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Michael Freeborn's Practice Areas:
Antitrust Litigation
Commercial Litigation
Employment Law
Environmental Litigation
Product Liability
Securities Litigation
His securities litigation has included the
following cases --
 | Grassi v. Information Resources, Inc.
From the dawn of time until today, there has been only one "fraud
on the market" securities class action in which, after trial, a jury
has found a company "not guilty" -- despite evidence that
directors and officers were selling shares prior to a disappointing earnings
announcement.
Most such cases settle without trial. The damages can be enormous, and
management rarely wants to risk the consequences in a "bet your
company" case. Those cases which are not settled may instead be
disposed of prior to trial by motions to dismiss on technical grounds, or
motions for summary judgment.
A few have been tried and won by the defendants where there was no
selling of shares by directors and officers before the earnings
announcement. A jury may be impressed by the argument which says,
"Gee, folks, don't you think that if insiders knew in advance that the
company wouldn't meet its earnings projection, somebody would have
sold their shares?"
Obviously, however, you can't make that argument in a case where directors and
officers did sell shares.
Michael has the distinction of being the only trial lawyer in history to
successfully defend a company before a jury in these challenging circumstances.
Grassi v. Information Resources, Inc., 63 F.3d 596 (7th Cir.
1995).
In that case, the plaintiffs highlighted the "'insider trading'
motive" in the trial court. Id. at 602. But after a
seven-week trial, including testimony by 28 witnesses and over 350 exhibits,
the jury returned a special verdict finding that no fraud had been committed
by any defendant. Id. at 599.
A well-respected consulting group known as National Economic Research
Associates (NERA) conducts studies
of class actions like this. We contacted them and
verified that their extensive database contains no other such results.
This case is still in the news.
Michael's successful use of a "shadow jury" during trial of the case
was most recently featured in a front page
article
of the National Law Journal on May 21, 2001.
(As with all records, however, this one is not likely to stand
forever. If you think you know of a case which prevents Michael from
continuing to claim this record, please contact us. We're offering a $100
bounty to the first person who presents us with another such jury verdict.)
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| Forsythe v. Indeck Energy et al
Since so few securities cases are ultimately tried, and fewer still
are tried successfully, the experience in Grassi has been
valuable. It has clearly helped Michael and his colleagues resolve
cases for other clients on advantageous terms. Recently, for example,
Indeck Energy and others were sued in a multimillion dollar case alleging
securities fraud, breach of fiduciary duty and other purported
wrongdoing.
The plaintiffs were represented by a major Chicago law firm. Michael
represented the defendant corporation.
When he took the deposition of just one of the plaintiffs, they each
had a preview of what cross examination at trial would be like.
Shortly thereafter the plaintiffs voluntarily dismissed their case, and were
later ordered by the court to pay the defendants more than $25,000 in
court costs.
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| Gebo v. Putman et al
Michael's securities litigation experience has not been limited to
representation of companies. He is currently defending several
directors and officers of Anicom, Inc. in a shareholders' derivative action
filed by shareholders in federal court in Chicago. The plaintiffs
allege that the defendants manipulated the financial records of the company
by violating Generally Accepted Accounting Principles in order to improperly
inflate the company's financial condition.
They further allege that on July 18,2000 the defendants, knowing that they
could no longer hide their accounting improprieties, announced that the
company's financial statements could not be relied upon and that the company
was investigating "possible accounting irregularities" which could
result in a charge to its earnings of as much as $35 million.
Subsequently, the company filed for protection under Chapter 11.
Numerous class actions and the derivative action remain pending.
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| CFTC v. Hunt
Earlier in his career, Michael and others in a previous firm represented the Hunt family of Dallas
when they were accused by the federal Commodity Futures Trading Commission
of trying to corner the market in soybean futures.
There was a "position limit" rule, intended to promote liquidity
in the futures market, which prohibited anyone from owning more than 3
million bushels of soybean futures at one time. The CFTC alleged that
nine members of the Hunt family, including college age children, were
illegally circumventing this position limit by buying soybean futures in
tandem. At one point, they allegedly controlled 27 million bushels --
three million bushels per person, times nine.
The CFTC filed suit in federal court in Chicago, site of the Chicago Board
of Trade, seeking injunctive and monetary relief. In particular, they
wanted an order requiring the Hunts to liquidate their positions.
The Hunts denied they had done anything wrong. If they were required
by court order to abruptly sell their soybean futures -- in effect, at a
"fire sale" -- the financial consequences could have been
enormous.
Michael took the lead in presenting their first line of defense in the case
-- a challenge to the validity of the position limit itself. At his
request, the court conducted an evidentiary hearing to receive testimony
from economists and others, regarding whether the rule promoted liquidity or
instead made the markets more volatile.
Although the judge said in his ruling that he might not himself have
promulgated such a rule, he nevertheless did not regard the rulemaking to
have been arbitrary or capricious, and thus
declined to hold it invalid. In the interim, however, the Hunts
had been permitted to continue buying and selling with the same confidentiality
enjoyed by other
participants in the market, and their holdings could therefore be liquidated in an
orderly manner rather than at distress prices.
(Michael was not involved in the later litigation against the Hunts arising
out of their trading in the silver market.)
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| Magi International v. Idea Industries
Michael's securities litigation practice began in 1973 when he was
associated with a previous firm. Some college classmates contacted him about an investment which their company,
Magi International, had made in another company, Idea Industries, which --
unfortunately -- had taken the money and run.
Magi had invested $50,000, and got in return a promissory note on a business
supply store form, by which Idea promised to pay back $100,000 in six
months. At the bottom of the note form, Idea had typed "Secured
by the assets of Michigan Circuits, Inc." (Michigan Circuits
claimed to have invented the technology which would permit manufacture of
flat TV screens.)
By the time Michael became involved, Idea was defunct and its principals
were hard to find. Eventually he tracked several of them down and sued
each individually.
Issues in the case included whether such a promissory note was a
"security," and what personal liability could be imposed on Idea's
directors, officers, shareholders and attorneys.
Aided by some pretrial rulings of the federal district court,
Michael ultimately recovered much of the investment by way of settlement
payments from the
individual defendants.
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