.”
Readers should be aware that Dan’s firm’s website has an archive of Dan’s other D & O-related writings (here, scroll down to “Director and Officer Liability”) His articles are uniformly interesting and well-written, and collectively represent a useful resource on D & O liability issues.
Special thanks to Dan for providing a copy of (and a link to) his article.
Pay Scale: According to an October 12, 2006 article in the Rocky Mountain News (here), the Lerach Couglin firm sought $96 million in legal fees for its role as lead plaintiffs’ counsel in connection with the $400 million settlement of the Qwest Communications securities class action lawsuit. Denver attorney Curtis Kennedy, representing the Association of U. S. West Retirees, succeeded in getting the legal fees cut to $60 million, providing $36 million more for the shareholders. Kennedy’s fee? $40,500. Seems like there might be an ironic parable about “value for value” here…
FCPA Perspective: Regular readers know that the D & O Diary has frequently written about the Foreign Corrupt Practices Act, and the growing importance that the FCPA has for D & O risk (most recent posts here and here). Alert reader Winnie Van called our attention to an article that appeared in the San Francisco Business Times entitled “Feds Take Aim at Bribery” (here). The article documents the recent sharp spike in FCPA enforcement activity, which the article attributes in part to the growing importance of doing business in India and China, as well as the increased scrutiny on operations and controls under Sarbanes Oxley. The article also discusses that several major law firms and accounting firms have been gearing up to address their clients’ issues under the FCPA, because they see it as a growing threat. As The D & O Diary has noted, the FCPA is also a growing area of potential D & O risk (here).
Blog Alert: The many D & O Diary readers who are involved in insurance coverage counseling and litigation may be interested to take a look at the Insurance Coverage Law Blog (here). While the blog does not specifically address professional liability coverage issues, it does generally have interesting posts and links related to insurance coverage issues.
Hat tip to Adam Savett at the Lies, Damn Lies blog for the link.
Why Google Bought YouTube: If, like The D & O Diary, you find yourself wondering what Google could possibly have been thinking when it agreed to pay $1.65 billion for YouTube, perhaps a glance at this Google-generated “trends” chart (here) might illuminate what was on Google’s mind.
If you still aren’t sure about the $1.6 billion price tag, it may be because you are unacquainted with the whole viral Internet video phenomenon. I suggest a quick look at two of the all-time most popular Internet videos: The Llama Song video (here) and the Badger Badger video (here). If you are now completely mystified, then we are in agreement.
Worst Headline Ever? You decide. Click here.