February 07, 2007
Class Actions, Overcriminalization and the Enron Shareholder Suit
Posted by Christine Hurt

As Larry Ribstein notes today, Professor Joe Grundfest celebrates the decline in class-action securities lawsuit filing in the WSJ.  Professor Grundfest participates in the Stanford Law School Securities Class Action Clearinghouse, which tracks filings, dismissals and settlements of these types of suits, and the Year in Review Report for 2006 can be found at that site.  In the Press Release for that report, and in the WSJ article, Professor Grundfest claims that part of the decrease is due to the successful criminal prosecutions of corporate actors.  As Larry notes, is that really a victory?

I have been blogging lightly because I'm trying to get my article on The Undercivilization of Corporate Law out the door, an article that asks that same question.  One example in point that may or may not be resolved by the time the article is:  For all the criminal pleas and convictions in the Enron case, the civil case may go nowhere.  We've seen convictions that were overturned (Type I errors) and then convictions that may stand and also plea bargains that may be regretted, but the private litigation may not even get started (Type II error).  As I've blogged before, the situation complained of in Enron would not survive a Dura analysis for pleading loss causation; however, that motion to dismiss was decided before Dura.  However, on Monday, the bank defendants argued in front of the Fifth Circuit to reverse the class certification determination.  If that should happen, then the case would be effectively over.  (The banks also seem to be arguing (again) that they can't be primary actors under the PSLRA amendments, but that may not be addressed again by the Fifth Circuit.) 

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