Post of the Day
June 12, 1998

From our
Dueling Fools Board

Subject: Law Suits Out of Hand
Author: DGChabino

Today's Dueling Fools on shareholder law suits touched a nerve with me, because I have such an aversion to law suits in general.

I think we can all agree that there are some legitimate cases that need to be handled, such as Real Fraud. But, most of the shareholder law suits I've seen have more to do with claims of improper disclosure of risk. This is what really nags at me as being frivilous.

Can anyone tell me with absolute certainty all the risks any company will face over the next year, five years, and beyond? Of course not. It's impossible to know all possible risks. If you are going to invest in stock you had better understand that there are going to be risks that you just can't know about. It's hard to find investors that won't admit to that. So why the law suits?

I don't think I know any good answers to this, but something needs to be done about these cases where only a drop in a stock's price (and no other factors) cause some sort of witch hunt to flush out possible nondisclosure of risk. If you look at anyone long enough, you'll find some kind of mistake that's been made. That's true of all of us. We all understand that when we invest, leaving no damages other than those self inflicted.

What about the short sellers? Should attornees also bring suit on their behalf because a company did not propperly disclose that they might do better than expected? Maybe I just sparked an idea for securites attornees looking to find new work.

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