Depending on a ruling by the U.S. Supreme Court, class-action securities lawsuits may be more difficult to bring. For the past 25 years class actions have been allowed based on the presumption that share prices can be affected by corporate acts. This presumption is now being challenged by Halliburton Co.
Investors would like to see such actions to be continually allowed. Among the investors that have signed onto this lawsuit, one party would include the Colorado Public Employees’ Retirement Association based out of Denver. The investors have also found support from the Department of Justice and the Securities and Exchange Commission.
Various business groups such as the U.S. Chamber of Commerce feel that securities class-action lawsuits are too easy to implement. There is concern that defending such suits can be costly. Whatever the merit of the class action suit may actually be, the incentive is for corporations to try to settle these matters.
One study suggests that 67 percent of these cases are either settled or dismissed before the merits of the cases could ever be heard. Another study suggested that while the cost of these cases for investors between 1995 and January 2014 were $39 billion, the recoveries for investors were only $5 billion.
We will have to wait and see what the court actually decides concerning this matter. The Supreme Court is expected to rule on this matter in June.
While securities matters are an especially complex when it comes business legal concerns, these are just some of the many legal issues that companies will need to deal with on a daily basis. Experienced business lawyers can help companies wade through the vast number of state and federal regulations and also assist businesses in the event that legal disputes arise.
Source: Pensions & Investments, “Class actions at risk in Supreme Court challenge,” Hazel Bradford, March 3, 2014