Associate Academic Dean Larry Cunningham was quoted in May 11’s New York Times in a story concerning a possible
retrial for the alleged killer of Etan Patz.
Official Blog of St. John's University School of Law Faculty
Professor Jeff Sovern’s broadcast about the St. John’s Arbitration Study was heard on Northeast Public Radio’s Academic Minute on Monday, May 11. To listen, go here.
The New York Times published a letter from Professor Jeff Sovern on May 6. In the letter, Sovern observes:
Elisabeth Rosenthal bemoans the incomprehensibility of medical bills. A New York law captioned “Requirements for Use of Plain Language in Consumer Transactions” requires that agreements for services provided to consumers be written in a “clear and coherent” manner.
Wouldn’t it make sense that medical bills must also comply with the law?
Professor Mark L. Movsesian’s post, “Thomas More, Villain,” was quoted in a Washington Post story by David Gibson,
On Wall Street followed up with another article on the DOL fiduciary duty rule proposal, focusing on rollovers and IRAs. The article, Is Your Rollover Business at Risk Under Fiduciary Plan?, written by Suleman Din, included the following quote:
It is important that rollovers and IRAs are included in the fiduciary standard now, says Christine Lazaro, director of the Securities Arbitration Clinic at St. John’s University School of Law.
“As individuals retire and are faced with the decision of what to do with the money in their employer-sponsored plans, they often seek advice from investment professionals, expecting that the advice they receive will be in their best interests,” Lazaro says. “At that point in time, when they are being advised to move their money into IRAs managed by the investment professional, it is essential that the investment professional is held to the highest standards to protect the retirement savings of Americans.
“The standards shouldn’t only apply after the money has been moved,” Lazaro adds. “If it is not in the investor’s best interest to move the money out of the employer-sponsored plan, it should be left alone. The profit motives of firms cannot and should not drive the decision to move an investor’s retirement savings out of the employer-sponsored plans.”
Professor Lazaro commented on the Department of Labor’s proposed rule to extend a fiduciary standard to those providing investment advice to clients on retirement accounts in an article in On Wall Street, Tougher Rules But Flexible Comp Under New Fiduciary Proposal. The article, written by Andrew Welsch and Suleman Din, states:
Critics should remember that the DOL had initially come out with a fiduciary standard proposal in 2010, then pulled it and spent the next five years seeking additional comment and revising rules, said Christine Lazaro, director of the Securities Arbitration Clinic at St. John’s University School of Law.
“It’s not like they’ve moved forward quickly or haphazardly, or without considering viewpoints that they needed to,” Lazaro said. “They’ve moved forward carefully and I think thoughtfully in the process.”
The DoL proposal will be filed in the Federal register and will again be open for public comment, she added. “So there will be another opportunity for anyone to voice their concerns. The fact that they are moving forward faster than the SEC on a fiduciary standard doesn’t mean they haven’t given full consideration of viewpoints that they should be considering.”
Lazaro found little in the proposal for the industry to be alarmed about.
“It does seem like the general business models will be permitted,” Lazaro noted. “There really isn’t any need to panic. The major concerns raised by the industry regarding commissions and revenue sharing, these would be permitted to continue, so long as the advice given is in the best interest of the investor.”
“There are plenty of situations where advisors are already held to fiduciary duty, such as under state common law standards. It’s not like strict standards haven’t been tested and brokers haven’t been held to these standards already. It’s not a foreign concept when it comes to brokers.”
Professor Michael Perino’s co-authored article on securities class action fee-setting (linked below), which will be published in the Columbia Law Review, was cited in this Reuters story by Alison Frankel. A bit from the beginning:
A couple of weeks ago, I wrote about a fee opinion by U.S. District Judge Lewis Kaplan of Manhattan, who decided that a request by class counsel for 13 percent of a $346 million settlement with underwriters of IndyMac mortgage-backed securities was just too much. Even though the 13 percent request was in line with the fee deal plaintiffs’ firms had negotiated in advance of the litigation with the lead plaintiff, a public pension fund, Kaplan cut the fee award to 8 percent, based on his own experience with securities class actions and skepticism about the hours reported by class counsel.
That example is a paradigm of the problems with the current system of awarding fees in securities class actions, at least as those problems have been pinpointed in an upcoming Columbia Law Review article by law professors Lynn Baker and Charles Silver of the University of Texas and Michael Perino of St. John’s University. In “Is the Price Right: An Empirical Study of Fee-Setting in Securities Class Actions,” the professors dipped into the dockets of 434 settlements announced between 2007 and 2012, looking at (among other things) how pre-set fee agreements with counsel factored into lead plaintiff selections; how fee requests and awards varied by the volume of cases handled by different jurisdictions and even individual judges; and why judges in about 15 percent of the settlements cut the requested fees.
Their overall conclusion is that in the vast majority of cases, fees are determined after the fact, based only on the size of settlement and the biases of the court. The professors argue that their findings show one of the goals of the Private Securities Litigation Reform Act of 1995 – to encourage lead plaintiffs to exercise oversight by negotiating fee arrangements with class counsel at the onset of a case – has not been met. They also concluded plaintiffs lawyers may be exploiting market inefficiencies by requesting higher fees from courts with a low volume of securities cases. And judges who slash fee requests without real analysis of benchmarks, they said, create uncertainty that, in the long run, hurts investors because it discourages class action lawyers from investing in cases.
The Pittsburgh Post-Gazette has published Professor Jeff Sovern’s op-ed, Consumers often sign contracts they don’t read or understand. The op-ed, which drew on research reported in the the article Professor Sovern wrote with Professors Elayne Greenberg and Paul Kirgis, as well as the University’s Director of Institutional Assessment, Yuxiang Liu, ‘Whimsy Little Contracts’ with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, opens as follows:
Consumers often sign form contracts without reading them — if you don’t believe me, just drop by a car rental agency and watch what happens.
Consumers may have many reasons for not reading contracts, including that they are too long (the iTunes contract is 32 feet long when printed); that the contracts are incomprehensible (all that legalese); or that they can’t negotiate better terms.
The Los Angeles Times quoted Professor Jeff Sovern in an article, Credit-reporting firms’ accuracy push? Finally — but it’s still not enough. The article, discussing the settlement between the big three credit bureaus and New York’s Attorney General, states:
Last week’s settlement is a step in the right direction. But it doesn’t go far enough.
“These companies still have a lot of power,” said Jeff Sovern, a law professor at St. John’s University in New York. “The Fair Credit Reporting Act favors credit-reporting agencies and creditors over consumers.”
Professor Jay Facciolo and Leland Solon, one of his former students, have just published an article in the New York Law Journal entitled “Sub-Adviser Fee Litigation: Will Section 36(b) Acquire Teeth?” It deals with a wave of class action litigation under the Investment Company Act of 1940 that is gaining real traction in challenging allegedly excessive fees paid by mutual funds to investment advisers to the funds. Successful private actions under the Investment Company Act historically have been few and far between. This article is a followup to an article that was previously published with the New York Law Journal in October 2013.