Let's PUNISH lawyers first:
Among all the law firms that recently filed suits against AMD and CPQ, the Milberg Weiss firm is the undisputed ring-leader.
It sued Lexecon. Lexecon counter-sued.
Milberg Weiss firm lost the case and will pay 50 millions settelment fee.
The defeat of the Milberg Weiss firm surely delighted the valley executives.
McCoy, take the notice!
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latimes.com
King of the Shareholder Suit Himself Tastes Defeat
Law: William S. Lerach and his firm agree to pay $50 million to settle with a
targeted company that fought back and won.
By DAVAN MAHARAJ, GREG MILLER, Times Staff Writers
William S. Lerach, who has built a legal empire
filing securities fraud lawsuits and collecting
multimillion-dollar settlements from corporate
America, on Tuesday agreed to pay $50 million to
settle a suit by one of his targets.
The settlement, among the largest ever agreed to
by a law firm, came as a federal jury prepared to
tack potential punitive damages onto a $45-million
judgment issued Monday against Lerach and his
firm.
The settlement marks an unusual reversal for
Milberg Weiss Bershad Hynes & Lerach, which has
become a legal nemesis for countless public
companies, particularly California's technology
firms.
Lerach, who lives on an 11-acre spread in
Rancho Sante Fe, is the undisputed king of the
shareholder lawsuit. His success in wielding suits
against large firms has even prompted federal
lawmakers to pass legislation trying to rein in his
legal strikes.
Lerach, 53, had been accused of attempting to
destroy Lexecon Inc., by maliciously naming the
Chicago legal and economics consulting firm as a
defendant in the now-infamous Lincoln Savings &
Loan scandal.
At the end of a six-week trial, a Chicago jury deliberated for only six
hours before voting Monday to award Lexecon $45 million in
compensatory damages. Overnight, Lerach's attorneys negotiated a
settlement rather than risk a huge damage verdict.
The settlement represents a windfall for Nextera Enterprises Inc., a
consulting firm controlled by former junk-bond king Michael Milken and
Lawrence Ellison, chief executive of Oracle Corp. Nextera bought
Lexecon for $63 million earlier this year.
Lexecon lawyers and others sought to portray Tuesday's settlement as
the first sign of Lerach's vulnerability.
"A lot of corporate defendants settle with him because they're afraid
to go to trial," said Mark Gitenstein, an attorney with the firm that
represented Lexecon. "This makes Bill Lerach look a lot less fearsome."
Lerach saw himself as a champion of the investor underclass, filing
suits on behalf of small shareholders who might otherwise be powerless to
fight large corporations.
Over the last 20 years, his firm--with offices in San Diego and New
York--has filed hundreds of suits, typically targeting companies whose
stock has dipped, accusing them of fraud and mismanagement.
Critics say Lerach engages in a form of extortion. His suits present
targeted companies with the dismal choice of spending countless hours
and small fortunes defending themselves, or cutting their losses with a
settlement. Most opt to settle, often for millions of dollars.
Since 1988, Milberg Weiss has raked in nearly $700 million in profits.
During that same period, Lerach and his senior partner, Melvyn I. Weiss,
took home about $100 million each, according to evidence presented at the
Chicago trial.
Large portions of Milberg Weiss' profits have been used to bankroll
other massive class-action suits. Lerach has also used his personal fortune
to support politicians. In recent years, he has ranked among the top donors
to candidates for federal office.
Technology companies have been popular targets of Lerach suits,
largely because their stocks tend to be particularly volatile. In the Silicon
Valley, executives speak of being "Lerached," and have warred politically
with him in recent years over state ballot measures alternately designed to
curtail or ease shareholder suits.
On Tuesday, many executives cheered Lerach's setback, calling it
well-deserved payback.
"Couldn't have happened to a nicer guy," said Al Shugart, who has
been named in four Milberg Weiss suits, three as an executive of disk
drive maker Seagate Technologies and one as a board member of
Valence Technology. "He certainly is guilty, and has been for years, of
misusing the system."
Alan Salpeter, a Chicago lawyer who represented Lexecon, said
Milberg Weiss agreed to wire the entire $50 million by Tuesday evening to
his client's bank account.
The settlement appears to be eclipsed only by Jones, Day, Reavis &
Pogue of New York, which in 1993 paid the federal government $51
million to settle malpractice claims involving legal work done for Charles
H. Keating Jr.'s Lincoln Savings & Loan Assn.
Lerach declined comment, but legal experts say that the lion's share of
the $50 million will come from the firm's insurance carrier.
"It's today, it's cash, it's immediate," Salpeter said. "This is an
enormous victory and important case for the legal profession because it
shows that lawyers are not above the law."
Only a couple years ago, the Lexecon case appeared unlikely to cause
Milberg Weiss any significant trouble.
A federal judge in Arizona threw out most of Lexecon's claims. Last
year, the U.S. Supreme Court, acting on Lexecon's appeal, breathed new
life into the case, saying it should have been heard in Chicago.
(The case, which was filed in Chicago, had been transferred to
Arizona so that it could be coordinated with other Lincoln Savings & Loan
cases.)
When the case came before U.S. District Judge James Zagel, an
appointee of Ronald Reagan, Milberg Weiss found itself on the opposite
side of some unfavorable legal rulings.
The judge allowed Lexecon attorneys to pursue a theory that Milberg
Weiss abused the legal process.
Lexecon officials had testified as expert witnesses on behalf of a
company that prevailed in a suit filed by Milberg Weiss.
In that other case, the law firm's client lost a bid for $200 million in
damages stemming from the failure of Nucorp Energy Inc., a San Diego
firm that went bankrupt in 1982.
Milberg Weiss attempted to steer business away from the consulting
firm by linking it to the infamous Lincoln S&L debacle, Lexecon officials
argued.
Weiss, who with Lerach testified at the Chicago trial, acknowledged
telling Lexecon's economist Daniel R. Fischel during the Nucorp case that
"we will destroy you." But he insisted that those remarks were
"inconsequential."
Milberg Weiss has consistently denied wrongdoing, but buckled after
Monday's jury verdict.
John C. Coffee, a Columbia University Law School professor who
specializes in securities law, said the jury's verdict could trigger copycat
lawsuits against Milberg Weiss.
Coffee, who has criticized Milberg Weiss' tactics, said he and many
litigators regarded Lexecon's case as one that was "controlled by a
determined and one-sided federal judge."
An appellate court might have reversed the verdict, Coffee said, but in
an irony not lost on legal experts, Milberg Weiss apparently decided to cut
its losses.
"Milberg Weiss has been accused of filing frivolous lawsuits and
collecting huge settlements," Coffee said. "This looked like a lawsuit more
frivolous than meritorious, but one that got $50 million. What goes around
comes around." |
