1
00:00:00,080 --> 00:00:03,520
Speaker 1: When companies merge, there's often litigation over whether they disclose

2
00:00:03,560 --> 00:00:08,320
Speaker 1: sufficient information to investors. The litigation often results in large

3
00:00:08,320 --> 00:00:10,480
Speaker 1: fees paid out to the lawyers who bring the cases,

4
00:00:10,880 --> 00:00:13,760
Speaker 1: but not much money for the investors that the lawyers

5
00:00:13,760 --> 00:00:16,919
Speaker 1: are supposed to represent. But one attorney who works at

6
00:00:16,920 --> 00:00:19,919
Speaker 1: the American Enterprise Institute has been objecting to settlements in

7
00:00:19,920 --> 00:00:22,600
Speaker 1: these cases, and he's found a lot of success blocking

8
00:00:22,680 --> 00:00:26,239
Speaker 1: lawyers from obtaining the fees that they seek. Our guest

9
00:00:26,320 --> 00:00:29,240
Speaker 1: to talk about this is Caleb Hannan, a reporter for

10
00:00:29,240 --> 00:00:32,000
Speaker 1: Bloomberg business Week, who wrote an article about the controversy

11
00:00:32,040 --> 00:00:34,800
Speaker 1: over these lawsuits and about the lawyer who's trying to

12
00:00:34,800 --> 00:00:40,760
Speaker 1: stop them this week. Caleb, these clases often settled, usually

13
00:00:40,760 --> 00:00:43,640
Speaker 1: do They're called disclosure only settlements by a lot of people.

14
00:00:43,880 --> 00:00:48,840
Speaker 1: Explain what that means. So, let's say that two large

15
00:00:48,880 --> 00:00:53,640
Speaker 1: public companies merge UM. In the past ten years, you

16
00:00:53,720 --> 00:00:57,840
Speaker 1: saw a relative explosion in the number of times that

17
00:00:58,120 --> 00:01:02,640
Speaker 1: a plainet's attorney brought a class action suit UM for

18
00:01:02,800 --> 00:01:04,880
Speaker 1: that settlement. So it used to be that it may

19
00:01:04,920 --> 00:01:06,959
Speaker 1: bee like half the time it happened, and then for

20
00:01:07,000 --> 00:01:10,040
Speaker 1: the past ten years it was five to ninety percent

21
00:01:10,080 --> 00:01:13,679
Speaker 1: of the time it happened. And Um, you could argue

22
00:01:13,720 --> 00:01:16,880
Speaker 1: about the motivations of those Planets attorneys, just like in

23
00:01:16,920 --> 00:01:19,280
Speaker 1: any field of law, there are good ones and there

24
00:01:19,319 --> 00:01:23,280
Speaker 1: are bad ones. Um. What Ted Frank's mission has become

25
00:01:23,360 --> 00:01:26,440
Speaker 1: over the past two years is basically to find the

26
00:01:26,440 --> 00:01:29,640
Speaker 1: lowest hanging fruit and to pick it and to make

27
00:01:29,760 --> 00:01:33,800
Speaker 1: life harder for those planets attorneys that he sees as

28
00:01:33,880 --> 00:01:38,640
Speaker 1: taking advantage of the system. And tell us, does he

29
00:01:38,959 --> 00:01:45,080
Speaker 1: just go after these settlements this disclosure only settlements that

30
00:01:45,120 --> 00:01:48,040
Speaker 1: are involved or are there other class actions that he

31
00:01:48,280 --> 00:01:53,279
Speaker 1: goes after no disclosure only are really, as I said before,

32
00:01:53,320 --> 00:01:56,560
Speaker 1: the lowest hanging fruit, because the disparity between what the

33
00:01:56,640 --> 00:02:00,160
Speaker 1: lawyers get and what the class gets so obvious. The

34
00:02:00,240 --> 00:02:04,520
Speaker 1: class gets let's say twelve the twenty pages of documents

35
00:02:04,560 --> 00:02:08,000
Speaker 1: that weren't disclosed before, much of which that information is

36
00:02:08,040 --> 00:02:10,920
Speaker 1: just sort of useless, and then the attorneys get hundreds

37
00:02:10,960 --> 00:02:13,800
Speaker 1: of thousands, in some cases millions of dollars. But no,

38
00:02:14,000 --> 00:02:17,360
Speaker 1: Ted Frank goes after cases. Um, if he feels the

39
00:02:17,360 --> 00:02:20,079
Speaker 1: settlement isn't good enough, he's going to go after it.

40
00:02:20,120 --> 00:02:22,680
Speaker 1: And the best example there is the case that got

41
00:02:22,720 --> 00:02:25,320
Speaker 1: him into all of this. Uh He was a guy who,

42
00:02:25,480 --> 00:02:27,359
Speaker 1: like a lot of people, had purchased a video game

43
00:02:27,440 --> 00:02:30,040
Speaker 1: called Grand Theft Auto. And one day he got a

44
00:02:30,080 --> 00:02:32,920
Speaker 1: letter and it said you were due back some tiny

45
00:02:33,000 --> 00:02:36,360
Speaker 1: percentage of the thirty thousand dollars that a group of

46
00:02:36,360 --> 00:02:40,040
Speaker 1: class action attorneys got for you and other class action members.

47
00:02:40,480 --> 00:02:42,520
Speaker 1: Uh Ted did a little more research on it and

48
00:02:42,520 --> 00:02:45,160
Speaker 1: found out that the lawyers, instead of getting thirty thousand's,

49
00:02:45,240 --> 00:02:47,960
Speaker 1: got over a million dollars for that settlement. So, on

50
00:02:48,000 --> 00:02:50,240
Speaker 1: his own accord, he went up to the courthouse and

51
00:02:50,280 --> 00:02:53,760
Speaker 1: said I object, and the settlement was denied. So that

52
00:02:53,840 --> 00:02:56,519
Speaker 1: was his start. His start came from a really personal,

53
00:02:57,160 --> 00:03:03,160
Speaker 1: you know, mission driven beginnings. Well, Caleb, he took that

54
00:03:03,240 --> 00:03:05,560
Speaker 1: and he started sort of making a crusade about this.

55
00:03:05,639 --> 00:03:09,880
Speaker 1: He's on, he's paid a salary by the American Enterprise Institute,

56
00:03:09,880 --> 00:03:11,840
Speaker 1: and he sort of does this professionally. Now what kind

57
00:03:11,840 --> 00:03:15,640
Speaker 1: of impact is he having on these lawsuits? So I

58
00:03:15,680 --> 00:03:19,320
Speaker 1: think the impact could be felt most in the statistics

59
00:03:19,360 --> 00:03:23,760
Speaker 1: about how many of these cases are now drawing litigation,

60
00:03:24,720 --> 00:03:27,600
Speaker 1: and that that number has finally dipped, I believe under

61
00:03:27,639 --> 00:03:30,520
Speaker 1: the percent figure where it had never fallen below that

62
00:03:30,520 --> 00:03:34,679
Speaker 1: in the past ten years. UM. But he admits, and

63
00:03:34,800 --> 00:03:38,440
Speaker 1: other other people who are on this crusade sort of

64
00:03:38,440 --> 00:03:42,320
Speaker 1: admit that really you're just trying to slow these planets

65
00:03:42,360 --> 00:03:45,360
Speaker 1: attorneys down. You're never going to stop them, so um.

66
00:03:45,440 --> 00:03:50,800
Speaker 1: For example, he sometimes takes cases in jurisdictions where he

67
00:03:50,880 --> 00:03:55,000
Speaker 1: knows or he hopes that the case will get more attention. Um.

68
00:03:55,080 --> 00:04:00,800
Speaker 1: For example, he objected to a sulment um in jurisdiction

69
00:04:01,120 --> 00:04:03,720
Speaker 1: that eventually found its way onto the desk of Judge

70
00:04:03,800 --> 00:04:06,360
Speaker 1: Richard Posner, who, even if you don't follow the law,

71
00:04:06,720 --> 00:04:09,400
Speaker 1: you've probably heard his name because he's just very famous.

72
00:04:09,480 --> 00:04:12,360
Speaker 1: He's a famous as any Jude outside of the Supreme Court,

73
00:04:12,960 --> 00:04:17,359
Speaker 1: and Frank got his wish. Posner wrote the decision, and

74
00:04:17,480 --> 00:04:20,880
Speaker 1: in that decision he wrote that these types of settlements,

75
00:04:20,920 --> 00:04:24,599
Speaker 1: these disclosure only settlements, were a racket really meant to

76
00:04:24,720 --> 00:04:27,360
Speaker 1: enrich the planet's attorneys and not to bring back anything

77
00:04:27,440 --> 00:04:31,320
Speaker 1: for the class um. So the effect he's having it

78
00:04:31,480 --> 00:04:36,280
Speaker 1: is measurable. Um. But really it's it's forcing these plaineffs

79
00:04:36,320 --> 00:04:39,200
Speaker 1: attorneys to work harder. It used to be that they

80
00:04:39,200 --> 00:04:43,159
Speaker 1: could just object, especially in places like Delaware where a

81
00:04:43,160 --> 00:04:47,080
Speaker 1: lot of these lawsuits originated, and they were almost guaranteed

82
00:04:47,279 --> 00:04:51,039
Speaker 1: to get a settlement, and to get a pretty favorable settlement. Now,

83
00:04:51,080 --> 00:04:55,400
Speaker 1: because of precedent that Frank and others like him are setting,

84
00:04:55,920 --> 00:04:59,200
Speaker 1: they're sort of having to hunt for jurisdictions and they're

85
00:04:59,200 --> 00:05:02,000
Speaker 1: having to work a lot harder. And Frank's basic goal

86
00:05:02,080 --> 00:05:04,520
Speaker 1: is to make them work so hard that it just

87
00:05:04,680 --> 00:05:08,760
Speaker 1: becomes too difficult and too costly for them to actually

88
00:05:08,760 --> 00:05:12,320
Speaker 1: bring these suits. Canibit in about thirty seconds. Tell us

89
00:05:12,320 --> 00:05:16,640
Speaker 1: about the Competitive Enterprise Institute, who supports it, and where

90
00:05:16,640 --> 00:05:23,200
Speaker 1: it stands politically. Sure, so if you, um, depending on

91
00:05:23,279 --> 00:05:27,279
Speaker 1: your political perspective, the CEI is either a fierce defender

92
00:05:27,279 --> 00:05:30,640
Speaker 1: of free market values or it's an enemy of all

93
00:05:30,680 --> 00:05:35,360
Speaker 1: good science. Um, it's it's definitely politically loaded. Uh. It's

94
00:05:35,360 --> 00:05:39,120
Speaker 1: funded by a lot of um, fairly famous right wing

95
00:05:39,240 --> 00:05:45,040
Speaker 1: or libertarian UH causes or people. Um. Frank sort of

96
00:05:45,320 --> 00:05:48,360
Speaker 1: is set apart from the group they they're they're merely

97
00:05:49,240 --> 00:05:51,920
Speaker 1: he has a nonprofit that's under the wing a CEI.

98
00:05:52,040 --> 00:05:55,039
Speaker 1: He's certainly paid by them. What's important to know is

99
00:05:55,080 --> 00:05:58,400
Speaker 1: that the work he's doing also gets the stamp of

100
00:05:58,440 --> 00:06:01,479
Speaker 1: approval from people like the CO founder of the litigation

101
00:06:01,600 --> 00:06:04,520
Speaker 1: arm of Public Citizen. Alright, well, Caleb, we're gonna have

102
00:06:04,600 --> 00:06:06,560
Speaker 1: to we're gonna have to stop. There are thanks to

103
00:06:06,640 --> 00:06:09,240
Speaker 1: Caleb Pennon of Bloomberg Business Week for being on Bloomberg

104
00:06:09,320 --> 00:06:09,480
Speaker 1: Law