At least three US-based law firms sent out statements on Saturday saying they would initiate class-action lawsuits against Infosys for unlawful business practices, an exercise that is not uncommon with US-listed companies every time they go through a change, especially in the case of mergers and acquisitions.
A day after Infosys chief executive Vishal Sikka stepped down from his role at India’s second-largest information technology services company, these law firms sent out near identical statements asking Infosys investors to come forward.
“Rosen Law Firm is preparing a class-action lawsuit to recover losses suffered by Infosys investors,” said Rosen Law Firm. “Pomerantz LLP is investigating claims on behalf of investors of Infosys Limited,” said another.
These law firms, often called “ambulance chasers”, spring up soon after a company goes through a major turmoil, especially after a merger or acquisition.
Like this 2010 piece in Investopedia says “Like everything in America, when you're not happy with an outcome in life, you hire a lawyer. Why should this be any different? I've counted no less than six law firms making headlines for commencing investigations into the acquisition.”
Similarly, this Fortune piece, explaining the springing up of lawyers inviting investors to come forward to file a class-action lawsuit against a company after M&A activity says “virtually every single take-private buyout is quickly "investigated" by class-action attorneys in seek of litigious shareholders.”
Infosys is also listed on the US stock exchange.
Very few investors actually come forward to ask for checking irregularities, almost never enough to merit a class-action suit.
Eventually, companies settle the cases, if any, that may be brought by the law firms. “These lawsuits almost always result in a quick settlement and rarely go to trial. It’s clear companies, which are under the gun to finalise the deals, have no interest in allowing their multi-billion dollar buyouts to be scuttled by a few disgruntled shareholders — or aggressive law firms,” explained this piece in Fox Business.
This is the most likely fate of these rather standard and expected “cases”.
Infosys did not respond to a request for comment on the lawsuits.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
