Jury trials are bad for shareholders

I’m not a lawyer so please take what I say with a grain of salt.  But here’s what I understand about the US legal system.

Juries generally consist of everyday people who:

  • Likely do not have a relevant technology background that would help them in patent lawsuits.
  • Likely do not have legal backgrounds.  Therefore, they may apply the law incorrectly.

Ambulance-chasing law firms generally take advantage of jury trials in the following manner:

  1. They try to stack the jury during the jury selection process.  There are various legal grounds on which a potential juror can be preventing from serving on the jury.  Lawyers (or jury consultants) try to guess which jurors would be favorable or unfavorable to their case.  Then they use various legal excuses to try to rig the jury.  As an aside, I would point out that this system encourages jury consultants to hone their discrimination skills.  They may make judgements about a potential juror based on their ethnicity, skin color, class, age, sex, etc.  They also make judgements on things such as tattoos, piercings, attire, etc.
  2. They may make subtle emotional arguments, e.g. XYZ corporation is large and therefore it is evil.  While this is not a legal argument, lawyers may try to influence the jury into making decisions based on emotion.
  3. The use of juries arguably creates uncertainty.

Instead of having no chance of winning, the uncertainty created by juries creates longshot odds for each lawsuit.  In my opinion, this enable lawyers to profitably chase lawsuits that would otherwise have no chance of succeeding.  This is why many publicly-traded companies occasionally lose longshot lawsuits against patent trolls and lawyers who “represent” shareholders.  (Shareholder lawsuits rarely make sense for shareholders as management teams often use shareholder money to pay for the legal fees and the settlement.)  I’m not a fan of these legal costs as they are a drag on performance.

Links

Reading People by Jo-Ellan Dimitrius.  The author is a jury consultant who was part of OJ Simpson’s “dream team” of lawyers.  She uses her professional experience to write a book on reading people for everyday use.  While I didn’t like the book that much, it is written in plain language and does give some insight on how a jury might be stacked.

Wikipedia page on jury trials.

Advertisements

2 thoughts on “Jury trials are bad for shareholders

  1. Yeah I totally agree with this. We need paid specialist juries that can process cases more quickly and fairly. The citizen jury system is more suited to “everyday crimes” (e.g. rape) than to more sophisticated or specialized issues.

  2. 1. This hits your post a bit tangentially perhaps, but there was a fascinating recent ruling / development in the Chevron v. Ecuador trial recently. The US federal system could improved to be sure — with some low hanging fruit in patent law and in shareholder suits where owners in effect sue themselves, paying themselves by taking money from their left pockets to deposit it in their right pocket, while giving lawyers a very serious cut in the process. Clearly other countries are worse though.

    http://www.economist.com/news/business/21598641-judge-finds-foul-play-behind-controversial-case-against-chevron-courtroom-drama

    2. Strictly speaking though, this blog post should probably be titled “Trials are frequently bad”. The shareholder element is almost incidental. While they may frequently be the target, quite often there may be a ‘home court’ advantage whereby local equity holders go after ‘out of town’ bankers or rival company shareholders. Classically Texas has been quite bad in this regard. The Beaumont court district was a plaintiff nirvana throughout the 80s, making Joe Jamail, for one, very rich. ( For one interesting take on the whole Texaco Pennzoil affair, see http://www.youtube.com/watch?v=UEc8Xzn1WqU ) There were significant reforms to the Texas legal practice subsequent to that, but in the 2000s there were several busted LBOs whereby ‘local’ companies (in effect the owners) sued ‘out of town’ creditors (read: NY banks) and received local favoritism.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s