And you write, "It is either no advisor has breached its fiduciary duty during that time, or as Johnson concludes and said, 'Something is amiss under Section 36b.'"
Professor Coates, I am going to give you this question first. Has no advisor done anything wrong in the last few decades?
What I can agree with is that, to my knowledge, there has not been a trial following which a court has found fees unfair. On the other hand, I think it is important to bear in mind that very few of these cases go to trial. In fact, to my knowledge, less than a half dozen.
And the reason is not because the courts are ruling against the plaintiffs in the vast majority of these cases, or nearly all of these cases, or in all of these cases as was just implied, but rather because most of them settle, as most litigation does. 90% or more of almost every case brought to the court system settles.
And there are strong incentives for the parties on both sides of a case, including the plaintiff lawyers representing the investors, to reach an agreement. Most of the time, both sides also keep those agreements confidential.
And so while I know secondhand that there have in fact been payments by advisors pursuant to these cases, that is, they have settled cases and they have paid money in damages as a result of these cases, I don't think anybody is in a position to say whether this is common or uncommon, because we just don't know.
Leggio: Professor Birdthistle, is that a fair characterization that in essence plaintiffs have won, it has just been in out of court settlements, not in actual court rulings?
William Birdthistle: Well I think it is a factual observation. I think there is an enormous difference between attempting to settle a case in a legal context in which no plaintiff has ever won a verdict.
I will quibble slightly with your characterization. There has been a victory by a plaintiff in a court of law in one of these cases. It was not a trial, as Professor Coates pointed out. It was on appeal, and it was something of an interlocutory appeal. The case will go back to trial and now be reheard. That was in the 8th Circuit in Gallus v. Ameriprise a few months ago.
But sure, it is true that there have been settlements in these cases. How many or for how much? We have no idea. But I can tell you this: if I were a plaintiff's lawyer or any lawyer attempting to settle a case, I would far rather attempt to do that in a context in which there was some conceivable possibility of me winning the case. The difference in the magnitude of the settlement payout would be enormous.
If you've never won one, the kind of payout that it would take to make a plaintiff go away is going to be a lot lower than in a scenario in which a possible victory is on the horizon.
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