Forum Analyzes the Current State of Global Litigation
More than a year after the financial-market meltdown, debate continues over whether regulation or litigation is the best way to achieve reform.
The recent Global Justice Forum, held between October 15-17 at Columbia Law School, revealed why there are no easy answers.
The two-day forum, titled Global Litigation in a Post-Crisis Economic World, focused on financial fraud affecting investors across borders, as well as antitrust litigation, mass torts, and class actions. Panelists also discussed the role of mediation and arbitration in disagreements triggered by the economic downturn and the growing anti-litigation culture in Europe and elsewhere.
On the heels of last year’s financial crisis, the Ponzi scheme run by Bernard Madoff, along with the Tyco, Enron, and Worldcom scandals of recent years, the debate on how to clean up the financial markets has only gotten more vigorous.
Regarding regulation, “I do think it is an incentive for truth-telling,” said Merritt B. Fox, Michael E. Patterson Professor of Law and Nasdaq Professor for Law and Economics of Capital Markets, who moderated a panel on financial fraud. “Ideally, regulation would work better, but there are imperfections in the market for government services, as there are in the market for litigation.”
The view is somewhat different from the plaintiff’s bar, where Max Berger ’71 has an auspicious perch. As a name partner at Bernstein Litowitz Berger & Grossman, he has helped obtain five of the largest securities fraud recoveries in history.
“Needless to say I believe very strongly in the prophylactic effect of what I’ve been doing for almost 40 years,” said Berger, who serves on the Law School’s Dean’s Council.
The scandals behind companies like Enron and Tyco spurred passage of laws like the Sarbanes-Oxley Act, which tightened rules for public company boards and accounting firms. Still, fraud has remained a growth industry, Berger said.
“Financial fraud has been rampant,” he said. “Trillions of dollars in investment money has been lost. The financial world is on the brink of economic Armageddon while a few take the spoils.”
Columbia Law School and Robert L. Lieff ’61 of Lieff Cabraser Heimann & Bernstein sponsored the gathering of lawyers, judges, government officials, and academics in October to discuss global litigation in a post-economic crisis world. The 200 attendees shared a variety of experiences, from jurisdictions with highly developed torts law regimes to nations where addressing wrongs with class action suits is a burgeoning idea. Columbia Law School participants included Professor John C. Coffee Jr., the forum’s keynote speaker, and Professors Merritt B. Fox, George A. Bermann, and Hans Smit, who served on various panels throughout the event.
In his address, Coffee explored the differences between class-action litigation in the U.S. and Europe, where litigants commonly must opt-in and consent to be represented. In contrast, class-action suits in the U.S. presume the class member has consented unless they opt out.
Coffee examined the strengths and weaknesses of both systems and showed why there is no clear-cut case to favor one system over another. In many instances, the approach that works best is case-specific. Coffee cited several securities class actions, including suits against WorldCom, Quest and Tyco, where institutions that opted out received settlements 20 to 40 times higher than those who remained in the class.
"As in other markets, competition works," Coffee said.
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