The law firm suing Cymer is finally getting a dose of its own medicine.
Plaintiffs' Lawyer Lerach and Firm
Ordered to Pay $45 Million in Damages
By RICHARD B. SCHMITT
Staff Reporter of THE WALL STREET JOURNAL
One of the country's most successful plaintiffs' lawyers, William Lerach, and his firm were ordered by a Chicago jury to pay $45 million in damages to one of their old targets.
Mr. Lerach and his firm, Milberg Weiss Bershad Hynes & Lerach, have won millions suing companies for securities fraud and other alleged misdeeds. But late Monday, the federal district court jury found that they had severely damaged the business of a Chicago legal and economics consulting firm, Lexecon Inc. The jury is expected to consider punitive damages Tuesday.
The award is one of the biggest against a law firm in recent memory, analysts said, and caps a long, bitter and highly personal feud. The trial spotlighted evidence about Milberg Weiss's huge fees, including that since 1988, Mr. Lerach and his senior partner, Melvyn Weiss, each pulled down a total of more than $100 million in earnings.
Lexecon sued Milberg Weiss in 1992, alleging that its business was severely damaged after it was named in a lawsuit brought by Milberg Weiss that linked it to a 1980s savings-and-loan scandal. One of Lexecon's principal consultants is Daniel Fischel, currently the dean of the University of Chicago law school.
"This is an enormous victory, and a very significant case for the legal profession," said Alan Salpeter, a partner with the Chicago law firm of Mayer, Brown & Platt, who represented Lexecon. "The biggest class-action firm in the U.S. has been held liable for abuse of process."
Lexecon was purchased earlier this year by a company affiliated with former junk-bond king Michael Milken for about $60 million. In its lawsuit, Lexecon sought damages of $209 million, reflecting lost profits from Milberg Weiss's alleged campaign as well as what it felt was a reduced purchase price.
Milberg Weiss, with offices in New York and San Diego, declined to comment. Previously, the firm contended that Lexecon had greatly exaggerated its woes, and denied that it hurt Lexecon's reputation.
The dispute began after Milberg Weiss, in March 1990, added Lexecon as a defendant in a $1.2 billion civil-racketeering class-action suit by investors over the failure of Lincoln Savings & Loan, the rogue Arizona thrift run by Charles Keating. Lexecon had once been a consultant to Lincoln, and declared the institution "sound," at one point. The firm denied any liability in the failure of Lincoln, saying its involvement with the thrift was taken out of context, but it subsequently consented to a "resolution" of the suit, agreeing to return some $700,000 in Lincoln-generated fees to the class members.
In its suit against the law firm, Lexecon alleged that Milberg Weiss subsequently used the fact that it was a defendant in the Lincoln case to defame it in other cases, and to eventually steer away business. Lexecon asserted that the initial suit was driven by a desire on Milberg Weiss's part to retaliate against Lexecon. The firm had served as an expert defense witness in a case Milberg Weiss brought -- and lost -- against a once highflying oil-and-gas developer, Nucorp Energy Inc., which tumbled into bankruptcy court in the early 1980s.
By 1995, a judge in Arizona, where the Lincoln Savings-related litigation had been consolidated, eviscerated most of Lexecon's case against Milberg Weiss. Lexecon appealed to the U.S. Supreme Court, which last year held that the suit should have stayed in Chicago, where Lexecon filed it, giving the case new life.
Trial began there early last month before U.S. District Judge James Zagel, who allowed Lexecon to pursue a theory that Milberg Weiss abused the legal process. Judge Zagel ruled inadmissible several pieces of evidence potentially helpful to the law firm, including the fact of the $700,000 agreement in the Lincoln case, which he found to be irrelevant and potentially prejudicial.
While Lexecon ended up in a tailspin, Milberg Weiss's fortunes soared, Lexecon's lawyers argued in court. According to evidence, the firm earned more than half a billion dollars in fees between 1988 and 1998. Annual compensation for Messrs. Lerach and Weiss, meanwhile, peaked at about $16 million apiece, just before Congress enacted a 1995 law putting some limits on securities-fraud suits, which had become the firm's bread and butter, according to testimony.
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