Shareholder Responsibility - Part 2
MALE VOICE 1: Okay. My job essentially is to explain how you as Europeans can start getting in on the fund. And I guess first, before I explain how, I want to spend one or two minutes on why because often the question we are faced with when we come to Europe is--why do I need American class actions at all? And certainly, there are antifraud rules in all European countries. I don't think--in no place in Europe is it legal to make a material misrepresentation about a stock in which you are the CEO or the CFO or a significant officer or director.
But the question is there really is no effective remedy for you to get your money back in those situations unless you've lost untold hundreds of millions of dollars. And that, as we've said, is due to the lack of a class action law, the lack of a contingency fee arrangement here in Europe and your loser-pay rules that you have and that we don't so that really there's no way for you to prosecute the case effectively on your home turf unless you can bring a direct action and you want to assume all the significant costs and the possibility you might have to pay the other side's lawyers. That's why you might want to come to America to seek redress.
I've ruined it again. Okay. I think you've already seen probably at least one slide similar to this about institutional involvement in class actions. And as you can see, it's increasing but certainly not up to 100 percent. Only in about a third of the cases do institutions participate actively in the prosecution of the cases in the United States.
Well, why might you want to get involved? You've heard a lot of people speak about fiduciary duties. As Tony said, there's no absolute duty to bring a case. But in certain circumstances, you may want to bring a case. And maybe you should bring a case. And if you don't bring a case, certainly it would be a very good idea if you could turn to the people you are a fiduciary for, your pensioners, your shareholders, somebody you might manage money on behalf of, and say, "I was fully aware of this case. I gave it very careful thought. I looked at how much money we can get back, how much time and money we'd have to put in. And I made a considered decision not to get involved."
Well, that's a great answer you can give them. And they probably won't pursue the matter any further against you. However, if somebody comes to you and says, "I think we had a great claim on behalf of the pension fund against ABC Corporation. And you did nothing to get my money back even though we were hardly defrauded, we being the pension fund. Why didn't you do something about it?" And you have to look them in the eye and say, "Well, I really can't tell you why. I didn't know that we had a viable cause of action. I wasn't aware that other people were bringing cause of action and maybe we were getting left out. And I have no good reason to explain why I didn't take action." You might be in trouble. And somebody might have a viable action for a breach of fiduciary duty against you.
So that's where the two words that you've heard ad nauseum today, portfolio monitoring, come into effect. If you can at least say you're aware of the action and you thought about it, you have a good defense. If you have to look at them and say, "I have no idea what went on and why," well, that's not very good.
Back--if you look at the top quote--I don't know if you can read it --that was from a case just about two weeks ago. As you're now aware, many pension funds and institutions engage in portfolio monitoring and have outside counsel who will regularly monitor their portfolio. There was a lead plaintiff motion made by one such institution and by a few other people as well in the case. And I think it was Merrill who described it as a firefight.
And these firefights can get vicious because once somebody decides they have a sufficient stake, that they want to move forward in the case, it's like a dog with a bone. And they won't let go. And they say, "Well, I filed. I really want to be the lead plaintiff and, you know, get rid of all these other guys."
Well, they're in the middle of the firefight. And one of the other people said, "That institution over there, that guy that lost the most money according to him, you want to know what he does? He has somebody monitor his portfolio. And he has his outside law firm that looks at things. And they tell him when he should get involved in cases. And that makes him bad. And he should not be the lead plaintiff."
And the court's answer was very simple. And it's expressed at the top line. It said, "If that fund wasn't taking steps to be aware of existing or prospective litigation, that would be an abdication of its duty." So the court disposed of the argument immediately and said, "Not only is that not a bad idea, that's a great idea. And that's something that they should be doing. And that makes them a great lead plaintiff, not an inadequate lead plaintiff."
Okay. We've gone over some of this. Basically, if you get involved in a case, who's going to be in charge? You know, if you do take the steps, what does that mean? Well, there's different ways to get involved. As we said, there's the lead plaintiff. You're kind of the king in that sense. You're in charge of everything. You choose the counsel. You make important decisions. The case can't be settled without your approval, without your input. I think some of the other things on the slide have already been mentioned. So I'll skip over them.
There's also what we call a class representative. Class representative is sort of the prince if the lead plaintiff is the king. That's a step down from lead plaintiff standard. But you are also actively involved in the case. And the class rep is very important. As Marvin said, in certain circumstances, when there's different securities and securities are traded on different exchanges, there may well be the need for a class representative for each of those different classes.
Somebody who bought the stock in New York, well, that's going to be obvious. I mean, they'll be a dime a dozen. But maybe you need somebody who bought the stock in Frankfurt. Maybe there's a bond offering, the 2005 eight percent, the 2006 nine percent, the 2007 ten percent. You need somebody who bought each of those securities to represent the class. And that's the class representative, does not have to be the lead plaintiff. They don't have to have bought every type of security. If they did, well, then it's a lay-up. Then nobody else has to get involved. But quite often, that's not the case.
Usually you find the lead plaintiff has a very large equity position in a case and lost a substantial amount of money in their equity holdings, but not necessarily the debt holdings, options, and the other types of subsecurities there are.
And this is why this is the simple answer to the question why do Europeans get left out because sometime there's nobody there to represent the Europeans. And that would be you. That is when you really, really need to step up and take some action and get involved in these cases.
As Marvin said in the Enron case, there were certain debt offerings sold on the Luxembourg exchange. And at a certain point in the case, there were seven different types of bonds. And they only had representatives for two types of those bonds.
Initially, the court said, "Alright, one and two are in. Three, four, five, six, seven, they're out. They're never going to get a recovery in the case." Eventually, a few people were found, maybe three, four, five. And only six and seven were left out. But if people don't step up that have each of the type of subsecurities, especially if they're only marketed and sold in Europe to Europeans, those people will forever be left out of the case.
And it doesn't matter if you have a monitoring system to enable you to file a proof of claim at the end of the case because you're not going to get a proof of claim at the end of the case. You won't be included in the class definition. If you're not within the class definition, you never participate in the recovery at the end of the case. And that's where you really need to be proactive upfront because you don't--like I said, you don't have to be the lead plaintiff necessarily. But you have to stay on top of things and make sure that at some point your interests are covered at the class certification stage.
And lead counsel, I think we went into that as well.
Okay. If you decide to get involved, who's paying for it? Well, I think we've explained it. The great advantage of a U.S.-style class action is, in the United States, we have contingent fees, which you don't have here. So there's never a cost to you. We don't have the loser pays either. So there's never cost to you. Even if I'm not going to charge you, here in Europe, I don't think you're allowed to do that. But even if you could, you might lose the case and still have to pay the other side's lawyer, even if your lawyer waived his entire fee.
That's not the case in the United States. You never pay the other side, absent certain circumstances Todd mentioned of bad faith, which certainly is hopefully never going to be the case. And you don't have to pay your own lawyer, unless there is a pool of recovery within which to pay in. So you're never going to go out of pocket to pay your lawyer.
Okay. How much do you pay your lawyer at the end of the day if you decide to get involved? Well, ultimately, the court decides. An application is made to the court. You ask for a certain percentage or a certain fixed dollar amount. The court has to decide the fairness of it.
Now here's the good news from your perspective. If you get actively involved, especially at the lead plaintiff stage--necessarily help at the class representation stage. But it will help at the lead plaintiff stage. You can enter into an agreement with your lawyer limiting how much they'll get. Left to our own devices, a lawyer is probably going to ask for more money if he can get away with it and if he thinks the court will approve it.
Certainly that--if there's no fee agreement, the fee still has to be justified to the court and explained on the certain standards. I put in X amount of time. And that's why my fee is reasonable.
But you can limit that. Going into the case, you can say, "If I'm going to be the lead plaintiff and you're going to be the lead counsel, I want you to charge your fee never in excess of--" you know, make up a number, you know, ten percent, 15 percent, some number that you think is reasonable and that you'll get your counsel to agree to if he thinks it's reasonable and fiscally possible for him to run the case on that fee agreement.
Oftentimes, it's a lot more complicated than that. There'll be what we call a grid, you know, a certain percentage up to X, a smaller percentage X to Y, different from Y to Z, et cetera. So it's not just one number. But the whole fee can be worked out in advance. And it still has to be approved by the court.
So even if I agree to a 12 percent fee in a case, that doesn't mean the court has to give me that. I may still go to the court, and the court may say, "Twelve percent, still too high. I'm going to give you ten." But as I said, you can limit the amount I can ask for. If you don't limit it, I'll probably ask for something reasonable. But I can ask for as much to 33--as much as 33 percent. It will depend on the size of the case and the eventual recovery that we anticipate before it's filed, which is often hard to figure out. But we make our best guess what kind of fee agreement to enter into.
And the bottom point is probably the most important point with regard to the fee agreements because probably the most direct way you have of increasing your recovery--you know, every dollar I don't get is bad for me and is good for you. You know, if you agree to a fee of ten percent and I would've asked for 20 percent, well, you've just increased your net recovery by ten percent. There's probably no other way you can directly influence the amount of money that is going to be available to you in the settlement because what the defendants give is dependant on a lot of factors. And you have a limited input into that. You have a direct input into how much money the lawyer will take out of the pot at the end of the day.
Okay. Without going into too much detail on this, this goes back to--why sue in the United States instead of in your home country? We have two very powerful laws passed in the middle of the Depression. And the idea was they wanted to instill a greater confidence in the securities markets and get people investing in companies again.
The '33 Act, which Todd mentioned, is for prospectuses. It is a very, very strong statute. I don't think you have an equivalent in any country here in Europe. It is, as far as the issuer of a security goes, a strict liability scheme. If there's any false or misleading statement, they have no defense. They're liable. And they have to pay.
For other defendants, there are certain what we call affirmative defenses that they can prove. It's very difficult. It is great to be able to sue under what we call the '33 Act in the United States if you bought on a prospectus or a public offering, very plaintiff friendly.The '34 Act, which is the other statute, has some twists in it. You have to prove C-enter [phonetic]. That means a knowing act on the part of the defendant, as somebody said before. This is very difficult. And actually, I want to use the C-enter standard to amplify a couple of points previous speakers made.
I believe it was Merrill that spoke about the difficult of actually trying a securities class action and how it's different. And the C-enter requirement makes it very different than prosecuting most cases. To prove C-enter in one of these cases, if I was suing, if I was suing Merrill, for instance, I have to prove his state of mind. I have to prove he actually knew the statement was false and misleading at the time he made the statement.
Well, how do I do that? It's difficult to call a witness that's going to be able to testify as to Merrill's state of mind at a certain point in time five and six years ago, whenever the fraud was. The only way to prove it is through documentary evidence and through cross examination. And securities class actions, if they ever go to trial--and I think my firm set the 20th century record by trying three cases in 1993, which is quite an operation because usually in the whole world there's one case tried a year. So it was kind of an odd year.
But it's very difficult to prove a case solely through cross examination without your own witnesses to call that's going to say, "Yes, these are the state of facts." My wife was a public prosecutor for ten years. She came to one of my trials once. I've been to hers. And she came away with the conclusion that it had almost nothing in common with her cases. When she actually got to call witnesses and say, "Yes, somebody pulled a gun. And somebody demanded drugs," et cetera. It's entirely different to prove your case by solely through cross examination by putting--me putting Merrill on the stand and asking him questions and trying to get him to admit to something or to prove my case through whatever I can get him to say and whatever the other company defendants will say in a bunch of documents. So it's quite different trying one of these cases. He was entirely right about that.
The other point about the 34 Act is the damages are measured in quite a unique way. And I think I have a slide up here. And this proves why it's very different for you to pursue your remedies in the U.S. as opposed to pursuing them in Europe.
I think Marvin defined what a class period is. And in this case, it is the period of time between A on this graph and C on the graph. And you can see at point A, that's when they make a false statement and the price of the stock gets inflated by X dollars per share. Everything goes along, happy as can be.
Then you get to period B. As we say, the truth is disclosed. You see the stock drops, goes--well, there's no letter. But you can see a very sharp drop. And we indicate it with the damages graphic on there. And that would be the measure of damages in a 10B case.
Now your stock moves along--oh, I think that's $5. So it dropped $5 a share. Okay. Now it's moving along at $5 a share. And the company comes out with some good news. Who knows? It turns out they were, you know, making a new parking lot. And they discovered oil, you know, when they were drilling the foundation. Great. The stock goes up five bucks a share.
Okay. Now it's back to $10. Well, now you're even. You bought the stock at $10. At a certain point, you were down $5. Now it's back up to $10. Then you know, the price of oil goes up. So the price of this company stock keeps going up and drifts up to $13 a share.
Okay. For the people I've spoken to--and I've had conversations ad nauseum with this with Germany lawyers. So I know it's the case in Germany. You would not have a cause of action in Germany if you bought the stock at $10 and follow this pattern, dropped five, and then recovered up to 13. And the thinking at least in that country is you bought at ten. Now it's 13. You're up three. What are you complaining about? You made $3 a share. You should be happy.
In the United States, that's not the thinking. The thinking behind the 34 Act was, well, maybe you're up three. But you should be up eight because you paid ten. But you really should've paid five. That was the true value of the stock. So yeah, it's nice that you're up three. But you should be up eight. And we're going to provide you a remedy to get that other $3 back. And that is something as far as I can tell from speaking to European lawyers is unique to the American system of damage calculation and provides a great remedy.
And it also provides a great opportunity to once again point out, as if nobody's told you yet, you need portfolio monitoring because if you're doing this on your own, you might be looking at your stock portfolio and say, "Alright, I bought XYZ at ten. How's it doing? Well, it's at 13, pretty good. Don't need to look any further into it." Well, unless you have somebody looking into it on an actual-time basis, monthly, and pretty much any securities class action lawyer is going to be aware what happens when the stock goes from ten to five and is going to know that this potential case. And if you have somebody monitoring your portfolio, they'll let you know if you have potential cause of action. And if you're just looking at it on your own and thinking, well, we can do this in house, you might night catch something like this.
Okay. I think by now, you should all be aware of what the advantages of the U.S. system are, class actions, contingent fees. We didn't talk that much about discovery yet, again, a unique system of American style justice, which Europeans think is almost insane when I explain it to them. But we can get every document ever published by a company, every email, every internal memo that has anything to do with the topic of the case. I mean, I can't get irrelevant documents. But if I think it's relevant to the case, I can get every stitch of paper that's related to the case. And sometimes you get more than you want.
We can get it all. We can take depositions. That means pre-trial testimony. Sit a guy down in a room, eight hours, ask him any question we want related to the case. And he has to answer. He can't say, "I don't want to." He can't say, "I'm embarrassed." He can't say, "Well, then I'm admitting fraud." I mean, he has to answer--sometimes they do lie. But he's supposed to answer truthfully.
Okay. So what should you be doing to get involved in these cases? Well, like I said, number one, consider getting involved upfront because it may not be simply enough to sit back and say, "Well, somebody else is taking care of me. I can file my proof of claim," because there may be no proof of claim to file, as I said. And it may be that action is necessary in advance before it's too late for you to take action. And many people have discussed opt outs. So I'm not going to go over that again.
And just to go back to point one, consider getting involved as a lead plaintiff or class rep. There are many instances when a case is filed--and as I said, typically the lead plaintiff has an enormous equity loss. But there are many other types of securities to be covered. And that is where it's not just enough to have portfolio management or portfolio monitoring by anyone. And there's certainly services that do it. And they do it very well in terms of telling you when proofs of claim need to be filed and when cases have been filed, et cetera. But there is a definite value added to having a law firm also get involved in your portfolio monitoring because only a law firm can tell you when there are instances when you may need to step forward in what we call a niche situation or a special situation.
Sometimes the class cert decision comes down. You know, somebody else has stepped forward as the class representative. And that's good. So you need do nothing. Then the court issues its decision and has to decide whether or not to certify a class. And the decision comes down. And it will say that the person who is representing your particular type of security, who you think is covering your interest, is not adequate for some reason. Maybe he has no damages. Maybe he changed his mind or he gave a bad deposition. And there are many reasons why somebody may not be certified as a class representative. So he's kicked out.
If somebody doesn't come forward to represent your security and take his place, you'll be left out at the end of the day. And usually, only a law firm is going to be able to provide you with that type of specific information.
One of the things I do at my firm, which more than anything proves what a geek I am, is that I read every single opinion regarding a securities class action that comes down every year, usually within about two weeks of the time it's issued, every motion to dismiss, every class cert opinion, all the intermediate opinions. And that enables us and the people who do it at other firms for their firm to know when these situations arise and when they need to inform their clients that there are situations where extra action may need to be taken where previously they thought it was not.
And to give you one more quick example in that regard, there was a case about four months ago. It had been pending for a few years. It was just a equity case. There were no special types of securities available. So the equity people are covered. And everybody is marching along. And then all of a sudden, it gets to class cert. And the court says I don't like this class representative. I'm kicking him out. And the case is dismissed completely.
Now in that situation when a class rep is thrown out for lack of adequacy, a new class action can be filed. So if you wanted to, you could step forward and say I want to file a class action and be the class representative. Or since that course of action was told for all those years, you could come forward and say, "I want to bring my individual action," if you had a stake large nough to warrant that. But absent having a law firm being involved in your monitoring, you might not be aware of that type of situation.
Okay. We talked about two. We talked about three, four. Number five many people have spoken about under the rubric of corporate and governance. This is an additional reason why you may want to get involved in addition to financial interests. I would not view this as the only reason to get involved in a case. But it could tip the scales if you're on the fence as to whether your stake is large enough or not.If you're still holding stock in the company, you may want to make sure that this kind of stuff doesn't happen again. And one way would be to insist on the corporate governance reforms as part of the settlement and make the company going stronger. And if you still hold it, that's what you want.
And point number one, a very important reason to get involved is influence on the plan of allocation. The plan of allocation in a nutshell is what it means when the money is distributed at the end of the day. When you get your proof of claim, there's going to be a very long and complicated explanation of how your loss is calculated.
Maybe sometimes it's simple. Usually, it's not. And people who bought at different times or bought different securities if they're available will be entitled to different amounts of damages when your claim is calculated. That will determine what your proportionate share of the settlement is.
So we look at this example. At the beginning of the class period, the stock is inflated by $6 due to the fraud. Okay. So if you bought in that time period A, that's how much money you lost, $6 because of the fraud. Then there's what we call a partial disclosure. The whole truth doesn't come out. But some of the truth comes out. And you know that they lied about half the stuff but not the other half. And the stock drops by $3 to reflect the truth you now know about the company.
And it goes along at that value for some period of time. And then the other shoe drops. Now you know the whole truth. And it drops the other $3. Well, the lead plaintiff and the class representatives have a great say in how the plan of allocation is going to be formulated. If you bought during time period A, you want to maximize the amount of money that goes back to the people who bought in A. If you bought in time period B, naturally the guy who bought in A is going to say, "You only get $3 a share because there's already a partial truth that comes out." If there's nobody who bought in time period A and the class representative is just the guy who bought in time period B, he might say, "You know, I think a good plan of allocation would be $3 for everybody, whether they bought in the beginning or the end."
So if you bought in A, you're interests would not be represented. And maybe you're not going to get as much back at the end of the day as you should, now which is not to say that we as lawyers are going to let the guy who bought in the second half totally get away with that. But he's going to have some say in how it's shaped. And if he can come up with good arguments why the people in A should get less, maybe they will get less unless there's somebody really advocating for the people who bought in that first half of the class period.
This very complicated chart I won't leave up here too long. But it's in the book. It's an actual case. It shows you a plan of allocation and how it was calculated and how different people in different periods received various amounts of money.
Okay. Another reason to get involved--you want--as I said, certainly not all classes are represented. Also, you want to make sure all defendants are represented. In the A Hold [phonetic] case, very big case in the United States, settled for $1 billion, I'm sure you're all aware of it. As I in my happy geekdom was reading the opinion on the case, I realized that they dismissed a certain part of the case because nobody had bought on a particular offering. And I think it was a European offering.
And we called up the lead counsel in that case. And we said, "Hey, I noticed that you have nobody who bought the whatever offering from whoever the defendant was," who I don't recall at the moment. "If we could find somebody, would that be useful?" And they said, "Absolutely. That defendant has been released from the case. If we can find somebody who bought on the offering, we can get them back into the case."
We spoke to our European clients. We were able to find somebody who actually bought that security on that offering. They came forward as a class representative. We were able to add in the other underwriting defendants. The settlement was $1 billion. And they kicked in a substantial part of that--I mean, not half, but at least $100 million or $200 million of that was because an additional defendant was able to be included because somebody was willing to step up as a class representative when somebody was needed.
I think this has been explained previously. I explained this, although most lawyers don't want me to.
As I say, if you look at the second point, you know, why can you reduce the legal fees? Why? Because you lost a lot of money and you have a big stake. And that gives you power. You know, the guy that lost 100 shares, if he's the only guy that comes forward, well, he's not going to have that much bargaining power to reduce the fees because if he wants to enter into an agreement that's too onerous, we could always say, "That's nice. But you lost 100 shares. I now have--we took out the notice that we're required to by law. I have 500 emails from a guy that lost 100 shares. We'll just use him instead of you. And I don't have to enter into this agreement that I think is too onerous."
The 100,000 share guy or the 1 million share guy, like yourself, has great bargaining power to begin with because I don't get 50 or 500 emails from 100,000 share people.
Okay. Most of this has been covered by previous speakers. And I don't want to repeat it. Plus, I'm running out of time. So I'll probably end here and take any questions.
MALE VOICE 2: Thank you very much. Do we have any questions from the floor? There's two. Tim, I'll come to you first. And then I'll come over there.
MALE VOICE 3: Thanks. You're talking about the 1933 Act and the 1934 Act.
MALE VOICE 1: Yes.
MALE VOICE 3: Could you just clarify a little bit for me? The '33 Act you said was to do with shares that have been bought or assets that have been bought on a prospectus or an IPO. So does that mean if we have clients who've bought shares not in that opening period, then they would be under the 1934 Act, which you say is harder to prosecute?
MALE VOICE 1: Generally speaking, yes. And I'll explain a little bit. And perhaps it'll be clearer. You don't have to buy directly on the public offering in the sense that when the shares are sold by Merrill Lynch--stick with my Merrill examples--you don't have to buy directly from Merrill Lynch on the offering and say, "Yes, I bought it right from him on day one at the offering price of $10 a share."
There's a certain period of time in any 1933 Act case in which your shares are what we call traceable back to the offering. In the initial public offering, the only shares traded are the ones that were sold in the offering. And as long as only those initially sold shares are the ones that are in the market, you can trace your shares back. And you get the remedies of the 1933 Act.
At a certain point, the companies do what we call pollute the pool. And then they start trading restricted shares and putting shares back into the market that were not registered and sold under that offering. Once they do that, the way the securities markets are today, you know, you buy a share on the open market. You can never trace your share back to the public offering because you don't know whether it was the share that was registered or the share that came from the restricted stock. So at that point, you no longer have a remedy under the '33 Act.
MALE VOICE 2: Okay. Thank you. There's another question just--
MALE VOICE 4: Hello. I just wanted to quantify the prevalence of this portfolio monitoring. If there are 50 states obviously in the U.S. or 51, District of Columbia, about the state retirement pension plans, how many of those are using such portfolio monitoring services that the law firms provide? I was just curious, a guess, best guess.
MALE VOICE 1: My answer's going to be well in excess of 51 because it's not going to be merely the California State plan because there's the California State teachers' plan, the California X plan, Y plan, and Z plan. So there is probably hundreds of public pension funds using portfolio monitoring in the United States. In addition to private pension funds, most unions have very large pension funds that also use the portfolio monitoring services.
MALE VOICE 2: Okay. Thank you. I think there's another question just in the middle.
MALE VOICE 5: just a very short question for clarification--obviously, the firms that you represent here are certainly representing the class action plaintiffs. Is there another set of experts that are defendant attorneys? And I take it they've got a different fee basis in terms of how they collect their money, so representing the shares?
MALE VOICE 1: Can you repeat that? It wasn't clear to me.
MALE VOICE 5: Well, obviously, if you take Enron, for instance, I mean, most of the companies - - have all seemed to lose. So I can't imagine that the lawyers in those cases would be in a winner-winner [phonetic] fee. So I was just wondering whether it's the same sets of lawyers that do both or whether those are a select bunch of attorneys that are representing the companies that are being sued.
MALE VOICE 1: Just to make sure I'm answering the right question before I answer, you're asking is it the same pool of plaintiff's lawyers that do most of these cases in the United States?
MALE VOICE 5: No, what I'm asking is that--are you mainly just doing the plaintiff work? Or is there a separate set of lawyers that do the defendant work?
MALE VOICE 1: Oh, yes, my firm does only plaintiff's work. You'll find most firms that do this type of work will do only plaintiff's work. And the firms that defend these cases will do only defense work. There are a few firms--and when I say few, you can probably count them on one hand--that can actually cross over and do both. And what usually that means is that they don't do a whole lot of either type just because the conflicts become too great if you start doing both types that you would be conflicted out of everything if you did too much of it.
MALE VOICE 5: And as far as the remuneration's concerned, does the remuneration come from the company or right with the pool of money that's been argued over? Or how are they remunerated?
MALE VOICE 1: The defendant's lawyers?
MALE VOICE 5: Yeah.
MALE VOICE 1: Oh, they're very lucky. They get paid at the end of every month by the company.
MALE VOICE 5: Right. Okay. So they don't have the same - - that you have.
MALE VOICE 1: Oh, no, not--well, their interest is in making the case last as long as possible so they keep getting those monthly checks.
MALE VOICE 5: Okay. Thanks very much for clarifying that.
MALE VOICE 1: And just to add one more thing, it's not necessarily the company that's paying those monthly checks. In a bigger case, just about in any case, there's going to be a directors' and officers' liability insurance policy that covers these kinds of cases. And in the first instance, the lawyers will be paid out of that D&O policy. I don't remember who said it. But they referred to the policies as wasting. And that's what he meant.
The defense lawyers get paid every month. So if it's a $20 million policy to start, by the time you get to settle the case, there may be $10 million left. And that does create some settlement pressure when it comes time to settle because they say, "Look, you know, we have 17 now. Next year, we'll have 13. So do you want to sit down today? Or do you want to sit down a year from now?