Backdating Lawsuits to Focus on Derivative Actions

When the backdating scandal (discussed in previous columns) erupted, many people expected shareholder lawsuits alleging damage to their stock prices. Many such lawsuits were filed, but the plaintiffs' bar has apparently concluded that it will be too difficult to calculate damages, that the statute of limitations may have expired anyway, and that proving when and how grant dates were manipulated will be tricky. So lawyers are instead focusing on derivative lawsuits in which plaintiff shareholders sue on behalf of the company, typically seeking changes in corporate governance, plus legal fees for the attorneys. It is not clear that plaintiffs can get much, if any, income from these suits, over 50 of which have been filed so far.