The U.S. Supreme Court in LaRue vs. DeWolff, Boberg & Associates has just given individual investors the right to sue under ERISA for breach of fiduciary duty to recover individual losses to an individual 401(k) or other defined contribution plans. Previous Supreme Court decisions had pertained to defined benefits plans. Prior to LaRue v. DeWolff, individuals were limited to participating in class action suits for relief for the plan as a whole. Now, individual investors can sue to be "made whole" as individuals, and do not have to settle for equitable relief among all plan investors.
Mr. LaRue had sued his former employer DeWolff, Boberg & Associates for breach of fiduciary duty when it failed to follow his instructions to move some of his 401(k) money to different investments. His initial suit was to recoup a personal loss to be paid into his individual account. Having been denied by the Fourth Circuit Court under two different statutes of ERISA sec. 502, Mr. LaRue appealed to the U.S. Supreme Court, thus doing an untold number of individual investors a great service.
It is easy to forget that Apple Inc. (NASDAQ: AAPL) still faces problems with options-backdating accusations. The New York Times was good enough to remind the financial world of that today.
According to the paper, "A CLASS-ACTION lawsuit contending securities fraud and filed last month may force the Apple board to pay some attention."
While the Justice Department may still be looking into the backdating issue, civil suits may be a larger problem. They can be brought by any one of a number of Apple shareholders. They could drag on for years. The trouble could take up substantial management time and create large legal expenses.
Because of Apple's great success, it is easy to forget that the options trouble could go on for the rest of the decade. But, as long as the press wants to push the issue, it will probably be easier for people who want to try to take money from the Apple treasury to keep hanging around.
Douglas A. McIntyre is an editor at 247wallst.com.
If Countrywide Financial (NYSE: CFC) faces any more suits, Bank of America (NYSE: BAC) may have to withdraw its offer to buy the mortgage lender. The legal bills will be too high.
New York City, which has already filed one set of legal actions against the company, has expanded that to include a number of officers, directors, and underwriters. The city, in a statement picked up by Reuters, said executives of Countrywide Financial "cashed out to the tune of almost $700 million" while borrowers lost homes and the value of investors' shares fell sharply. The new action named "additional company officers and directors, 26 underwriters, and two accounting firms."
The city is overreaching. A suit against the company and CEO Angelo Mozilla might, just might, hold some water. He may have known that the subprime mortgage market was facing problems that would hurt his company. It will probably be hard to collect facts that can show he acted with that intention.
But, to demonstrate that a number of individuals and institutions acted on the same information about upcoming trouble in the markets would require proving a massive fraud.
New York City ought to stick to a case it can make.
Douglas A. McIntyre is an editor at 247wallst.com.
If you've seen Borat, you probably remember the scene: Borat, played by Sacha Baron Cohen, goes to a driving school and takes a driving lesson. During the lesson, he makes ethnic slurs, discusses the relative brain size of women, drives on the wrong side of the road, and offers the driver of a passing car money to "make sexy time".
Well now the driver's ed coach, Michael Psenicska, is suing the filmmakers, saying that they misrepresented the nature of the film when he signed the waiver.
He's asking for $100,000 and frankly, given the success of the film and his fairly prominent role in it (the straight man in a pretty long scene), it seems like a reasonable request.
And do the filmmakers really think that describing Borat as a documentary about the integration of foreign people into the American way of life is a fair and complete description?
Pfizer (NYSE: PFE) is facing a number of lawsuits that say its painkiller Celebrex can cause heart attacks. Yesterday, a court threw some of those cases out. The Wall Street Journal wrote "U.S. District Judge Charles R. Breyer of San Francisco ruled that plaintiffs in the litigation haven't presented scientifically reliable evidence that Celebrex caused heart attacks or strokes when taken at a daily dosage of 200 milligrams." Pfizer says that the 200 milligram dose is the one most commonly given.
The cases involving Celebrex include over 3,000 plantiffs, and some are suing about effects of the drug at a higher dose, but the ruling is still a considerable relief for the big pharma company.
Like most drug liability cases, this one hinges on whether Pfizer knew that there were risks that the drug could cause significant problems beyond those disclosed on the labels. In that case, the amount of the dose would seem to be academic, especially for anyone who became sick.
But the court may have more wisdom than Wall Street and some plaintiffs will go unrewarded. As the tobacco companies proved two decades ago, suing big business rarely yields much reward.
Douglas A. McIntyre is an editor at 247wallst.com.
However, Ontario is more than just Canada's financial center. Its abundance of resources and location on Great Lakes have made Ontario a manufacturing powerhouse, including steel production and automobile manufacturing in southern Ontario, and mining and forestry in the north. Toronto is Canada's film and media center, as well as an important tourism destination. Niagara Falls is one of world's most popular tourist destinations. Other Ontario companies the Motley Fool liked include Research in Motion Ltd. (NASDAQ: RIMM), Nortel Networks Corp. (NYSE: NT), and IMAX Corp. (NASDAQ: IMAX).
Research in Motion (RIM), Canada's largest public company, is well know for its BlackBerry smart phones, but it also provides software development tools and produces radio-based modems used in portable devices. The consensus recommendation of analysts surveyed by Thomson Financial is to buy RIM, and has been since April. RIM met analysts' earnings per share estimate when it reported second quarter FY2008 earnings in early October, and Wall Street expects EPS of 62 cents in the third quarter, double the 31 cents actual from a year ago. RIM has a five-year EPS growth rate of 73.5%, easily beating the S&P 500 and the technology sector average. RIM's share price has been climbing since a share split in August, to reach a 52-week high of $128.36 on Tuesday; it opened today at $124.75. Also this week, RIM announced plans to sell the BlackBerry in China, and introduced Facebook for the BlackBerry as well. For more on Microsoft Corp.'s (NASDAQ: MSFT) challenge to RIM and other RIM-related news, see Bloggingstocks' RIM coverage.
Deaths come in threes and the latest lawsuit against Vonage Holdings Corp. (NYSE: VG), the VoIP pioneer, may just put it under. It is the third such suit by a major telephone company.
Vonage has now lost or settled patent infringement suits brought by Verizon Communications Inc. (NYSE: VZ) and Sprint Nextel Corp. (NYSE: S). Each loss has brought a one time payment and royalties on future revenue.
An SEC filing by the VoIP company disclosed that an action has been filed buy AT&T Inc. (NYSE: T), which accuses Vonage of "violating a single patent that lets users access an Internet phone system using a standard phone device," according to The Wall Street Journal.
Vonage opened at $17 on its IPO in 2006. The stock is lucky to hold $1 now. And, the AT&T suit may be the end of the line. In the June quarter, the company had an operating loss of $33 million on $20 million in revenue. The company's cash was down to under $350 million.
It is Chapter 11 time for Vonage. One of the large cable companies would probably be willing to pay enough for the company to pay off lawsuits and, perhaps, leave a few pennies for the shareholders.
According to a recent report from CBS News, "Direct-marketing firm Quixtar Inc., a sister company of Amway Corp., has sued 30 people who anonymously posted what it considers disparaging remarks about Quixtar in blogs and online forums and in YouTube.com videos."
The company is seeking subpoenas to compel internet sites, including Google (NASDAQ: GOOG)'s YouTube, to give the company information it needs to find out who is making the videos that it believes are defamatory. Amway/Quixtar believes some of the videos were made by former distributors who unsuccessfully sued the company and are under court order not to disparage the company.
For years, Amway has been battling allegations that the company is a pyramid scheme. In 1979, the FTC ruled that Amway was not a pyramid scheme, but ordered the company to change many of its sales and marketing practices.
Unfortunately, the media as a whole lacks a strong understanding of how Amway and other multi-level marketing companies work. For instance, take this line from the CBS piece: Quixtar develops and manufactures nutrition, beauty and cleaning products that are marketed in the United States and Canada through a tiered selling system, hiring entrepreneurs to sell its products.
This is not even close to how Quixtar really works. Quixtar does not "hire entrepreneurs." "Independent business owners," as Amway euphemistically calls them, must buy products in order to qualify for commissions, and can earn by recruiting others to buy products as well. Sites like Pyramid Scheme Alert have documented how little "selling of products" actually happens.
Early in my career I worked for Dean Witter Reynolds, now Morgan Stanley (NYSE: MS), and had the opportunity to get to know Brian Biggins. Brian was a broker, an office branch manager and a compliance director in his 10-year stint with Dean Witter, until he went through a major career change. He put himself through law school at the tender age of 31 and became an advocate for the aggrieved individual investor.
Biggins opened his own law practice in Cleveland, Ohio, but has represented investors in nearly all 50 states. He works on behalf of investors who have been defrauded by unscrupulous brokers. He has handled, and won, hundreds of cases ranging from $10,000 to multi-million dollar losses. He has taken on almost every big Wall Street firm and insurance companies. Many of these firms know to sit down at the settlement table rather than go to arbitration against Mr. Biggins. What makes him so successful in helping investors who have been ripped off, defrauded or just plainly mismanaged by their brokers?
Biggins was in the securities industries for over a decade. He knows exactly how big firms operate and where the bones are buried. He can interrogate a broker or the other firm's counsel like no one else because Biggins was "one of them." Firms know that they cannot throw a fast ball past him because of his vast knowledge and experience in the industry. A true advocate for the individual investor.
Hilton is seeking at least $500,000 in damages and a permanent injunction barring Hallmark from further use of her name, likeness, and catchphrase. She accuses the company of invading her privacy and misappropriating her image.
Yes, it isn't the sex tape that has hurt her privacy. Oh, and what about the innocent people who could have been harmed when Paris drove drunk? What about their rights to privacy/life? No, it's all a Hallmark greeting card.
Paris Hilton is being an idiot with this lawsuit. She's a public figure -- in fact, that's all she is. She's famous for being famous, and has been among the most shameless self-promoters this side of Don King. Given that, she should expect to be satirized, and that's exactly what Hallmark has done.
When Hilton went on Larry King after her release from the slammer, Paris talked about her "new outlook on life," and later mentioned her desire to do some good in the world and devote time to philanthropy.
She appears to be back to her old stunts: feeling sorry for herself as a result of her own self-inflicted celebrity. Hey Paris, get on with the charity work you waxed about, and stop being lame.
By an 8-to-1 vote, the justices ruled that plaintifs must show that executives knew they were engaged in wrongdoing. This will give companies another way win early dismissal of these suits without paying huge legal fees.
Though I hate crooked CEOs as much as the next person, I think the court made the right decision. Investors shouldn't be able to run to the court house every time a company's stock unexpectedly falls. Fear of these lawsuits has caused some companies to communicate as little as possible with investors.
The people who made out biggest in these cases were the law firms such as the class action kings at Milberg Weiss & Bershad, which was indicted last year, along with some of its attorneys, for allegedly paying kickbacks to clients involved in some cases.
Last month, The Wall Street Journal (subscription required) reported that the firm's David Bershad was in talks that may lead to a guilty plea to the charges. Another former partner, Steven Schulman, was indicted along with Bershad. Melvyn Weiss, the head of the firm, and former partner William Lerach have also been investigated by prosecutors though formal charges haven't been filed against either of them.
President Bush and the Justice Department have declined to file a brief supporting shareholders in a Supreme Court case that will test whether investors can seek to recoup damages from investment banks and other firms associated with the collapse of companies due to accounting fraud. The SEC supports holding banks accountable and, of course, so do many disgruntled shareholders.
The case before the court involves a company called Scientific-Atlanta, and the plaintiffs are hoping to sue not just the company and its officers, but also the investment banks and legal firms that were involved.
The outcome of the case will have big implications for the Enron case, and many other cases of securities fraud. In most cases, a bankrupt company will have little in the way of assets to satisfy a class-action judgment, and suing accountants, banks, and lawyers is probably the investor's only hope for getting some money back -- Shareholders don't generally sue when business is going well.
The concern is that increased liability for investment banks could further undermine the competitiveness of U.S. markets, which are losing business to exchanges in Europe.
Given the huge amounts of money that investment banks earn, it seems like they should be held accountable for their participation, even if unwitting, in cases of fraud.
Random House, a division of the privately held media conglomerate Bertelsmann AG, is offering compensation to any reader claiming to be "duped" by James Frey's memoir, A Million Little Pieces.
Frey's story was a scandal that broke in January of last year. The author's ostensibly non-fiction book described, in excruciating detail, his miserable existence within an alcohol and drug-addled haze. Toe-curling details include a three-month stint in jail, an anesthesia-free trip to the dentist, and time in rehab.
Published in April 2003, the book hit the best-seller list more than two years later, after Oprah Winfrey named it her September 2005 book club selection. But Frey's ride of success wasn't long; in January 2006, it was revealed that the "memoir" contained outright fabrications. (Essentially, Frey is the Milli Vanilli of modern American literature). Readers who bought A Million Little Pieces before January 26, 2006 (around the time Frey confessed that his penned story wasn't entirely true) are now entitled to a refund from the publisher.
Those who bought the hardcover copy will receive as much as $23.95; ones who bought the book in paperback will get a maximum refund of $14.95. The entire program is expected to cost Random House $2.35 million. The publisher's decision, approved by a Manhattan Federal Judge, is expected to resolve several lawsuits already filed across the country by disgruntled readers.
While Frey's fabrications are certainly reprehensible, the fact remains that A Million Little Pieces reportedly helped countless readers who were struggling with their own addictions. I can't help but wonder how Frey's real story might have gone if he'd pitched his book as one "inspired by true events" rather than a completely factual "memoir."
The Wall Street Journalhas noticed that Vonage (NYSE: VG) is fighting a PR campaign against Verizon (NYSE: VZ). The voice-over-IP company is trying to claim that Verizon's lawsuit over Vonage's use of its patented techology is really an attempt to shut the smaller company down.
From The Wall Street Journal: "In a series of full-page ads in several major newspapers in recent days, Vonage said it benefits consumers by providing competition to higher-priced phone service from Verizon. 'Now, Verizon has chosen to attack Vonage in the courts,' one section of the ad read. 'Why? Could it be all about the money?'"
Well, of course it is about money. VoIP products from Vonage and the major cable companies are taking millions of landline customers from Verizon and AT&T (NYSE: T) each quarter. Just one company, Comcast (NASDAQ: CMCSA) added 571,000 new voice customers last quarter. Those customers come from the phone companies. And, the Comcast service is now available to 35 million homes.
The large phone companies find themselves behind the curve. It will be another two years before their fiber-to-the-home networks are large enough to effectively compete with cable companies for bundled voice, TV, and broadband products. And there is no guarantee that they will be able to switch cable customers over.
It is all about the "Benjamins." Wall Street should not be surprised if Verizon eventually files patent suits against the cable companies as well. If the telecom firm owns the intellectual property, why should it let competitors use the technology against it.?
The SEC is looking at a new way to resolve costly class-action lawsuits from shareholders. One possibility is to switch to an arbitration system, much like investors use if they have a conflict with a broker. With the dollar value of settlements related to shareholder lawsuits at an all-time high, many worry that the litigation may be frightening companies into listing their securities in other countries. According to the Wall Street Journal, (subscription required) "Critics of these lawsuits say multimillion-dollar settlements have lined the pockets of lawyers at the expense of shareholders, created burdensome costs, and frightened off companies that might otherwise have chosen to list their stocks in the U.S."
Of course, any suggestion of moving away from class-action lawsuits will draw the ire of trial lawyers, but I would be interested in hearing more about resolving disputes through arbitration. As I wrote last week, lawsuits filed against public companies divert resources away from the operation of the business. This hurts the current shareholders, and these lawsuits tend to generate very little for the plaintiffs. On average, they hurt the current shareholders, hurt the company, and do little for the people suing. Of course, they do make the lawyers a lot of money.
It is easy to forget that 
If you've seen 
My recent 
According to a recent report from CBS News, "Direct-marketing firm Quixtar Inc., a sister company of Amway Corp., has 
Random House, a division of the privately held media conglomerate Bertelsmann AG, is 
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
