New York Stock Exchange
Chairman Richard Grasso hadn't had much occasion to do business with Jerry Krim. Not, that is, until a federal lawsuit brought by Krim named the Big Board's top dog as a defendant.
The suit put Grasso among the swelling ranks of corporate executives who have been sued by a man who may be the nation's most prolific filer of shareholder lawsuits.
Despite a 1995
law to put the brakes on excessive shareholder lawsuits, Krim now has filed at least 50 shareholder suits over the past decade, court records show. The activity of such busy plaintiffs is a sign that despite their lobbyists and lawyers' best efforts, publicly traded companies can't shake these litigious legions.
They certainly haven't dissuaded Krim, who has filed most of his suits after the
Private Securities Litigation Reform Act
became law. Though his chief lawyer flatly disagrees, some legal experts label Krim a professional plaintiff.
"I think it's abusive and ridiculous that one man can file cases over and over again in various jurisdictions," says Charles Schwartz, a Houston lawyer who is defending
in a shareholder suit Krim filed last year.
Krim has filed shareholder suits in a long list of places: federal, state and bankruptcy courts in Texas, California, New York and Illinois; appeals courts in numerous states; and the chancery court in Delaware.
Krim has sued billionaires such as
Chairman John Kluge, New York developer
Chairman Ronald Perelman and cable television magnate John Malone.
But whatever the appearances, Krim is no professional litigant, insists Harvey Greenfield, a New York lawyer who specializes in class action litigation and has filed many of Krim's lawsuits for him. He notes, for example, that Krim receives only what other members of the "class" do when the suits are successful.
"He's got millions of dollars in securities and, frankly, he has a right to protect his interests," Greenfield says. "These cases all have merit."
It should be neither a surprise nor a concern that class action law firms use the same plaintiff over and over again, says Samual Issacharoff, a professor at the
Columbia University Law School
"Increasingly, it's an issue that doesn't even give pause to the courts," he says. "The reality is that these are cases that are brought by lawyers. The named plaintiff plays a secondary gate-keeping function."
When Krim sued Grasso last year, the case wasn't about Grasso's role at the Big Board. The suit was against
, a Long Island-based software firm that's been embroiled in a shareholder dispute over its executive compensation.
Grasso sits on the Computer Associates board. He declined, through an exchange spokesman, to comment on the suit or on Krim. The suit since has been consolidated with other litigation against the company.
Greenfield, also well-known in class action circles, has represented Krim in so many suits that the lawyer says he can't remember them all. Krim, who lives in Arlington, Va., didn't respond to a request for an interview.
A Closet Full of Suits
Court records show Krim often owns hundreds of shares of stock in many of the companies he sues. Schwartz, the Waste Management lawyer, says he finds it at least suspicious that Krim makes legal claims on so many of his investments.
"Having an extraordinary run of bad luck there, aren't you, Mr. Krim?" asks Schwartz, a partner in
Vinson & Elkins
Similar questions came up in 1998 when a federal judge in Texas threw out a suit Krim filed against the chairman of
First City Bancorporation of Texas
, after finding that Krim had purchased the shares in the company after he sued, according to press reports.
By 1995, the debate over shareholder suits had reached such a pitch that Congress took action to rein them in, and do away with "professional plaintiffs" used by class action law firms.
Among other things, the act prohibits an individual from serving as the lead plaintiff in more than five class action shareholder lawsuits in a three-year period. It also requires plaintiffs to disclose other cases in which they have been plaintiffs.
But the act does nothing to limit someone from filing a suit that is then consolidated with other lawsuits, as often happens in class action litigation. That is the case with many of Krim's claims.
Nationally, federal class action securities suits rose to 244 in 1998 from 162 in 1995. Last year, there were 216, according to a
report by the
Stanford University School of Law
The federal law has, however, prompted some plaintiffs to steer shareholder suits to state courts, Stanford found.
Krim, however, is so profligate in his suit-filing that
Milberg Weiss Bershad Hynes & Lerach LLP
-- the biggest and baddest of the class action law firms -- won't even handle him directly as a client, says Darren Robbins, a lawyer at the firm. Krim has indirectly ended up as a Milberg Weiss client when the firm is appointed as lead counsel on a large class action that consolidates many suits.
For his part, Greenfield unabashedly defends his lawsuits and Krim's motivations. Investor lawsuits, he says, push management to shape up.
"He wants justice," Greenfield says.