How to Get Revenge on Wall Street

But the Wall Street-tainted research scandal has opened a new avenue of opportunity for class-action lawyers because so many investor claims involve a common allegation of an analyst wantonly hyping a stock. That's why class-action lawyers have been filing class-action lawsuits over tainted brokerage research even before the terms of last year's $1.4 billion industrywide settlement have been finalized.

At last count, dozens of class-actions have been filed against Grubman and Citigroup's Salomon Smith Barney brokerage division. Merrill Lynch(MER Quote), the former home of Internet guru Henry Blodget, is a defendant in more than 150 class-actions.

More lawsuits and arbitrations are expected to follow, once securities regulators release the internal emails they gathered during their massive investigation into the stock research practices at a dozen Wall Street firms. Merrill Lynch, for instance, is expecting such an onslaught of arbitrations that it has been advertising on Monster.com, an online employment service, looking to hire part-time lawyers to defend its interests.

But even with regulators expected to dump all of Wall Street's dirty laundry out in the open, prevailing in an arbitration or class-action won't be easy. It's worth remembering that one of the first "tainted research" lawsuits -- a class-action filed against Morgan Stanley(MWD Quote) and its online analyst Mary Meeker -- was quickly dismissed by a federal judge.

To win, investors will need to show that they relied on an analyst's stock touts in deciding to buy a stock. And since most investors deal primarily with a broker, not an analyst, that will be difficult to establish. It's not enough for an investor to simply say they heard that a high-profile analyst like Grubman, Blodget or Meeker were bullish on a particular stock.

"I believe you really need to show reliance on a research report," said Jill Gross, director of the securities arbitration clinic at Pace University School of Law. "In other words, an investor would not have purchased a stock if not for the recommendation."