Securities Class Actions
Securities cases arise when a shareholder of a public or private company believes that the managers, directors or executives of the company have acted dishonestly, or negligently, and the dishonest or negligent behavior caused the price of the stock to drop. Some scholars go so far as to contend that every precipitous drop in the share price of a company is caused by some misrepresentation.
Who May File a Securities Class Action?
Any individual shareholder may sue on behalf of all shareholders. The individual must be able to establish that he/she/it (the individual is sometimes another company or other institutional investor) owned at least one share of the company at the time of the drop in price.
Dishonest Activities Relating to Securities
The most common type of shareholder case arises when the board agrees to sell the company too cheaply. Sometimes directors vote to sell companies too cheaply for their own personal gain. Cases also arise when a board refuses to sell a company or unit, despite receiving a reasonable offer. Often, board members refuse to sell a company because doing so would result in less income (or loss of a director seat) for these board members.
Cases can also arise when people running a company commit outright fraud. This can occur when a company creates bogus accounting records to inflate the value of a company, or when an unregistered securities broker sells shares in a non-existent company.
Shareholders in a Milwaukee Count Court recently alleged that Marshall & Ilsley Corp, Wisconsin's larges bank, was selling itself too cheaply to BMO Group (Bank of Montreal) in a stock swap.
A class action in Los Angeles Superior Court alleged that Wesco Financial Corp. was selling itself too cheaply to Berkshire Hathaway.
A shareholders class action in Philadelphia Federal Court alleged that Hemispherx Biopharma inflated its share price through false and misleading statements.
Shareholders of ExxonMobil alleged in a Texas lawsuit that the company's failure to develop a $50 billion oilfield caused the State of Alaska to revoke the company's rights to drill for 200 million barrels of oil on the North Slope.
Shareholder of Tenet Healthcare alleged that the company's directors failed to consider a buyout offer from Community Health Systems for $2.9 billion, a 40% premium, for selfish motives, namely their desire to remain on the board.
If you have a question relating to a possible or pending securities class action, please send a direct message or call our office at (314) 725-4400.