Uncovering the Hidden Conflicts in Securities Class Action Litigation: Lessons from the State Street Case

Courts, Congress, and commentators have long worried that stockholder plaintiffs in securities and M&A litigation and their counsel may pursue suits that benefit themselves rather than absent stockholders or the corporations in which they invest. Following congressional reforms that encouraged the appointment of institutional stockholders as lead plaintiffs in securities actions, significant academic commentary has focused on the problem of “pay to play”—the possibility that class action law firms encourage litigation by making donations to politicians with influence over institutional stockholders, particularly public sector pension funds. A recent federal securities class action in the District of Massachusetts, however, suggests that the networks of influence between class plaintiffs and their counsel are much more complex and difficult to detect. After appointing a special master to look into fee issues, the court discovered that a large class action firm had paid over $4 million in “bare referral” fees to an attorney who did little work on the case but had recommended the larger firm to a public sector pension fund “after considerable favors, political activity, money spent and time dedicated in Arkansas.” This is only one of the less-visible ways that class counsel may route benefits to class plaintiffs. Current class action processes do not routinely identify these potential conflicts of interest. Instead, they tend to surface when nonlitigants bring them to public attention. Because neither the lead plaintiff nor the defendants have a strong incentive to voluntarily address these conflicts, we propose revisions to the class certification process that would require class plaintiffs to disclose more information regarding their relationships with class counsel. We also propose that courts routinely appoint special masters or class guardians as part of the settlement approval process to ensure that class plaintiffs’ statements are subject to discovery and adversarial review

Objections to Disclosure Settlements: A How-To Guide

Stockholder litigation remains in crisis, with over seventy percent of major mergers and acquisitions subject to litigation. A contributing factor is the breakdown of the adversary process at settlement, when former opponents join hands in favor of a compromise that too often expends corporate resources for no real recovery to the plaintiff class. One obvious corrective is the shareholder’s objection to settlement, which restores adversarial character to the settlement process. Shareholders, however, face substantial difficulties in making such objections. In this article, the authors detail the problem and share their experiences in addressing these obstacles, providing a how-to manual for future shareholder objections to class action settlements in merger litigation

American Squares Vol. 11, No. 5 (Jan. 1956)

Monthly square dance magazine that began publication in 1945

American Squares Vol. 12, No. 3 (Nov. 1956)

Monthly square dance magazine that began publication in 1945

American Squares Vol. 9, No. 8 (Apr. 1954)

Monthly square dance magazine that began publication in 1945

American Squares Vol. 9, No. 4 (Dec. 1953)

Monthly square dance magazine that began publication in 1945

American Squares Vol. 9, No. 12 (Aug. 1954)

Monthly square dance magazine that began publication in 1945

American Squares Vol. 10, No. 04 (Dec 1954)

Monthly square dance magazine that began publication in 1945