Lerach (he who is sueing Cymer, inter alia) strikes out
From an editorial in today's WSJ:
Strike King Strikes Out
The key words were "abuse of the legal process" in the recent victory over the law firm Milberg Weiss Bershad Hynes & Lerach, whose lead partner William Lerach, King of the Strike Suits, enriched himself by $100 million in the past decade churning out machinelike lawsuits against companies with volatile stock prices.
What went around has come around with a stunning jury verdict of $45 million for malicious litigation on behalf of Daniel Fischel, dean of the University of Chicago Law School and cofounder of Lexecon, a consulting group that often tangled in court with the Lerach firm. Mr. Fischel held on for nearly a decade against the advice of friends and lawyers, maintaining that the real issue was the integrity of the law. His point was pretty well established when, after the verdict but before the jury could deliberate on punitive damages, Milberg Weiss agreed to his surrender terms, $50 million wired into his lawyer's bank account immediately.
According to the legal press, it would be highly unusual for insurers to pay for an "intentional tort." Nor were any insurance company representatives involved in the settlement negotiations. But facing the prospect of punitive damages, Milberg Weiss had reason to fear that judges in the future would refuse to accept its lead role in the class-action lawsuits that are its bread and butter. This is a second blow following Congress's 1995 overhaul of the rules for federal securities suits. That law stipulated that the investor with the biggest losses should pick the lead counsel. This provision was aimed squarely at Mr. Lerach, who typically brought suits in the names of figurehead shareholders on his roster who often own relatively few shares in the target company.
Indeed, the words "abuse of the legal process" have a resonance beyond the pursuit of Lexecon, a firm that had been successful in providing expert testimony to companies targeted by Mr. Lerach. "I have the greatest practice of law in the world," Mr. Lerach once told a meeting of corporate directors. "I have no clients." It might be truer to say that he manufactures the client to suit the case, but a federal judge in Dallas cited the remark in stripping the firm of its lead role in a case three years ago under the new securities law.
It is an open secret that Mr. Lerach and friends make much of their living suing innocent companies with volatile share prices, mostly in the technology sector, and extracting settlements from busy executives who can't afford to waste time in legal maneuvering. John Doerr, one of Silicon Valley's most admired venture capitalists and a backer of AOL, Netscape, Amazon.com, and Sun Microsystems, told us four years ago that "Bill Lerach is a cunning economic terrorist. What he's doing is certainly immoral, and just this side of illegal." Fortune called him a "Mr. Happyface the clown" who instantly becomes a "blustery, profanity-sputtering bully."
The Fischel dispute stems from the 1988 Nucorp Energy lawsuit, which Mr. Lerach had publicly boasted was going to be his biggest victory. Stuart Kadison, a distinguished Los Angeles lawyer who worked on Brown v. Board of Education, testified how Mr. Lerach once pushed his way into a crowded elevator during the Nucorp trial and shouted, "Kadison, this case is going to bring an ignominious end to your mediocre career."
Mr. Fischel's testimony gutted Mr. Lerach's arguments in Nucor, in what this page at the time called a victory for economics. Mr. Lerach became apoplectic and, as the jury heard, threatened to "put the little expletive out of business." Two years later he ginned up a flimsy premise to name Lexecon as one of 100 defendants in the notorious Lincoln Savings case, then used the fact that Mr. Fischel had been sued in the Lincoln case to discredit his expert testimony in other cases.
Mr. Lerach's temper has been useful to him over the years, convincing himself and juries that the companies he was shaking down somehow deserved it. He evidently found a kindred soul in Bill Clinton, who had promised Silicon Valley his help in curbing meritless shareholder lawsuits, but then vetoed the bill a few days after Mr. Lerach somehow found his way to a White House dinner. That backflip enraged good Democrats like Chris Dodd of Connecticut. A bipartisan Congress overrode the veto by a margin of three to one. Over the years Mr. Clinton and the Democrats have pocketed hundreds of thousands of dollars in contributions from Mr. Lerach.
The 1995 legislation was meant to corral the shoot-first tactics of Mr. Lerach and his acolytes, but his firm's mass-strafing of high-tech companies has hardly let up. In just the past 30 days it has issued press releases announcing class-action lawsuits against 20 firms, ranging from Compaq to Engineering Animation Inc. In our view, Mr. Lerach continues to "abuse the legal process." |
