Thomas R. Ajamie's voice mail and e-mail inboxes are jammed.
Business has been booming for the Houston-based securities lawyer, who makes his living fighting for investors who feel they have been had, since the historic $1.4 billion deal between state and federal regulators and the nation's 10 largest investment banking firms was unveiled two weeks ago.
"The day the global settlement was announced, our phone was ringing off the hook," he said. "I literally had scores of e-mails from across the United States."
Yet securities attorneys, including Mr. Ajamie, a partner at Schirrmeister Ajamie LLP, caution that the settlement may not provide the treasure trove of evidence that many were seeking. In fact, they say it probably will not make investors' private suits any more successful or lucrative than they were before.
"I don't think there's anything in there that makes a case against an investment banking firm a slam dunk," Mr. Ajamie said. "It provides material for lawyers to work with, but it does not guarantee that these firms are going to lose billions of dollars" to settlements and awards from private actions.
Of course, that will not stop the suits from being filed.
Fielding questions about the deal through The Washington Post's Web site on May 2, New York Attorney General Eliot Spitzer appeared to encourage litigation by writing that he expects the $1.4 billion to be just the beginning of what the firms would pay.
"At the end of the day I hope that the restitution amounts will total many billions of dollars, but most of that will result from private litigation," Mr. Spitzer wrote.
And even though Mr. Spitzer did not go further up the food chain than the analysts at the firms whose research practices he investigated, recent hearings in Washington suggest that other regulators are itching to go after the investment banking side of the business and seek evidence of a failure to supervise analysts. Such actions could provide more fuel for litigation.
In the meantime, shareholders and class-action attorneys are heeding Mr. Spitzer's advice on the analyst issue. Stung by several years of losses but buoyed by the settlement deal's completion, investors are reaching out to attorneys like Mr. Ajamie in unprecedented numbers to seek redress.
Enraged over allegations of fraud and conflicts of interest, some see the deal as a road map for recovering their investments from the deep-pocketed firms.
But several lawyers pointed out that, no matter how compelling the evidence, virtually all the individual cases must still go to arbitration, not to a jury trial. Investors would have a much harder time taking advantage of the settlement if they have to make their case before three-person arbitration panels, the lawyers said.
The long-simmering debate over the fairness of arbitration aside, the lawyers say the settlement is hardly the weapon of mass destruction that some have claimed. That is because, even though its findings are admissible into arbitration hearings, they cannot be offered as "statements of fact," as many attorneys had hoped would happen. That means that the firms can use everything in their legal arsenal to defend themselves when issues from the settlement are raised in arbitration.
"All of these firms neither admitted nor denied the charges. They simply settled," said Jeffrey S. Feinberg, a New York-based securities lawyer. "The attorney general's office made some findings of fact, but they didn't find any criminal wrongdoings."
Further, according to attorneys, the e-mails and memos unearthed by the settlement focus on the stocks of specific companies over a finite period of time. Hence, investors who take action must tie their losses to the stocks and years addressed in the settlement, they said.
"We're looking at a narrow range of stocks in a narrow time frame," said Debra G. Speyer, a securities lawyer and former prosecutor for the National Association of Securities Dealers. "For a slam dunk, somebody would have had to have purchased that product during that time period with that company."
Mr. Feinberg agreed with that assessment but went further. Even investors who owned the right stocks during the right years face a "proof problem" in that they must show they relied on the research in question, he said.
"Did the investor who may have that stock in his portfolio rely directly on this information?" Mr. Feinberg asked. "If he didn't, there really is no claim."
Ms. Speyer, who also serves on arbitration panels, said that investors seeking money from the $385 million restitution fund that the settlement created could end up with enough money in three years "to buy a pizza." For cases made directly against the banks, the settlement's most useful contribution would be contextual evidence, not directly applicable information, she said.
According to Mr. Feinberg, plaintiffs' attorneys believed the settlement would release information that would allow them to skip a trial and move right to summary judgment. "They thought the global settlement would provide the goods on all the firms, when in fact it's rather limited information."
Nevertheless, all the lawyers contacted for this article said they would use the material in their cases. Moreover, they said the settlement would likely help class actions clear the hurdle imposed by the Private Securities Litigation Reform Act of 1995, which made it harder for the suits to compel discovery and move forward.
At the same time, the lawyers said that benefit could be where the settlement's value to the class-action bar ends.
"There is probably enough there to get them past a motion to dismiss, which will allow them to [make] discovery into the investment banks' files," said Adam Pritchard, a professor at the University of Michigan School of Law. "But that's not the same thing as being able to make their case."
Richard C. Szuch, a securities defense attorney and partner at the Roseland, N.J., firm Lowenstein Sandler PC, said the reaction shows that the settlement was a "smart" resolution that appears to have been "well thought out" by the investment banking firms. It is not surprising that the pact does not contain a smoking gun for investors, because the companies never would have signed on if it did, he said.
This website is provided for general information about our law firm. The information you obtain at this site is not, nor is it intended to be, legal advice. Use of this website and any electronic communications between you and Nackman & Feinberg LLP ["The Firm"] does not cretae an attorney-client relationship.An attorney-client relationship will only be created upon a signed retainer agreement between you and The Firm.
You may reproduce materials available at this site for your own personal use and for non-commercial distribution. Commercial use of any portion of this website is strictly prohibited. All copies must include the above copyright notice.