Speaker 1: When companies merge, there's often litigation over whether they disclose
Speaker 1: sufficient information to investors. The litigation often results in large
Speaker 1: fees paid out to the lawyers who bring the cases,
Speaker 1: but not much money for the investors that the lawyers
Speaker 1: are supposed to represent. But one attorney who works at
Speaker 1: the American Enterprise Institute has been objecting to settlements in
Speaker 1: these cases, and he's found a lot of success blocking
Speaker 1: lawyers from obtaining the fees that they seek. Our guest
Speaker 1: to talk about this is Caleb Hannan, a reporter for
Speaker 1: Bloomberg business Week, who wrote an article about the controversy
Speaker 1: over these lawsuits and about the lawyer who's trying to
Speaker 1: stop them this week. Caleb, these clases often settled, usually
Speaker 1: do They're called disclosure only settlements by a lot of people.
Speaker 1: Explain what that means. So, let's say that two large
Speaker 1: public companies merge UM. In the past ten years, you
Speaker 1: saw a relative explosion in the number of times that
Speaker 1: a plainet's attorney brought a class action suit UM for
Speaker 1: that settlement. So it used to be that it may
Speaker 1: bee like half the time it happened, and then for
Speaker 1: the past ten years it was five to ninety percent
Speaker 1: of the time it happened. And Um, you could argue
Speaker 1: about the motivations of those Planets attorneys, just like in
Speaker 1: any field of law, there are good ones and there
Speaker 1: are bad ones. Um. What Ted Frank's mission has become
Speaker 1: over the past two years is basically to find the
Speaker 1: lowest hanging fruit and to pick it and to make
Speaker 1: life harder for those planets attorneys that he sees as
Speaker 1: taking advantage of the system. And tell us, does he
Speaker 1: just go after these settlements this disclosure only settlements that
Speaker 1: are involved or are there other class actions that he
Speaker 1: goes after no disclosure only are really, as I said before,
Speaker 1: the lowest hanging fruit, because the disparity between what the
Speaker 1: lawyers get and what the class gets so obvious. The
Speaker 1: class gets let's say twelve the twenty pages of documents
Speaker 1: that weren't disclosed before, much of which that information is
Speaker 1: just sort of useless, and then the attorneys get hundreds
Speaker 1: of thousands, in some cases millions of dollars. But no,
Speaker 1: Ted Frank goes after cases. Um, if he feels the
Speaker 1: settlement isn't good enough, he's going to go after it.
Speaker 1: And the best example there is the case that got
Speaker 1: him into all of this. Uh He was a guy who,
Speaker 1: like a lot of people, had purchased a video game
Speaker 1: called Grand Theft Auto. And one day he got a
Speaker 1: letter and it said you were due back some tiny
Speaker 1: percentage of the thirty thousand dollars that a group of
Speaker 1: class action attorneys got for you and other class action members.
Speaker 1: Uh Ted did a little more research on it and
Speaker 1: found out that the lawyers, instead of getting thirty thousand's,
Speaker 1: got over a million dollars for that settlement. So, on
Speaker 1: his own accord, he went up to the courthouse and
Speaker 1: said I object, and the settlement was denied. So that
Speaker 1: was his start. His start came from a really personal,
Speaker 1: you know, mission driven beginnings. Well, Caleb, he took that
Speaker 1: and he started sort of making a crusade about this.
Speaker 1: He's on, he's paid a salary by the American Enterprise Institute,
Speaker 1: and he sort of does this professionally. Now what kind
Speaker 1: of impact is he having on these lawsuits? So I
Speaker 1: think the impact could be felt most in the statistics
Speaker 1: about how many of these cases are now drawing litigation,
Speaker 1: and that that number has finally dipped, I believe under
Speaker 1: the percent figure where it had never fallen below that
Speaker 1: in the past ten years. UM. But he admits, and
Speaker 1: other other people who are on this crusade sort of
Speaker 1: admit that really you're just trying to slow these planets
Speaker 1: attorneys down. You're never going to stop them, so um.
Speaker 1: For example, he sometimes takes cases in jurisdictions where he
Speaker 1: knows or he hopes that the case will get more attention. Um.
Speaker 1: For example, he objected to a sulment um in jurisdiction
Speaker 1: that eventually found its way onto the desk of Judge
Speaker 1: Richard Posner, who, even if you don't follow the law,
Speaker 1: you've probably heard his name because he's just very famous.
Speaker 1: He's a famous as any Jude outside of the Supreme Court,
Speaker 1: and Frank got his wish. Posner wrote the decision, and
Speaker 1: in that decision he wrote that these types of settlements,
Speaker 1: these disclosure only settlements, were a racket really meant to
Speaker 1: enrich the planet's attorneys and not to bring back anything
Speaker 1: for the class um. So the effect he's having it
Speaker 1: is measurable. Um. But really it's it's forcing these plaineffs
Speaker 1: attorneys to work harder. It used to be that they
Speaker 1: could just object, especially in places like Delaware where a
Speaker 1: lot of these lawsuits originated, and they were almost guaranteed
Speaker 1: to get a settlement, and to get a pretty favorable settlement. Now,
Speaker 1: because of precedent that Frank and others like him are setting,
Speaker 1: they're sort of having to hunt for jurisdictions and they're
Speaker 1: having to work a lot harder. And Frank's basic goal
Speaker 1: is to make them work so hard that it just
Speaker 1: becomes too difficult and too costly for them to actually
Speaker 1: bring these suits. Canibit in about thirty seconds. Tell us
Speaker 1: about the Competitive Enterprise Institute, who supports it, and where
Speaker 1: it stands politically. Sure, so if you, um, depending on
Speaker 1: your political perspective, the CEI is either a fierce defender
Speaker 1: of free market values or it's an enemy of all
Speaker 1: good science. Um, it's it's definitely politically loaded. Uh. It's
Speaker 1: funded by a lot of um, fairly famous right wing
Speaker 1: or libertarian UH causes or people. Um. Frank sort of
Speaker 1: is set apart from the group they they're they're merely
Speaker 1: he has a nonprofit that's under the wing a CEI.
Speaker 1: He's certainly paid by them. What's important to know is
Speaker 1: that the work he's doing also gets the stamp of
Speaker 1: approval from people like the CO founder of the litigation
Speaker 1: arm of Public Citizen. Alright, well, Caleb, we're gonna have
Speaker 1: to we're gonna have to stop. There are thanks to
Speaker 1: Caleb Pennon of Bloomberg Business Week for being on Bloomberg
Speaker 1: Law