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September 4, 2014

New ‘Loser Pays’ Rules Could Prevent Abusive Lawsuits

Today’s Washington Examiner editorial board highlights ILR in a piece on the potential for ‘loser pays’ rules to reign in abusive class-action investor litigation.

The editorial criticizes the 2009 lawsuit brought by “notorious securities litigation firm” Robbins Geller against Boeing Co. in which Robbins Geller’s key witness turned out to be “a contractor in a job unrelated to the case who hadn’t even worked for Boeing until months after the period in question.”

“The witness ‘repudiated each of the allegations’ in the Robbins Geller complaint,” and ostensibly spared the company “millions of dollars in cash and stock value.”

The case represents how class-action investor litigation can be used as a form of legal extortion, according to the article. Absent effective ‘loser-pays’ rules, plaintiffs’ lawyers can bring suits which essentially threaten: “settle now and we’ll go away” with relative impunity. This practice “on aggregate cost[s] shareholders more than six times as much wealth as they generate for plaintiffs,” according to a recent study by the U.S. Chamber Institute for Legal Reform.

To prevent this, the article argues in favor of corporate ‘loser pays’ rules applicable to “fellow owners of a company.” This would “prevent attorneys from avoiding punishment by simply withdrawing their case after their bluff is called” and “protect Americans’ retirement savings from unscrupulous trial lawyers like the ones at Robbins Geller.”

Read the full story here.

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