Prohibits any restrictions on fee contracts with attorneys by consumers or businesses, and requires each party to pay its own legal fees. Declares this initiative would be in conflict with any other initiative that limits the right to bring actions alleging securities fraud. Because of the significant investment, brisk pace and substantial risk associated with developing new products in this rapidly evolving field, high-tech firms frequently have difficulty accurately forecasting future performances. Officers in high-tech companies point to a pattern of securities litigation filed within days of minor drops in stock prices. Some suits may be boilerplate complaints that contain little evidence, but may have the effect of pushing companies into settling out of court to avoid long and expensive trials.
Evidence is mixed as to whether a growing number of lawsuits are meritless.
But a recent study showed 93 percent of lawsuits resulted in compensation for an average of just 6 percent of the losses that were claimed. Critics contend a fundamental problem in corporate law is insufficient management accountability to the shareholders, on whose behalf management exercises power. The essential legal tool for making managers accountable to shareholders is the derivative suit. These suits have been used, for example, to challenge transactions and mergers on grounds of unfair terms, secret profits, kickbacks to management, bribes and extortion, misapplication of funds, misappropriation of corporate business opportunities, excessive stock options issued by board members to themselves, excessive salaries, violation of contractual arrangements, and unlawful securities transactions. The initiative could pose a potential increase in administrative costs to the courts, depending on the number of lawsuits it triggers.