Background
Currently, persons who own stock in a company (shareholders) can sue the company when they believe there has been misconduct by company officials which violates laws protecting the interests of the shareholders. Many of these lawsuits are ``class action cases,'' meaning that these lawsuits are filed on behalf of a group of shareholders with similar interests. Under current law, with certain exceptions, both the suing party (the ``plaintiff'') and the defending party (the ``defendant'') are required to pay their own legal expenses.
Proposal
This measure changes who is responsible for paying the legal expenses of persons involved in shareholder lawsuits. Specifically, the measure requires the losing party in shareholder lawsuits to pay the winning party's reasonable legal expenses, including attorney fees. The measure permits the court, however, to waive the liability of the losing party if it finds that the lawsuit was substantially justified and the payment of the legal expenses would be unjust. The court may also reduce the expenses or require the losing attorney, rather than the losing client, to pay all or part of the expenses.
This measure also requires the plaintiff in shareholder lawsuits to post a bond, if ordered by the court, to ensure the payment of the defendant's expenses should the plaintiff lose. No bond is required if the plaintiff owned or traded a specified amount of the company's stock. The measure provides that the plaintiff's attorney may furnish the bond.
Fiscal Impact
The fiscal impact of this measure on state and local governments is unknown, but probably not significant. This is because there are few of these cases in the state courts.