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News
February 13, 2008

The People versus the Powerful Class Action Lawyers

Bill Lerach, the famed class action trial lawyer who made a personal fortune representing plaintiffs in securities lawsuits, was sentenced this week to federal prison for conspiracy to obstruct justice in connection with a two-decade scheme of paying individuals to participate as lead plaintiffs in massive class action lawsuits.

In his long and successful career, Lerach has often positioned himself as an advocate for the little guy against the powerful corporations – a refrain frequently sung in the class action lawyer community.  Even since his guilty plea last fall, Bill Lerach has continued to position himself as a “champion of the people” in opinion pieces in The Washington Post and other newspapers.

His rhetoric is what makes his guilty plea so ironic.  Lerach and his former partners at the Milberg Weiss firm were not indicted for defrauding the corporations they sued, but for conspiring to obstruct justice – at the expense of the class members and investors whose interests they claimed to be representing. 

Put more simply: the victims of Lerach’s crimes are his own former clients.

By paying kickbacks to lead plaintiffs recruited by Lerach’s former law firm, the indictment reads, those lead plaintiffs “had a greater interest in maximizing the amount of attorneys’ fees awarded to Milberg Weiss than in maximizing the net recovery to the absent class members or shareholders.” 

In a civil suit filed last August against Lerach’s former law firm by his former class member clients, the shareholders charged that the firm paid kickbacks and misrepresented their clients’ losses to ensure that the law firm would “keep the lion’s share of the legal fees awarded by the court.”

But Lerach isn’t the only high-profile plaintiffs’ trial lawyer in the news recently.

In Kentucky, class action trial lawyers William Gallion, Shirley Cunningham Jr. and Melbourne Mills Jr. are currently being held in the Boone County jail awaiting trial for allegedly stealing $65 million of their clients’ money in a $200 million diet drug settlement.  Former client Patricia Kennedy said, “I guess I’m naïve….  I always believed when you retained a lawyer, they are going to do what is right by you.”

Down in Mississippi, famed class action lawyer Dickie Scruggs will soon go on trial for allegedly seeking to pay a judge to rule his way in a lawsuit over how to divide the legal fees in a class action settlement.  Two other prominent plaintiffs’ attorneys in the state – Joey Langston and Tim Balducci – have already admitted to attempting to bribe judges.

There appears to be an emerging acceptance among some in the plaintiffs’ bar of a culture of greed and corruption, in which actions like those of Lerach and Langston are not considered outside the norm. 

Their rhetoric continues to be about defending clients against the powerful. 

But the reality seems to be, at least in the instances of Lerach and Langston, one of naked self interest.

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