For class action plaintiffs lawyers, Ted Frank at the non-profit Center for Class Action Fairness, is like a bad rash that never quite goes away. Frank’s history is in tort reform advocacy, and he now specializes in filing objections to class action settlements that (in his view) overcompensate plaintiffs lawyers at the expense of their clients. He’s filed papers in more than a dozen cases on behalf of class members who don’t like the deals their lawyers have reached with defendants. In more than a few of them, he’s persuaded courts to reduce attorneys’ fees or order modifications to the settlements. (In others, including the Nvidia case he describes here, he’s flat out lost.)
But no one can accuse Ted Frank of not putting his money where his mouth is. Last week, in anticipation of what he is absolutely certain will be the U.S. Supreme Court’s decertification of the biggest gender discrimination class action in history, Frank invested 10 percent of his net worth in Wal-Mart options contracts, betting that when the Court issues its ruling in Wal-Mart v. Dukes, Wal-Mart’s stock price will bounce up—and he’ll be able to retire from the class action objection biz a little earlier. (If you’re wondering, he told OTC his net worth is in “the high six figures.)
Frank disclosed the investment at his Point of Law blog, but OTC called him Monday with some more questions. Like, Ten percent of your net worth? Are you crazy? “I’m probably a little too risk neutral for my own good,” said Frank, who mentioned that he also used to play high-stakes poker to earn a little extra on the side. “But however this works out, it’s going to cost me a lot less than being a public interest litigator rather than doing something else.”
Fair enough. And honestly, when Frank explained his theory, it made sense. After listening to oral arguments in the Dukes case, which took place on March 29, Frank concluded there’s no way this Supreme Court is going to let stand the class certification ruling by the U.S. Court of Appeals for the Ninth Circuit. Yet he noticed that Wal-Mart’s share price didn’t budge in response to the argument at the high court. Frank inferred that the market hasn’t factored decertification into Wal-Mart’s stock value, just as it didn’t account for previous rulings he considered sure bets, like the Illinois state supreme court’s 2005 overturning of a $10 billion jury verdict against Philip Morris.
To maximize the impact he believes the Supreme Court’s ruling will have on Wal-Mart’s share price, Frank waited until last week—when there’s less than a month left for the Justices to rule—to invest. He plans to sell after the SCOTUS bounce levels off.
“I’m swimming upstream against the efficient market hypothesis,” he said.
So was he nervous at 10 A.M. Monday morning, waiting to see if the Court’s Wal-Mart ruling had come down? (It didn’t.) Frank said he doesn’t rattle easily, but he’s anxious to see how his bet plays out. “I was on a plane, and I did pay the $9.99 for WiFi,” he said. “And I did keep hitting the refresh button to see if the ruling was in.”
(Reporting by Alison Frankel)