Milberg Weiss settles for $50 Million

“The nation’s most successful securities class-action law firm agreed last week to pay $50 million to settle allegations it used the legal process to drive a hostile witness out of business, in a bit of payback that could signal an era of reduced aggressiveness by the plaintiff’s bar”, according to the April 14th edition of the Wall Street Journal.

“The settlement follows a Chicago federal jury’s verdict late Monday ordering Milberg Weiss Bersshad Hynes & Lerach to pay $45 million in damages to a Chicago-based legal and economics consulting firm, just before the jury was to consider punitive damages against Milberg Weiss.”

This is the law firm who has filed a $1 billion lawsuit against the local apparel industry here, but ironically it has refused to name specific defendants in its complaint for fear of retaliation by individuals or the industry itself.

“The settlement, most of which apparently will come directly out of the pockets of Milberg Weiss partners, caps a vituperative seven-year legal battle between Milberg Weiss and Lexecon, whose principals include Daniel Fischel, the dean of the University of Chicago law school. Mr. Fischel and two other Chicago professors, Dennis Carlton and Andew Rosenfeld, will share in the award, which was being wired in full Tuesday. Their attorney said they intend to give much of it to charity”.

‘Not Above the Law’

“I hope that it will make them more careful,” Alan Salpeter, Lexecon’s law, and a partner at Chicago’s Mayer, Brown & Pratt, said of Milberg Weiss. The verdict and settlement, he added, send the message that “lawyers are not above the law, although sometimes, they think they are”.

“The stunning verdict and settlement, one of the largest ever against a law firm, followed a five-week trial in which Lexecon alleged that Milberg Weiss targeted it in a 1990 savings-and-loan case, purely as a device to subsequently discredit the firm when it served as an expert witness in other suits. Lexecon sought $209 million in damages.

“Lawyers for Milberg Weiss, including name partners William Lerach and Melvyn Weiss, declined comment. Previously, the firm, with offices in New York and San Diego, argued that it was justified in suing Lexecon, and that the consulting firm had exaggerated or misstated the source of its woes.

“For more than two decades, Milberg Weiss has been a pioneer in securities-fraud litigation, a kind of self-styled Robin Hood, returning millions in settlements from well-heeled corporations and executives to investors. Along the way, Mr. Lerach became a major power broker and contributor to the Democratic Party and developed a reputation as a pugnacious litigator. Yet, many companies, especially in high-tech industries who have been a prime target of Milberg Weiss in recent years, have come to view its law practice as a kind of legalized extortion and Tuesday some of them welcomed the verdict and settlement.

“It couldn’t happen to a nicer guy,” Alan Shugart, former chief executive of Seagate Technology Inc., said of Mr. Lerach, who has sued the Scotts Valley, Calif., disk-drive maker three times over the years.

Financial Impact on Firm

The financial impact on Milberg Weiss is difficult to gauge, experts said. The firm has been hugely profitable generating nearly $700 million in earnings since 1988, according to testimony at the Lexecon trial. Mr. Salpeter, Lexecon’s lawyer, said Milberg Weiss told him during the course of the litigation that the firm had relatively little or no liability insurance to cover the verdict. Jerold Solovy, partner at Chicago’s Jenner & Block, and Milberg Weiss’s trial counsel in the Lexecon case, declined comment on the insurance question Tuesday.

At the least, experts said, the settlement is a black eye on Milberg Weiss and while few expect it to take the edge off its aggressive style, they said it could have a chastening effect on less powerful firms. “Milberg will survive and flourish. But I think it is going to be a cautionary event for other plaintiffs’ class-action law firms,” said Stephen Gillers, ethics professor at New York University law school, adding that many lawyers will now be forced to think twice before naming defendants in their suits.

The settlement comes at a time when Milberg Weiss’s core business of securities litigation isin flux, and thefirm is searching for other revenue sources. In 1995, congress approved new limits on securities suits, which has triggered a huge backlog of unresolved cases in the courts, holding up settlements and fees for Milberg Weiss and other plaintiff’s firms.