Lawsuits May Be Down, But the Plaintiffs' Lawyers Haven't Gone Away

Lawsuits May Be Down, But the Plaintiffs' Lawyers Haven't Gone Away - 7/23/2009 , Class Action News, Class Action, Securities News, shareholder class action, claim, litigation, securities action, common stock'>

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Lawsuits May Be Down, But the Plaintiffs' Lawyers Haven't Gone Away
Kevin LaCroix

The D & O Diary. July 23, 2009
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EXCERPT: As I have shown and has been detailed by others, the number of securities class action lawsuits declined during the first half of 2009 compared both to last year and to historical norms. There is a lot that might be said about the decline and its causes. However, the mainstream media has latched onto the message that the number of securities suits is declining because the plaintiffs are "running out of people to sue." Let’s be honest -- fish gotta swim, birds gotta fly, and plaintiffs’ lawyers make their living filing lawsuits. The fish and the birds can be counted upon to continue their traditional activities, and so can the plaintiffs’ lawyers. The very idea that the plaintiffs have run out of targets is a flawed conclusion built on a faulty premise. Before I get started on this topic, I think it would be useful to review why this question matters. Once before, the idea circulated that the securities class action plaintiffs’ lawyers were going out of business. This hypothesis turned out to be very wrong and it proved to be a very expensive mistake. After the PSLRA was enacted at the end of 1995, some D&O insurers assumed the statute’s passage would mean that many fewer securities lawsuits would be filed, and so they slashed their insurance pricing. The marketplace followed. When securities litigation ramped back up, the D&O insurance industry suffered hundreds of millions of dollars in losses. The industry paid a lot of tuition to learn that what plaintiffs’ lawyers do is file lawsuits.

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