The Facebook Shareholder Derivative Lawsuit Floodgates have Opened

[lawrocket 3]

I understand that a couple of suits have already been filed. I'm wondering who is doing it. The usual suspects? Or someone trying to get in on it?

As an educational subject, here’s how these suits play out. There’s a public company. The stock price of the company declines. A law firm has someone as a plaintiff who owns stock in the company, and already has a complaint prepared. Just plug in the dates and amounts when some event happens and file a lawsuit on behalf of all common stockholders against the board of directors.

So facebook, with its 2.14 billion shares, has lost stock value of $6 per share. That’s $12.84 billion dollars in damages being claimed. And if successful, the Plaintiffs’ class lawyer will get a good chunk of it – let’s put that number at a couple billion.

Which is where other lawsuits come in. Now there are 100 lawsuits filed for a derivative action. So a lead case is designated in a federal court and it gets placed in a multidistrict litigation panel to consolidate all national cases. Here’s where the plaintiffs’ lawyers duke it out with themselves, form steering committees, see who is lead counsel, etc. Let’s not even talk about the Defense attorneys costs and fees.

So let’s say there’s a settlement, when the facebook board decides it’ll be cheaper to pay a $6 billion. Plaintiffs counsel take a couple billion off of that, and the common-law stock holders will maybe get $2 each per share. Sounds workable. So it goes to the judge to approve the settlement.

But here’s where the Objectors’ counsel gets involved. The Objectors’ counsel’s job is to come in and say, “Hey. The Plaintiffs’ counsel is getting paid too much.” Or, “The settlement does not adequately compensate the Plaintiffs.” Sounds reasonable, right?

Only the Objector is also a professional. Those Plaintiffs’ class action extortionist scumbag lawyers? They think that Objectors counsel are scumbag extortionist free riders. Picture Vezzini as the Plaintiffs’ lawyer and Dread Pirate Roberts as the Objector. “You are attempting to kidnap what I have rightfully stolen.”

The Objector is the parasite of the mosquito. The Objector has a member of the class as a client and says, “My client objects to this settlement.” Perhaps there is a valid reason, i.e., the costs are not properly allocated to the attorneys. So what happens? The Objector takes a piece of the settlement and leaves less for the classmembers.

Remember the Ford sidesaddle fuel tank class action? All the actions were consolidated in an MDL in February, 1993. By July, there was a prospective settlement (six months and settlement? No. There’s no racket going on here) As the settlement, GM would give all class members a coupon for $1000 off the purchase of their next GM truck. Anybody see a problem with this? An appeals court did, the issue being that the $1000 off coupon was great for those class members who could AFFORD a new vehicle. It also didn’t do anything about the defective sidesaddle tanks still out there. And the $9.5 million fee to class counsel for doing little more than file a suit and negotiate was problematic when compared to the marginal benefits of the class. This stoppage is what the objectors did.

Just after the Appeals court shot it down, a new settlement was reached for the whole country – in Louisiana STATE court (that had much more plaintiff-friendly rules). It provided a $1000 off coupon for the purchase of ANY new GM vehicle except for a Saturn. Can’t afford a new car? Then try to sell your coupon. And the Plaintiffs’ attorneys would get $26 million now. It was approved in Louisiana and the attorneys for the Objectors to the SECOND settlement got nothing. The initial Objectors? They’re attorneys got a cut of the $26 million.

Nice racket, eh? This is what to expect in the Facebook lawsuits. A circus with lots of money for the attorneys and a screwing for the stockholders.

My wife is hotter than your wife.

[Skyrad 0]

What kind of an idiot would buy them in the first place? Its like the dot com crash never happened. Muma Gump was right, Stupid is as stupid does.

When an author is too meticulous about his style, you may presume that his mind is frivolous and his content flimsy.
Lucius Annaeus Seneca

[jclalor 12]

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What kind of an idiot would buy them in the first place? Its like the dot com crash never happened. Muma Gump was right, Stupid is as stupid does.

I resemble that remark.

[rushmc 23]

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What kind of an idiot would buy them in the first place? Its like the dot com crash never happened. Muma Gump was right, Stupid is as stupid does.

A person had to wonder about all of this. The TV and media hype over this seemed overplayed. Did it to you?

I dont know. The whole thing just seem fishy to me

I see now Congress want to do and investigation

That will really help

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[SkyDekker 1,465]

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I understand that a couple of suits have already been filed. I'm wondering who is doing it. The usual suspects? Or someone trying to get in on it?

As an educational subject, here’s how these suits play out. There’s a public company. The stock price of the company declines. A law firm has someone as a plaintiff who owns stock in the company, and already has a complaint prepared. Just plug in the dates and amounts when some event happens and file a lawsuit on behalf of all common stockholders against the board of directors.

So facebook, with its 2.14 billion shares, has lost stock value of $6 per share. That’s $12.84 billion dollars in damages being claimed. And if successful, the Plaintiffs’ class lawyer will get a good chunk of it – let’s put that number at a couple billion.

Which is where other lawsuits come in. Now there are 100 lawsuits filed for a derivative action. So a lead case is designated in a federal court and it gets placed in a multidistrict litigation panel to consolidate all national cases. Here’s where the plaintiffs’ lawyers duke it out with themselves, form steering committees, see who is lead counsel, etc. Let’s not even talk about the Defense attorneys costs and fees.

So let’s say there’s a settlement, when the facebook board decides it’ll be cheaper to pay a $6 billion. Plaintiffs counsel take a couple billion off of that, and the common-law stock holders will maybe get $2 each per share. Sounds workable. So it goes to the judge to approve the settlement.

But here’s where the Objectors’ counsel gets involved. The Objectors’ counsel’s job is to come in and say, “Hey. The Plaintiffs’ counsel is getting paid too much.” Or, “The settlement does not adequately compensate the Plaintiffs.” Sounds reasonable, right?

Only the Objector is also a professional. Those Plaintiffs’ class action extortionist scumbag lawyers? They think that Objectors counsel are scumbag extortionist free riders. Picture Vezzini as the Plaintiffs’ lawyer and Dread Pirate Roberts as the Objector. “You are attempting to kidnap what I have rightfully stolen.”

The Objector is the parasite of the mosquito. The Objector has a member of the class as a client and says, “My client objects to this settlement.” Perhaps there is a valid reason, i.e., the costs are not properly allocated to the attorneys. So what happens? The Objector takes a piece of the settlement and leaves less for the classmembers.

Remember the Ford sidesaddle fuel tank class action? All the actions were consolidated in an MDL in February, 1993. By July, there was a prospective settlement (six months and settlement? No. There’s no racket going on here) As the settlement, GM would give all class members a coupon for $1000 off the purchase of their next GM truck. Anybody see a problem with this? An appeals court did, the issue being that the $1000 off coupon was great for those class members who could AFFORD a new vehicle. It also didn’t do anything about the defective sidesaddle tanks still out there. And the $9.5 million fee to class counsel for doing little more than file a suit and negotiate was problematic when compared to the marginal benefits of the class. This stoppage is what the objectors did.

Just after the Appeals court shot it down, a new settlement was reached for the whole country – in Louisiana STATE court (that had much more plaintiff-friendly rules). It provided a $1000 off coupon for the purchase of ANY new GM vehicle except for a Saturn. Can’t afford a new car? Then try to sell your coupon. And the Plaintiffs’ attorneys would get $26 million now. It was approved in Louisiana and the attorneys for the Objectors to the SECOND settlement got nothing. The initial Objectors? They’re attorneys got a cut of the $26 million.

Nice racket, eh? This is what to expect in the Facebook lawsuits. A circus with lots of money for the attorneys and a screwing for the stockholders.

Capitalism at its finest. Don't udnerstand why you have an issue with it? Are lawyers and judges not allowed to make as much money as possible?

[rushmc 23]

Capitalism at its finest. Don't udnerstand why you have an issue with it? Are lawyers and judges not allowed to make as much money as possible?

[lawrocket 3]

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Capitalism at its finest. Don't udnerstand why you have an issue with it?

Because "extortion" is not capitalism at its finest. Open markets require open information and non-adhesion. Buyer's remorse is NOT, to me, a valid thing. These shareholder derivative suits are as dirty and corrupt as they come. Google "millberg weiss scandal" and "william lerach" and see about it.

The Plaintiffs' bar has become so powerful and wealthy that I don't even regard it as being a fair fight. Tort reform is necessary. Forum shopping in class actions is out of control. Every time a stock price goes down does not mean the BOD was evil, bad or corrupt.

These suits are extortion. Legalized.

Edited to add: not ALL suits are extortion. There are legitimate suits and actions involved. But far too many of them are little more than efforts to squeeze out. Hence, lawsuits being filed within days of an IPO because the stock didn't perform as well.

The lawsuits and plaintiffs were there before this even started.

My wife is hotter than your wife.

[SkyDekker 1,465]

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Well, in a way it may be. I didnt see the value in the IPO. It seems that I was not alone. So, the market did not support this.

Not quite sure how you are getting to this conclusion. Right now the market is "judging" the company to be worth roughly $87 billion.

The shares aren't soaring, but they aren't tanking either.

[rushmc 23]

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Well, in a way it may be. I didnt see the value in the IPO. It seems that I was not alone. So, the market did not support this.

Not quite sure how you are getting to this conclusion. Right now the market is "judging" the company to be worth roughly $87 billion.

The shares aren't soaring, but they aren't tanking either.

I guess I was just going with the OP

Some seem to think it has tanked enough to file a law suit

Congres will investigate

Again

Something just does not seem right

Dont know what it is but.........

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

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Quote

Capitalism at its finest. Don't udnerstand why you have an issue with it?

Because "extortion" is not capitalism at its finest. Open markets require open information and non-adhesion. Buyer's remorse is NOT, to me, a valid thing. These shareholder derivative suits are as dirty and corrupt as they come. Google "millberg weiss scandal" and "william lerach" and see about it.

The Plaintiffs' bar has become so powerful and wealthy that I don't even regard it as being a fair fight. Tort reform is necessary. Forum shopping in class actions is out of control. Every time a stock price goes down does not mean the BOD was evil, bad or corrupt.

These suits are extortion. Legalized.

Edited to add: not ALL suits are extortion. There are legitimate suits and actions involved. But far too many of them are little more than efforts to squeeze out. Hence, lawsuits being filed within days of an IPO because the stock didn't perform as well.

The lawsuits and plaintiffs were there before this even started.

What changes would it take to kill this type of law suit?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[SkyDekker 1,465]

Quote

The Plaintiffs' bar has become so powerful and wealthy that I don't even regard it as being a fair fight. Tort reform is necessary. Forum shopping in class actions is out of control. Every time a stock price goes down does not mean the BOD was evil, bad or corrupt.

These suits are extortion. Legalized.

So you want to regulate the market. Fine, I agree, but not very capitalistic of you.

[lawrocket 3]

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What changes would it take to kill this type of law suit?

I think that the only way to regulate it is to make the derivative action a statutory cause of action. That is, federal supremacy for publicly traded companies and an administrative prerequisite to bringing the suit. That is, before bringing the action in a civil court, a report is made to the SEC, who then has authority to investigate and pursue the action on its own and obtain an appropriate remedy. The SEC may then issue a "right to sue" letter if it determines it will not act on the issue - much as is done with Fair Employment actions. Or perhaps a waiting period prior to filing?

Or give more guts to Rule 11 of the FRCP.

My wife is hotter than your wife.

[kelpdiver 2]

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I guess I was just going with the OP

Some seem to think it has tanked enough to file a law suit

Congres will investigate

Again

Something just does not seem right

Dont know what it is but.........

What's wrong is that a bunch of "lucky" investors who got IPO allocations are upset because the stock didn't have a 50-100% first day pop whereby they could sell their shares onto the next sucker and walk away with a profit.

The problem was that they were in fact the "next sucker" for the various parties offering up the initial shares. I have no pity for them - the last hours increase in price and share allocation was a pretty sound tip off.

Nothing is funnier to me than the idea of shareholders suing the company (iow, themselves) for money that they have to pay themselves. Of course, reality isn't quite that way - ex shareholders are recruited by a Lerach type to strong arm for some money rather than bother with a trial, the lawyer takes a large cut, so it's not even a 100% theft from yourself. It's more like robbing your own house but giving up 40% to the IRS.

[lawrocket 3]

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So you want to regulate the market. Fine, I agree, but not very capitalistic of you.

Since when is regulating the market non-capitalistic? Seriously? What is it about the laws of contracts that are not capitalistic? Rules against adhesion? Rules against monopoly? Rules against fraud and deceit?

What is not capitalistic about those rules?

My wife is hotter than your wife.

[rwieder 0]

The Latest

-Richard-
"You're Holding The Rope And I'm Taking The Fall"

[SkyDekker 1,465]

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Since when is regulating the market non-capitalistic? Seriously? What is it about the laws of contracts that are not capitalistic? Rules against adhesion? Rules against monopoly? Rules against fraud and deceit?

What is not capitalistic about those rules?

because the only rules that should be in place for pure capitalism is a free market. Any regulation after that, is the government meddling in that free market.

[quade 4]

So, does anybody think the Facebook IPO may turn out to be the Facebook killer?

quade -
The World's Most Boring Skydiver

[rushmc 23]

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I guess I was just going with the OP

Some seem to think it has tanked enough to file a law suit

Congres will investigate

Again

Something just does not seem right

Dont know what it is but.........

What's wrong is that a bunch of "lucky" investors who got IPO allocations are upset because the stock didn't have a 50-100% first day pop whereby they could sell their shares onto the next sucker and walk away with a profit.

The problem was that they were in fact the "next sucker" for the various parties offering up the initial shares. I have no pity for them - the last hours increase in price and share allocation was a pretty sound tip off.

Nothing is funnier to me than the idea of shareholders suing the company (iow, themselves) for money that they have to pay themselves. Of course, reality isn't quite that way - ex shareholders are recruited by a Lerach type to strong arm for some money rather than bother with a trial, the lawyer takes a large cut, so it's not even a 100% theft from yourself. It's more like robbing your own house but giving up 40% to the IRS.

Sorry if I came across different

I agree with you

The law suit is the mess

I was commenting to the IPO in general

The hype seemed over the top to me

Even if I had the money, I would not have touched this one with a 10' pole

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[Skyrad 0]

Totally agree, remember back in the late 90's when people would make a website and sell it based on the number of clicks it was getting Simple economics and business principles went right out the window as people turned the web designers into overnight millionaires only to find that they had just bought a very expensive website. Well its the same thing all over again.

As they say, 'a fool and his money are soon parted'.

When an author is too meticulous about his style, you may presume that his mind is frivolous and his content flimsy.
Lucius Annaeus Seneca

[lawrocket 3]

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the only rules that should be in place for pure capitalism is a free market. Any regulation after that, is the government meddling in that free market.

Correct. And for a market to be free it has to be uncorrupted. Regulations ensure that. Even Milton Friedman understood that when there is a stock market, insider trading has to be banned because the public will not have confidence without a rule banning it.

For all transactions the important information must be available. Without it, there is not equal bargaining power.

My wife is hotter than your wife.

[kelpdiver 2]

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So, does anybody think the Facebook IPO may turn out to be the Facebook killer?

No. The stock may have been overpriced, but it's still a profitable company with 900M users (roughly half active). Unlike myspace and friendster, it survived the early transition into big and monetized.

At this point it has the critical mass to endure. Yahoo is considered to be in the dumps, but really only when you compare it to Google does it seem true. It still makes a lot of money and employs a lot of people for 6 figure salaries. When people like my mom use FB for casual communication with more distant friends, I don't see it disappearing. It just may not (will not) maintain 24% growth in revenue.

Personally I think it peaked 2 years ago, with many 'active' users only lurking and sending the occasional note.

[Bertt 0]

Don't the lawyers need some, let's say, "cooperative" judges to pull off this kind of stunt?

You don't have to outrun the bear.

[Southern_Man 0]

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Don't the lawyers need some, let's say, "cooperative" judges to pull off this kind of stunt?

That's what the forum shopping is for...

"What if there were no hypothetical questions?"

[quade 4]

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...but it's still a profitable company...

Uh, are you certain of that?

quade -
The World's Most Boring Skydiver

[rushmc 23]

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Totally agree, remember back in the late 90's when people would make a website and sell it based on the number of clicks it was getting Simple economics and business principles went right out the window as people turned the web designers into overnight millionaires only to find that they had just bought a very expensive website. Well its the same thing all over again.

As they say, 'a fool and his money are soon parted'.

What you said

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln