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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
More 'Megacase' D&O Lawsuits On The Way: Lawyer; Professional Liability Underwriting Society Conference
By: Mark A. Hofmann
Business Insurance. November 25, 2002
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EXCERPT: ORLANDO, Fla.-The worst is yet to come, as far as securities-related directors and officers liability lawsuits are concerned, warns one of the country's best-known plaintiffs attorneys. ''I do think many large chickens are coming home to roost,'' said William Lerach, a partner in the San Diego office of the New York-based law firm of Milberg, Weiss, Bershad, Hynes & Lerach. Mr. Lerach said that ''megacases'' are on the rise because of grossly inflated stock prices and the unraveling of companies. Whereas a securities case that involved $200 million or so used to be regarded as a big case, such cases are now considered run of the mill, he said. He spoke during a discussion of financial mismanagement and its aftermath for directors and officers liability at the annual international conference of the Professional Liability Underwriting Society in Orlando, Fla., held earlier this month. Mr. Lerach said that securities litigation reform legislation enacted in 1995 turned out to be ''the all-time law of unintended consequences.'' Although the law was aimed at curbing securities-related lawsuits by, among other things, requiring that class actions take place in federal rather than state courts, the losses suffered by big institutional investors caused a change in plaintiff strategy. Pension funds ''are not happy'' about their losses, he said. ''They're mad as hell, and they're not going to take it any more.'' Rather than taking their chances in federal court as part of a class wherein they might receive pennies on the dollar, the large institutional investors are filing their own private litigation in state courts, Mr. Lerach said. The federal act left such cases alone, he noted. ''The fact of the matter is there are a lot more cases coming,'' said Mr. Lerach, particularly if the economy spins into another downturn. And that could lead to a ''debacle'' in the D&O market, he said. Underwriters who thought they would be protected by the 1995 securities legislation went into what he called a ''binge of cash-flow underwriting,'' only to now confront both larger losses than they anticipated and lowered investment income. Mr. Lerach dismissed the recently enacted corporate governance reform legislation popularly known as ''Sarbanes-Oxley'' after its chief sponsors-Sen. Paul Sarbanes, D-Md., and Rep. Mike Oxley, R-Ohio-as ''reform light.'' Mr. Lerach said it might help plaintiffs by discouraging the destruction of corporate documents but would do little else.
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