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July 01, 2003

Seniors with sense

I noted with approval that U.S. District Judge Milton Pollack dismissed one of the numerous class action lawsuits against Merrill Lynch seeking damages for "fraudulent" research published during the tech bubble.   In a scathing opinion, Judge Pollack concluded that:

The record clearly reveals that plaintiffs were among the high-risk speculators who, knowing full well or being properly chargeable with appreciation of the unjustifiable risks they were undertaking in the extremely volatile and highly untested stocks at issue, now hope to twist the federal securities laws into a scheme of cost-free speculators’ insurance.  Seeking to lay the blame for the enormous Internet Bubble solely at the feet of a single actor, 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, but which delivered such riches to only a scant handful of lucky winners.  Those few lucky winners, who are not before the Court, now hold the monies that the unlucky plaintiffs have lost—fair and square—and they will never return those monies to plaintiffs. Had plaintiffs themselves won the game instead of losing, they would have owed not a single penny of their winnings to those they left to hold the bag (or to defendants).

Notwithstanding this — the federal securities laws at issue here only fault those who, with intent to defraud, make a material misrepresentation or omission of fact (not opinion) in connection with the purchase or sale of securities that causes a plaintiff’s losses.  Considering all of the facts and circumstances of the cases at bar, and accepting all of plaintiffs’ voluminous, inflammatory and improperly generalized allegations as true, this Court is utterly unconvinced that the misrepresentations and omissions alleged in the complaints have been sufficiently alleged to be cognizable misrepresentations and omissions made with the intent to defraud.  Plaintiffs have failed to adequately plead that defendant and its former chief internet analyst caused their losses.  The facts and circumstances fully within this Court’s proper province to consider on a motion to dismiss show beyond doubt that plaintiffs brought their own losses upon themselves when they knowingly spun an extremely high-risk, high-stakes wheel of fortune.

If only we had a couple of hundred more Federal Judges like Milton Pollack, there would no be litigation crisis in this country.

But what really threw me for a loop was this sentance from Matthew Goldstein's piece on TheStreet.com: "One thing is for sure: Pollack, a 96-year-old semiretired judge, has shown a dislike for lawsuits alleging that investors lost money on stocks because of misleading or fraudulent research." [Emphasis added]   Nahhh...  Must be a typo; the guy can't be 96 years old.   But he really is 96; in fact he's almost 97.   Even more bizarre, there are lots of other octogenarians and nonagenarians active on the Federal bench.   In fact, one judicial branch administrative official estimates that semi-retired, volunteer judges perform 15% to 17% of all the work in the Federal Court system.   Amazing.   If only more of them could be like Judge Pollack.

July 1, 2003 at 08:41 PM | Permalink

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