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The pain of reading these
pieces reminds me of why it was worth it to go to law school. At least I understand how little the analysts know about litigation.
There are several phases of litigation that seem to elude the sensibilities of analysts. Here's the primer of what you need to know about how the justice system really works.
First, federal judges are incredibly powerful. You get a federal judge who believes that Merck is the devil, that's the end of Merck. He or she can devise a novel remedy that includes taking the company from the shareholders and giving it to the aggrieved plaintiffs. That this is legal and possible is simply never discussed by any of these "analysts." Makes me furious, especially because it happened once already, with AH Robins, which got taken away from shareholders and given to the women who were harmed by using Robins' Dalkon Shield.
Second, federal prosecutors are incredibly powerful. You get a rogue prosecutor who decides to go after Merck criminally -- heck, even go after it for manslaughter in some form -- you end up with some verdicts that easily could put the company under. Why people don't believe this could happen is a testament to how naive we are about the power of the government. It is all-powerful, and not pro-capitalist.
Third, you could have people who didn't want to sue Merck because they believed that they could never win now calling lawyers. When we got a few wins against tobacco, we suddenly had litigation floodgates open and we got two decades of lawsuits that
are winding down.
All of these factors make the question of "the dividend" a bit of a joke. Who knows? The company may have very little say in this once the Pandora's box of litigation is opened. Any assurances are simply irresponsible.
What drives me crazy, of course, is that when I say this stuff aloud on television, people brand
irresponsible. How funny is that? The only irresponsibility is on the part of those analysts who simply refuse to recognize how out-of-control litigation is in this country and how powerless companies are to stop both plaintiffs and prosecutors.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for ActionAlertsPLUS by
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