Not only do lawyers for Milberg Weiss lawfirm have to worry about a 20-count federal indictment, but now they also must defend against a class-action lawsuit much like those the firm specialized in filing against others for decades.
The suit was filed earlier this month in federal District Court in New York by six former shareholders represented in three major cases in which Milberg Weiss was lead counsel. Also named in the suit is the firm of Lerach Coughlin & Robbins LLP, a California offshoot of Milberg Weiss.
Plaintiffs in the suit claim they suffered damages worth at least $214 million and ask the court to award treble damages to them and other members of the class they represent. The $214 million is the amount in legal fees paid to Milberg Weiss in three cases involved in the federal indictment. Their filing stresses, however, that the total actual damages they suffered may be even greater.
The suit also alleges that Milberg Weiss inflated its clients’ losses in an attempt to increase the amount of damages awarded and thus of the fees paid to the firm in shareholder litigation covering such firms as Network Associates, Waste Management Inc., Oxford Health Plans, Linux VA, Safeskin Corp., Aurura Foods, Chubb, MicroStategy and Organogenesis
Milberg Weiss has denied all allegations in the federal indictment, calling it an indictment that is “unjust, misguided and uninformed.” Following the indictment, the firm has used a Web site — milbergweissjustice.com — to make its public statements about pending legal actions.
The plaintiffs include Linda Marshall, Ben Dampios and Al Spilloway, who were members of the class of Safeskin shareholders in Stanley v. Safeskin, a case in federal court in Southern California.
Also among the plaintiffs are Bernie Apotheker, Harry Esposito and Brent Wentz, who were members of the class of Schein shareholders represented by Milberg Weiss in Schein Pharmaceutical Inc. Securities Litigation, a case in federal court in New Jersey.
Among the key allegations of the class-action suit against Milberg Weiss by these six individuals it formerly represented are that the alleged payments by the firm to individuals who became lead plaintiffs created illegal conflicts of interest:
“Because a Lead Plaintiff acts as a fiduciary for the absent class members or the absent shareholders and is required to remain free of any conflict of interest toward them, the Lead Plaintiff may not directly or indirectly receive any compensation that would conflict with his independence or his fiduciary obligations, specifically including any direct or indirect interest in any attorneys’ fees awarded to, or sought by, the Lead Counsel.”
The suit also notes that if such an agreement between a lead plaintiff and lead counsel to split fees were discovered, “the court should and likely would disqualify the lead plaintiff and him or her attorneys from representing the absent class members or shareholders and disallow fees requested by or awarded to the plaintiff’s attorney.”
The suit alleges that Milberg Weiss attorneys committed “commercial bribery, mail fraud and wire fraud,” which are defined by federal law as “racketeering activities and constitute predicate acts as defined under RICO,” the main anti-racketeering statute.”
