For
the Supreme Court to issue a unanimous opinion, legal minds as vastly
different as Antonin Scalia and Ruth Bader Ginsburg, must find
agreement, as well as everyone in between.
That rarely happens on contentious or unclear issues. Unanimity on the
court usually signals that the resulting opinion is a simple
application of common sense with which no reasonable person could
disagree. This has occurred many times at the Obama administration's
expense, but this week the court issued a unanimous opinion that
instead puts a key White House ally — the trial lawyer lobby — on the
spot.
“But
this ruling leaves one less justification for lawsuits by people upset
they lost money on a stock.”
In Omnicare v. Laborers District Council, all nine justices agreed that
when shareholders sue a corporation for making false statements of
opinion in their filings, they must establish that the statements were
knowingly false. This may seem like a minor or obscure matter, but the
decision nibbles around the edges of an increasingly lucrative (for
trial lawyers) field of lawsuits — those brought by aggrieved
shareholders, often as class-action cases, when their stock loses
value.
In financial markets whose existence depends on everyone's ability to
win or to lose money, it isn't hard to understand how enough frivolous
lawsuits of this kind could result in disaster. If they become too
common, companies will hesitate to go public at all.
More to the point, such suits are frequently filed as a nuisance — a
form of legal extortion — in the knowledge that most companies would
rather settle than fight. In many cases, they are filed by investors as
leverage. A shareholder lawsuit can delay large merger and acquisition
deals. The companies being sued can be forced to pay out settlements as
ransom so that they can move forward with multibillion-dollar deals.
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