Top Menu

IBM Faces NSA Cooperation Fallout With Lawsuit

You really have to admire how creative lawyers can be. There are certain laws that lawyers can base their lawsuits on when it comes to corporate law and one particular type of lawsuit is the Shareholder Lawsuit. If certain decisions of a corporation’s board of directors lead to shareholders being harmed, this harm normally takes the place of the stock price dropping or some sort of major relationship or partnership dissolving which then translate to lower earning for the company. There are many ways to define this harm.

Be that as it may, the latest revelations by Edward Snowden of NSA spying has opened a very interesting door to corporate lawsuits. Some shareholders of IBM are filing a lawsuit against the giant global data services company for its cooperation with the NSA. On paper, the logic is pretty good. There is a straight line of causation.

Step 1. IBM cooperates with the NSA’s prism program.
Step 2. This cooperation becomes known in China.
Step 3. Due to Chinese outrage regarding this cooperation, IBM’s sales in China drops.
Step 4. This drop in sales impact IBM’s bottom line and it causes the company’s stock to decline.

Pretty interesting causation, pretty interesting chain of events and that is precisely what the complaint filed by the Louisiana Share of Pension and Relief Fund is accusing IBM of doing. IBM naturally is saying that this is just a wild conspiracy theory, but anybody who is paying attention to this, who is a little bit cynical, could easily conclude that this is really a typical class action lawsuit because the pension fund is seeking to be able to represent whoever bought the stock of IBM between the dates June 25 and October 16 when all these alleged events and damage took place.

One thing you have to keep in mind about class action lawsuits is that when you get to represent the law a class, then a lot of money would be involved and most of the time, this class action lawsuit are settled. The big winners are primarily lawyers because they, under court rules, get to collect the reasonable amount of their services rendered for bringing the suit forward. The named plaintiffs usually get settlements that are very low because the actual damages are chopped up among a huge number of people. It’s a very interesting case, very interesting way to pursue a class action lawsuit. I’m sure this is not the most interesting. They probably happened in the past and there’s probably more interesting quirky cases in the future.