Copyright 1995 The New York Times Company
The New York Times
November 5, 1995, Sunday, Late Edition - Final
SECTION: Section 3; Page 3; Column 1; Money and Business/Financial Desk
LENGTH: 1464 words
BYLINE: By ANTHONY RAMIREZ
DATELINE: STAMFORD, Conn.

HEADLINE: INVESTING IT;
Will It Please the Court? A Litigation Analyst Calls the Verdicts

JUDGING by how wildly the stocks moved, the upstart Advanced Micro Devices shocked many people last year when it won a legal victory over Intel, the giant of the semiconductor business.
But Calvert D. Crary, a stock analyst here, was unruffled. In fact, he had predicted the victory. A former securities lawyer with a perpetually bemused look, he is the Peter Lynch of litigation, a bottom-up, kick-the-tires, taste-the-pudding kind of guy who aims to determine how investors might profit from pending litigation.
The victory of Advanced Micro Devices over Intel in a fight over computer chip copyrights sent Advanced Micro's stock soaring more than $6 a share, or $630 million, on March 10, 1994. Intel's stock dropped $1.50 a share, or $1.2 billion. The total market impact was nearly $2 billion.
The trial turned on abstruse definitions of "microcomputer" and "microprocessor." Mr. Crary, managing director of the securities firm of Auerbach, Pollak & Richardson, recalled recently that he looked at "bits and pieces" of information that jurors would review, and that while the jury was out, he decided to advise clients that Advanced Micro Devices would probably win.
Mr. Crary is one of the few full-time litigation analysts in the country. Most of this small group don't publish their work, preferring to advise their clients privately.
Robert A. Burka, a litigation analyst at Foley & Lardner in Washington, cited another reason for the elite band: Most lawyers can't do what Mr. Crary does.
"Lawyers are taught to analyze things in agonizing detail and then come firmly out on a fuzzy, gray area," said Mr. Burka, who does not publish his work. "Cal is one of the few lawyers," he said, "who can take the complex issues of a case, boil them down and then predict how key issues will turn out. And then stand by his judgments in public."
In his work, Mr. Crary, 52, seems to meld a bit of each of his parents' skills. His father was a stockbroker and his mother a history professor. Mr. Crary became interested in the impact of litigation on stock prices in 1973. In a single day that year, I.B.M. fell 29 percent, to $240 a share from $340, when it lost an antitrust case: Telex v. I.B.M. Asked by his securities firm to assess the likelihood of I.B.M.'s winning on appeal, Mr. Crary correctly predicted I.B.M.'s appellate victory, which sent its stock soaring. "It marked my birth as a litigation analyst," he said.
"What makes this such an interesting field," said Mr. Crary, his already wide-eyed gaze becoming wider under his wire-frame glasses, "is that the herd is not necessarily correct. People tend to make investment decisions on the basis of very little investigation."
Mr. Crary used to work at a much larger brokerage firm, but bumped up against some occupational hazards. His former employer didn't appreciate it when he knocked the cigarette industry in a television interview at the same time the firm was wooing the business of a major tobacco company. Within days, he was looking for other work.
How does Mr. Crary reach his verdicts? No tricks, really. He finds out as much as he can about the case, the relevant law, the track record of the plaintiff's and defendant's lawyers in similar cases, as well as that of the presiding judge.
In certain types of lawsuits, like patent litigation, smart lawyers with lots of money are extremely important. "A strong patent in weak hands is not as important as a weak patent in strong hands," he said. "When a small inventor with a strong patent sues Monsanto, I'd say Monsanto will find a way to win."
But information is often scarce. "You are looking through a glass darkly, struggling for telltale clues," Mr. Crary said. "One of them is that the side that is better prepared often is the one willing to talk to the public. I call up the plaintiff's lawyer and he says, 'Go fish.' I call up the defendant's lawyer and he says, 'Oh yeah, let me tell you all about it.' That means something."
Even without talking to the lawyers, Mr. Crary finds clues in poorly argued legal briefs. "Bad paperwork can mean two things: bad lawyers and bad facts," he said. "The evidence is not with them."
Though once naive about the legal system, he says he is no longer.
One of the wheels often ignored in analyzing cases is that some judges are ruled by "peculiar quirks, that they are not all alike, and that they often behave in bizarre ways."
Without being too specific, Mr. Crary said there are certain trial judges in major litigation who nearly always rule in favor of plaintiffs or the Government. The merits of the case can be secondary in those instances, he said.
Even the Supreme Court will let politics or prevailing public policy influence judicial decisions. And, not infrequently, judicial corruption can tip the scales, he said.
Mr. Crary follows scores of cases. When asked to name the cases worth watching, Dow Chemical came out near the top of his list.
In a case in which he readily acknowledges he was wrong, he did not anticipate that a Nevada jury would order Dow Chemical last Monday to pay $10 million in punitive damages to a plaintiff for breast implants from Dow Corning, its joint venture with Corning Inc.
"But just because a single event takes place does not mean it is the end of a case," he said. For one thing, this was not the first time that Dow Chemical was found by a jury to be liable in a breast-implant case. In an earlier case in Texas, the trial judge set aside the jury's verdict against Dow Chemical. Mr. Crary believes Dow Chemical has ground for an appeal.
Whatever the twists and turns of the breast-implant litigation, Mr. Crary expects Dow Chemical's lawyers to keep settlement costs at a reasonable level.
In the Archer-Daniels-Midland investigation, Mr. Crary conceded that the Justice Department inquiry could affect Archer-Daniels's stock. But what's more important, he said, is the growing number of lawsuits by soft-drink bottlers, chicken-feed companies and other customers of Archer-Daniels who are accusing the company of fixing prices. At triple damages, these suits could be more ruinous than the Justice Department inquiry, he said.
Nonetheless, Mr. Crary foresees no legal settlement or judgment to justify the sharp drop in the company's stock since June. To him, the stock seems oversold.
Mr. Crary also recommends that investors buy Glaxo Wellcome, which is suing generic drug makers who are challenging Glaxo's monopoly patent protection for its best-selling, anti-ulcer drug, Zantac. He recommends buying the stock when it dips following negative litigation news. He expects Glaxo ultimately to prevail. Microsoft also seems a good buy to him, in part because it is likely to escape major antitrust scrutiny from the Justice Department.
But Sofamor Danek and other medical-supply companies may fall, he says, because the market does not understand the full implications of product-liability litigation involving surgical screws and back surgery. The industry's liability could reach $1 billion, he says.
A STOCK that might rise is that of American Home Products, even though its Norplant litigation has been assigned to plaintiff-friendly Beaumont, Tex. (where Dow Chemical, in separate suits, must argue breast-implant litigation). While serious, the side effects, like vaginal bleeding, of Norplant contraceptive implants are not considered life-threatening, he says, and the settlement costs therefore might be low.
For the long-running litigation that has helped depress the price of tobacco stocks, Mr. Crary sees little relief. Smokers will probably be allowed, he says, to pursue what is known as the Castano nicotine-addiction case as a class-action against the cigarette industry.
A case now before the Supreme Court might help Bell Atlantic stock. In a suit against the Federal Government and the National Cable Television Association, a trade group, Bell Atlantic argues that it has a First Amendment right to offer television programming. The high court is likely to agree with Bell Atlantic, Mr. Crary said.
But perhaps the most intriguing lawsuit is an action filed against the Food and Drug Administration by the Washington Legal Foundation, a politically conservative lobbying group. The suit says that the F.D.A. is restricting information about drugs and their use in treatments not approved by the F.D.A. The suit says that it is an unconstitutional abridgment of free speech when the F.D.A. prohibits drug makers from promoting drugs for uses not yet approved by the agency.
If the suit is successful, drugs like Doxil, from Sequus Pharmaceuticals, which can now be used only for AIDS treatment, might be used by doctors to treat cancer. If that happens, Mr. Crary expects Sequus stock to rise. GRAPHIC: Photo: Calvert D. Crary is a stock analyst in Stamford, Conn., who predicted Advanced Micro Devices' legal victory last year against Intel. (Carl David Labianca for The New York Times)

Chart: "Weighing the Evidence" lists Calvert D. Crary's comments on 10 cases.
LOAD-DATE: November 5, 1995

Copyright 1995 The New York Times Company
The New York Times
November 5, 1995, Sunday, Late Edition - Final
SECTION: Section 3; Page 2; Column 5; Money and Business/Financial Desk
LENGTH: 104 words
HEADLINE: INSIDE
BODY:
INVESTING IT /Page 3/
For companies facing complex legal issues, Cal Crary is on the case. By Anthony Ramirez.