| Throw the Bums Out |
7 July 2003
|
Sometimes, the Brokers Are Innocent
Sometimes, a lawsuit deserves to be tossed out of court even if those being sued merit contempt. Judge Milton Pollack rightly dismissed a class action lawsuit last week against Merrill Lynch brought by those who lost money speculating in the dot-com bubble of the 1990s. And U.S. District Judge Harold Baer dismissed a similar case involving Goldman Sachs Group Inc., Morgan Stanley and the Credit Suisse First Boston and stock in Covad. When a gamble goes sour, the gambler should pay up and shut up. Instead, many on Wall Street are trying to welch, and Judges Pollack and Baer called them on it.
The Merrill case involved people who bet on 24/7 Real Media, Inc., and Interliant, Inc. -- both of which are trading today at less than a dollar a share. They claimed that Merrill's optimistic research led them to invest unwisely. His Honor's opinion noted that the plaintiffs lost their money "fair and square". He added, "The record clearly reveals that plaintiffs were among the high-risk speculators who ... now hope to twist the federal securities laws into a scheme of cost-free speculators' insurance." Indeed, there is doubt the specultaors even read the research.
Judge Baer was as clear and concise in dismissing the Covad case, "The fatal flaw of the pleadings is that nowhere does the amended complaint adequately state why the recommendations were fraudulent or misleading."
Should a roulette player be allowed out of a bet on red because the waitress who brought the complimentary booze had a red top but the number came up black? At least, those who gamble in casinos accept their losses without recourse to lawyers. Wall Street gamblers appear to be lesser characters.
When companies lie to investors as Enron and WorldCom did, the injured party should have the right to redress. When the company tells the truth (as appears the case here), and the stock advisor is wrong in assessing the future value of the firm, the responsibility still lies with the investor -- whether there is a conflict of interest or not on the part of the advisor. Just because one receives advice about a hot stock does not require one to put money into it; due diligence requires one to be diligent.