WEBVTT - Ted Frank: Professional Objector (Audio)

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<v Speaker 1>When companies merge, there's often litigation over whether they disclose

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<v Speaker 1>sufficient information to investors. The litigation often results in large

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<v Speaker 1>fees paid out to the lawyers who bring the cases,

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<v Speaker 1>but not much money for the investors that the lawyers

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<v Speaker 1>are supposed to represent. But one attorney who works at

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<v Speaker 1>the American Enterprise Institute has been objecting to settlements in

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<v Speaker 1>these cases, and he's found a lot of success blocking

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<v Speaker 1>lawyers from obtaining the fees that they seek. Our guest

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<v Speaker 1>to talk about this is Caleb Hannan, a reporter for

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<v Speaker 1>Bloomberg business Week, who wrote an article about the controversy

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<v Speaker 1>over these lawsuits and about the lawyer who's trying to

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<v Speaker 1>stop them this week. Caleb, these clases often settled, usually

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<v Speaker 1>do They're called disclosure only settlements by a lot of people.

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<v Speaker 1>Explain what that means. So, let's say that two large

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<v Speaker 1>public companies merge UM. In the past ten years, you

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<v Speaker 1>saw a relative explosion in the number of times that

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<v Speaker 1>a plainet's attorney brought a class action suit UM for

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<v Speaker 1>that settlement. So it used to be that it may

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<v Speaker 1>bee like half the time it happened, and then for

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<v Speaker 1>the past ten years it was five to ninety percent

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<v Speaker 1>of the time it happened. And Um, you could argue

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<v Speaker 1>about the motivations of those Planets attorneys, just like in

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<v Speaker 1>any field of law, there are good ones and there

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<v Speaker 1>are bad ones. Um. What Ted Frank's mission has become

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<v Speaker 1>over the past two years is basically to find the

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<v Speaker 1>lowest hanging fruit and to pick it and to make

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<v Speaker 1>life harder for those planets attorneys that he sees as

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<v Speaker 1>taking advantage of the system. And tell us, does he

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<v Speaker 1>just go after these settlements this disclosure only settlements that

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<v Speaker 1>are involved or are there other class actions that he

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<v Speaker 1>goes after no disclosure only are really, as I said before,

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<v Speaker 1>the lowest hanging fruit, because the disparity between what the

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<v Speaker 1>lawyers get and what the class gets so obvious. The

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<v Speaker 1>class gets let's say twelve the twenty pages of documents

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<v Speaker 1>that weren't disclosed before, much of which that information is

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<v Speaker 1>just sort of useless, and then the attorneys get hundreds

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<v Speaker 1>of thousands, in some cases millions of dollars. But no,

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<v Speaker 1>Ted Frank goes after cases. Um, if he feels the

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<v Speaker 1>settlement isn't good enough, he's going to go after it.

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<v Speaker 1>And the best example there is the case that got

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<v Speaker 1>him into all of this. Uh He was a guy who,

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<v Speaker 1>like a lot of people, had purchased a video game

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<v Speaker 1>called Grand Theft Auto. And one day he got a

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<v Speaker 1>letter and it said you were due back some tiny

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<v Speaker 1>percentage of the thirty thousand dollars that a group of

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<v Speaker 1>class action attorneys got for you and other class action members.

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<v Speaker 1>Uh Ted did a little more research on it and

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<v Speaker 1>found out that the lawyers, instead of getting thirty thousand's,

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<v Speaker 1>got over a million dollars for that settlement. So, on

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<v Speaker 1>his own accord, he went up to the courthouse and

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<v Speaker 1>said I object, and the settlement was denied. So that

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<v Speaker 1>was his start. His start came from a really personal,

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<v Speaker 1>you know, mission driven beginnings. Well, Caleb, he took that

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<v Speaker 1>and he started sort of making a crusade about this.

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<v Speaker 1>He's on, he's paid a salary by the American Enterprise Institute,

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<v Speaker 1>and he sort of does this professionally. Now what kind

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<v Speaker 1>of impact is he having on these lawsuits? So I

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<v Speaker 1>think the impact could be felt most in the statistics

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<v Speaker 1>about how many of these cases are now drawing litigation,

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<v Speaker 1>and that that number has finally dipped, I believe under

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<v Speaker 1>the percent figure where it had never fallen below that

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<v Speaker 1>in the past ten years. UM. But he admits, and

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<v Speaker 1>other other people who are on this crusade sort of

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<v Speaker 1>admit that really you're just trying to slow these planets

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<v Speaker 1>attorneys down. You're never going to stop them, so um.

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<v Speaker 1>For example, he sometimes takes cases in jurisdictions where he

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<v Speaker 1>knows or he hopes that the case will get more attention. Um.

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<v Speaker 1>For example, he objected to a sulment um in jurisdiction

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<v Speaker 1>that eventually found its way onto the desk of Judge

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<v Speaker 1>Richard Posner, who, even if you don't follow the law,

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<v Speaker 1>you've probably heard his name because he's just very famous.

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<v Speaker 1>He's a famous as any Jude outside of the Supreme Court,

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<v Speaker 1>and Frank got his wish. Posner wrote the decision, and

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<v Speaker 1>in that decision he wrote that these types of settlements,

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<v Speaker 1>these disclosure only settlements, were a racket really meant to

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<v Speaker 1>enrich the planet's attorneys and not to bring back anything

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<v Speaker 1>for the class um. So the effect he's having it

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<v Speaker 1>is measurable. Um. But really it's it's forcing these plaineffs

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<v Speaker 1>attorneys to work harder. It used to be that they

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<v Speaker 1>could just object, especially in places like Delaware where a

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<v Speaker 1>lot of these lawsuits originated, and they were almost guaranteed

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<v Speaker 1>to get a settlement, and to get a pretty favorable settlement. Now,

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<v Speaker 1>because of precedent that Frank and others like him are setting,

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<v Speaker 1>they're sort of having to hunt for jurisdictions and they're

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<v Speaker 1>having to work a lot harder. And Frank's basic goal

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<v Speaker 1>is to make them work so hard that it just

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<v Speaker 1>becomes too difficult and too costly for them to actually

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<v Speaker 1>bring these suits. Canibit in about thirty seconds. Tell us

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<v Speaker 1>about the Competitive Enterprise Institute, who supports it, and where

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<v Speaker 1>it stands politically. Sure, so if you, um, depending on

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<v Speaker 1>your political perspective, the CEI is either a fierce defender

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<v Speaker 1>of free market values or it's an enemy of all

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<v Speaker 1>good science. Um, it's it's definitely politically loaded. Uh. It's

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<v Speaker 1>funded by a lot of um, fairly famous right wing

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<v Speaker 1>or libertarian UH causes or people. Um. Frank sort of

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<v Speaker 1>is set apart from the group they they're they're merely

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<v Speaker 1>he has a nonprofit that's under the wing a CEI.

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<v Speaker 1>He's certainly paid by them. What's important to know is

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<v Speaker 1>that the work he's doing also gets the stamp of

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<v Speaker 1>approval from people like the CO founder of the litigation

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<v Speaker 1>arm of Public Citizen. Alright, well, Caleb, we're gonna have

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<v Speaker 1>to we're gonna have to stop. There are thanks to

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<v Speaker 1>Caleb Pennon of Bloomberg Business Week for being on Bloomberg

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<v Speaker 1>Law