Bob Reed, September 11, 2008

Show me the money.

Chances are that’s what some angry UAL Corp. shareholders will soon be saying. It’s a demand expected to surface in legal actions that may arise from the controversial Internet posting of a news story and headline earlier this week that stated the airline concern had filed for bankruptcy protection.

UAL didn’t enter bankruptcy. But the story–which was six-years-old and in an archive–was mysteriously plucked from a Tribune Co.-owned Florida newspaper web site by search engine Google and blasted over the web. Ultimately, the entry made its way into the system of financial news and information provider Bloomberg, which ran a UAL bankruptcy headline on its terminals, prompting a brief but massive sell-off Monday before the mistake was discovered and corrected.

UAL lost about $1 billion in market capitalization during the free fall as its stock price tumbled from about $12 to $3 per share until trading was halted. Today, UAL shares remain below the $12 mark.

All of which sparks some questions that haven’t been thoroughly addressed yet in the crush of news coverage about this debacle. They include: Can shareholders recoup losses or are they stuck? Do they have a case for being injured? If so, who gets sued for damages? Who is ultimately liable for this situation? Does UAL, in its capacity as a representative of shareholders and stakeholders, have grounds to sue for damages?

I rang up Andrew Stoltmann, one of Chicago’s better-known shareholder rights attorneys, for some perspective. (I’ve interviewed Stoltmann many times, for print and radio, and he gets right to the point.)

Yes, he said, expect shareholders who believe they unjustly suffered losses to take their cases to court. The reason this hasn’t happened already, he surmises, is that shareholders don’t know who to sue–yet.

In fact, since the bogus UAL story emerged, there have been claims flying between Tribune Co., which owns the Florida Sun-Sentinel web site where the old bankruptcy story appeared, and Google.

Both Tribune and Google have issued conflicting statements about what happened.

Stoltmann, says one thing is for certain: “Someone is to blame”.

he contends lawsuits will raise hot-button issues of “liability” or “negligence”. Among those most eager to make up for any losses will be investors who had “Stop-loss” orders attached to their UAL stock positions. They may never recoup their losses, he notes. (The NASDAQ, where UAL is traded, is not busting or rescinding any of the UAL trades sparked by the faulty bankruptcy post).

Who’s going to feel the wrath of UAL shareholder lawsuits?

Now, that’s an interesting question. There’s Tribune Co., which has nearly $13 billion in debt, and then there’s Google, one of the richest and most profitable companies on the globe.

Hmmmm, which would you pick?

Actually, it could be one or all of the companies involved in this matter, most of which probably have some type of business insurance to help protect against damages, Stoltmann says.

Still, chances are this situation is not going to just blow over.

UAL is outraged. When I spoke to the company yesterday it did not back off of its previous statement that the Tribune’s Florida newspaper started this mess. Perhaps Tribune and Google’s more recent statements will temper that view. We’ll see.