Glenn Chan's Random Notes on Investing

Jury trials are bad for shareholders

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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:

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.

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