The Institute for Legal Reform released a study last week on where money goes in US class action suits. It found that the “fraud on the market” theory, established by the Supreme Court in 1988 case Basic vs. Levinson, may be the reason these cases cost around $39 billion per year— whilst just $5 billion is recovered. The theory concerns class-action securities suits and allows lawyers to assemble actions for every investor who sells stock at a loss, regardless of why the stock dipped. Leonard Masiowski, an investor awaiting his share of over $2.4 billion from a Bank of America case, said: “We need to find a way to have the lawyers’ fees capped in such a way that the system can’t be milked.” The Supreme Court will reconsider the 1988 decision tomorrow in Haliburton v. Erica Fund. Source: Forbes.com
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