Feeds

Court rejects class action status for Wall Street lawsuit

Banks breathe sigh of relief

  • alert
  • submit to reddit

High performance access to file storage

A lawsuit aiming to hold Wall Street banks accountable for alleged manipulation of technology stock prices in the dotcom boom has failed to win class action status. The ruling could save the banks billions of dollars in payouts.

The suits accused Wall Street banks of colluding with investors to buy shares once a company floated on the stock markets, driving up prices in the so-called after market and making money for those favoured investors it had granted pre-flotation stock.

The suit also said that banks artificially inflated the prices of companies floated in initial public offerings (IPOs) and that they created misleading research about the firms to lure investors into buying the stock.

US legal experts predicted that the case would have been unlikely to go to trial, and would most likely have been settled by the banks. Virtually every investment bank is involved in the case and it could have cost them billions of dollars to settle.

A previous ruling from a federal judge had allowed 310 separate cases to be consolidated into six 'focus' cases. These six cases were granted class action status. Class action suits allow a large number of cases involving similar points of law to be tried together and commonly involve massive payouts because of the large numbers of claimants involved.

That was overturned, though, by a panel of three judges in a federal appeals court, which said that the cases should not have been granted class action status.

The case involved 300 investors, 309 issuing companies and 55 underwriting banks, including the biggest names on Wall St such as Morgan Stanley, Credit Suisse First Boston, Goldman Sachs and Merrill Lynch.

"It's not over," Melvyn Weiss, a founder of one of the law firms acting for the claimants, told the New York Times. "We have the right to seek a review by the entire panel of the Second Circuit. I think the decision doesn't reflect a real understanding of how people get defrauded in our society."

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.