The suits accused Wall Street banks of colluding with investors
to buy shares once a company floated on the stock markets, driving
up prices in the so-called after market and making money for those
favoured investors it had granted pre-flotation stock.
The suit also said that banks artificially inflated the prices
of companies floated in initial public offerings (IPOs) and that
they created misleading research about the firms to lure investors
into buying the stock.
US legal experts predicted that the case would have been
unlikely to go to trial, and would most likely have been settled by
the banks. Virtually every investment bank is involved in the case
and it could have cost them billions of dollars to settle.
A previous ruling from a federal judge had allowed 310 separate
cases to be consolidated into six 'focus' cases. These six cases
were granted class action status. Class action suits allow a large
number of cases involving similar points of law to be tried
together and commonly involve massive payouts because of the large
numbers of claimants involved.
That was overturned, though, by a panel of three judges in a
federal appeals court, which said that the cases should not have
been granted class action status.
The case involved 300 investors, 309 issuing companies and 55
underwriting banks, including the biggest names on Wall St such as
Morgan Stanley, Credit Suisse First Boston, Goldman Sachs and
Merrill Lynch.
"It's not over," Melvyn Weiss, a founder of one of the law firms
acting for the claimants, told the New York Times. "We have the
right to seek a review by the entire panel of the Second Circuit. I
think the decision doesn't reflect a real understanding of how
people get defrauded in our society."
