U.S. District Court Judge Milton Pollack dismissed two class-action lawsuits brought by investors who claim biased research reports from stock analysts at Merrill Lynch were to blame for their losses on 24/7 Media and Interliant whose stock prices dropped after the Internet bubble burst in 2000. In a similar suit, federal judge Harold Baer Jr., tossed out a class-action suit brought against Morgan Stanley, Credit Suisse First Boston and Goldman Sachs.
“The record clearly reveals that plaintiffs were among the high-risk speculators who now hope to twist securities laws into a scheme of cost-free speculators insurance,” Judge Pollack said in his ruling. “Seeking to lay the blame for the enormous Internet bubble solely at the feet of Merrill Lynch, plaintiffs would have this court conclude that the federal securities laws were meant to underwrite, subsidize and encourage their rash speculation in joining a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches.”
New York Times reported that, “the ruling is likely to curb the increase in class-action suits against Wall Street firms and cause bruised investors to take their claims to arbitration panels, where the legal standard for proving that research contributed to their losses is lower.”
“This is clearly a victory,” said John C. Coffee Jr., a professor of securities law at Columbia University. “Judge Pollack has the view that what caused the decline in shares for investors was the collapse of the bubble, not the research itself. He has raised a number of obstacles for plaintiffs in these types of suits.”
Judge Pollack has 25 similar class-action lawsuits before him, all of which involve Internet research at Merrill Lynch, reported the New York Times.
(via New York Times)
Comments on this entry are closed.