The Wall Street Journal, Stoneridge and Congressman Frank

As a substitute for legal analysis, the WSJ has a tendency to take positions because of the people involved.  There is no one that raises the ire of the Journal more than Bill Lerach, the dean of the securities class action bar. 

Take the recent motion filed by Congressman Frank and Conyers for a request to file an amicus brief out of time in Stoneridge.  We have writtenon this and have a copy of the motion posted at the DU Corporate Governance web site. 

The WSJ on Friday, August 10, posted an editorial essentially characterizing Congressman Frank and a sieve for the plaintiffs' bar because of his decision to seek to file an amicus brief.  In an editorial titled "Barney Frank's Muse," the WSJ had this to say about the decision:  

• "Barney Frank is a busy guy, so we suppose it's no great surprise that he used a ghost writer for his recent Supreme Court amicus brief in a big securities tort case. Imagine our surprise, however, to learn that the ghost is none other than tort kingpin Bill Lerach's favorite lobbying outfit."

• "His amicus brief argues further that, as the head of a powerful Congressional committee, he has an "interest" in making it easier for trial lawyers to sue corporations. Yet according to a footnote, the Frank-Conyers brief was written by lawyers from Cuneo, Gilbert & LaDuca. And according to disclosure records, that firm's lawyers have since 1998 been lobbyists for the National Association of Securities and Commercial Law Attorneys, an outfit set up by Mr. Lerach."

In other words, its not that Congressman Frank got the analysis wrong, its that he used a law firm associated with an organization associated with Bill Lerach. 

We note several things about this view.  First, the Journal presumably views Senators Dodd and Specter in a similar vein.  After all, Senator Dodd has indicated an interest in filing a brief in Stoneridge and Senator Specter has written a letter to the President criticizing the Solicitor General's decision not to file a brief seeking reversal of Stoneridge (the same position take by Congressman Frank).   

Second, the editorial somehow tries to impeach the legal analysis through association.  We trust the Journal will be similarly rigorous when it looks at the law firms employing Supreme Court Justices (Justice Roberts worked for Hogan & Hartson) or presidential candidates (Rudy Guiliani worked for Bracewell & Guiliani).  To the extent the firms have associations with organizations not to the liking of the WSJ, it will presumably get mention on the main editorial page.

Third, to the extent attempting to describe the issue in Stoneridge, the WSJ is misleading, perhaps deliberately.  The paper characterizes the issue as "whether plaintiffs attorneys can sue not just a company that engages in wrongdoing, but any company that has done business with the wrongdoer."  But of course no one argues that primary liability extends to companies that simply do business with the company making the false disclosure.  Nor does anyone argue that primary liability extends to a companies unless they have engaged in their own wrongdoing.  The test developed by the 9th Circuit essentially extends liability only to businesses that engaged in sham transactions knowing that the transactions would be used to manipulate another company's disclosure.  Somehow none of this is captured in the editorial's description. 

Finally, as we have noted, the Journal likes to use Lerach's name as if it is outcome determinative on the legal issues.   The reality is that Stoneridge is a critical, difficult case in which the Supreme Court will benefit from a full range of views.  As we have noted, the Frank motion promises to provide a brief that does not simply duplicate what others have said.  This Blog views any brief by any group or person (particularly any interest group that can provide a different viewpoint or analysis) as useful to the Supreme Court, whether supporting the decision or seeking reversal. 

Perhaps with new owners, the Journal will become a bit less personal and a bit more accurate on its characterization of the legal issues involved.