Requiem for a Junk Lawsuit
One of the most noxious corporate blame-shifters I know is Biovail, a Canadian biotech company whose primary product appears to be litigation----suing short sellers in an unsuccesful effort to prove that it isn't a heap of dung. A few months ago the company pleaded guilty to criminal charges. Here's a blog item from last May describing the charges and some of the awful press coverage Biovail has received.
Yesterday, a federal judge tied a bow around this whole stinky mess, by throwing out a junk lawsuit against some hedge funds that had been accused of conspiring to drive down the company's share price.
In so doing, Judge Stanley R. Chesler described the suit as a preemptive strike against a class action suit. The judge said:
“The record before the court suggests that these proceedings and the RICO action proceedings were all part of a choreographed strategy by Biovail and its attorneys designed to constitute a counterattack against the Biovail securities action,” he wrote. “The conduct is so egregious, and the futility of imposing alternate sanctions is so clear, that dismissal is the only appropriate sanction.”I can think of a more appropriate sanction: fine the responsible parties and their lawyers, and insist that they be paid out of their own personal funds. It would be nice if the Obama administration started taking strong action against companies that file frivolous lawsuits like this. It's called "issuer retaliation" and it's a major problem.
© 2009 Gary Weiss. All rights reserved.