Lawsuits’ impacts minimal

NEW YORK – Suing. It’s the American way.

When it comes to shareholder lawsuits, it may be time to reconsider. Class-action shareholder suits remain a popular fixture in courts throughout the land, although they very rarely pay shareholders much of anything. Nor are they a stellar way to change a company’s bad behavior.

Some might argue the lawsuits serve as a deterrent to bad behavior. That’s a hard sell: Because there are so many lawsuits, they carry little stigma.

There were 182 federal securities fraud class actions in 2005, according to the Stanford Law School Securities Class Action Litigation Clearinghouse and Cornerstone Research.

The suits are hardly a path to riches for shareholders. The median settlement for the top 10 class-action law firms was 3.8 percent. So, if you lost $10,000 when your stock declined and you proceeded to join a class-action shepherded into federal court by the biggest names in the field, you might get a whopping $380 when the case was settled.

Except you won’t. The lawyers customarily take one-third of the settlement.

And who pays for the settlement? Maybe the company’s insurer, so the company’s rates go up, cutting into profits.

Or maybe the company itself pays. If you still own the stock, you may be suing yourself, in a sense.