This Space for Rent

High tech ambulance chasers

On saturday, the mail delivery included a couple of ledger-sized envelopes, which looked like they might contain legal documents. On the hope that they were the legal documents telling me that I had inherited US$1 bazillion from a previously unknown benefactor, I opened one up, to find a little yellow cover sheet saying that I might qualify to get money as part of a class action suit against Red Hat for something that happened during their IPO. Ooo-kay, it's dimly possible that the wannabe open source Microsoft may have been up to something fishy during their IPO during the bubbly .com boom. The second envelope, on the other hand, contained a little yellow cover sheet saying that I might qualify to get money as part of a class action suit against VA Research Linux Software for (and I suspect that you can see this coming) something that happened during their IPO. And, wonderous to relate, both of these documents came from the exact same legal firms.

So I looked over the documents a little more carefully, and realized that my original read was incorrect; I wasn't not actually someone who might qualify to get money as part of a class action suit, but the law firms are instead shopping around for people to back the proposed class action suits against Red Hat and VA whatever. The sums are not huge -- US$4.5 million against Red Hat, US$14 million against VA whatever -- but the class action lawyers intend to keep a third of the gross from the case for their own, plus take their "litigation expenses" out of the remaining two thirds before distributing it to the people who bought into the scheme. I searched for details on some of the named lawyers, and they are pretty much uniformly considered to be expensive lawyers even in the fairly expensive territory of Wall Street. So I would not be at all surprised to discover that the people who signed on to these proposed lawsuits are walking away with (before taxes) approximately US$zero (not counting stock losses if this class action lawsuit causes one or more of the companies to fail), while the lawyers walk away with considerably more than that.

And it's not just these two companies, either! The longer form that came with the little yellow cover sheets listed, as an appendix, 296 other companies that they're also suing, and which have nothing in common with Red Hat or VA whatever except that they also IPOed during the peak tech bubble frenzy.

I've heard of this sort of thing before; some company doesn't have their stock raise to stratospheric levels during the IPO, and is thus immediately sued by some sharpies claiming that the stock not going up is because of malfeasance on the part of the company, or some company has an IPO bubble deflate and is immediately sued by some sharpies who claim that the stock not staying up is because of malfeasance on the part of the company. But I've never heard of it on this scale before. 298 companies, all being dinged for small possibly not company-threatening sums, and all of which will require spending considerable cash to defend themselves against unproven claims of financial recklessness because some sharpies see the .com crash as evidence of some sort of massive criminal conspiracy.

To my untrained eye, it looks an awful lot like a shakedown attempt. But these are lawyers, and I'm sure they have a good reason for doing this. I'd certainly like to see the reasoning for doing something that looks for all the world like the legal version of pulling out a shotgun and blasting away into a flock of passenger pigeons.

But I'm not holding my breath.

Comments


I would not be surprised if it turned out that Microsoft was footing the bill on this attempt to smother Linux. And Microsoft wouldn't care how expensive the lawyers are.

Lynn Mon Dec 5 08:22:36 2005

If you look at the list of .com companies that are listed as targets in this solicitation letter, not very many of them turn out to be Linux companies. And these days, VA whatever is almost completely irrelevant to whether Linux succeeds or fails (if Red Hat was killed off, it would be a small hiccup until one of the 100 or so redhat-derived distributions started hiring laid-off programmers and started publishing Yellow Jacket™ Enterprise Linux.)

I'm convinced they're trying for a traditional "we'll sue because your stock {went up|went down}" class action suit.

David Parsons Mon Dec 5 09:10:11 2005

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