Dumping And Suing: Legal, But Questionable

Law360, New York (March 3, 2006, 12:00 AM EST) -- Plaintiffs and their attorneys are often accused of scouring the legal underbelly in search of greater potential payouts, but the growing practice of the plaintiffs’ bar teaming up with short-sellers signals a new low, critics charge.

Dumping and suing, which involves plaintiffs short-selling a company’s stock before announcing the suit, has become the subject of a growing debate on whether plaintiffs’ attorneys or hedge funds tipped off by plaintiffs who engage in these practices are guilty of traditional insider trading.

Current securities law says no, but...
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