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Class actions feel effects of Milberg case
Legal Career News |
2008/02/11 10:24
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As famed class-action lawyer William S. Lerach steps before a federal judge in Los Angeles today to learn his sentence in a wide-ranging fraud and conspiracy probe, his misdeeds and those of former colleagues may be helping to alter the way securities law is practiced.
The number of class actions filed on behalf of disgruntled investors has been dropping, and legal experts say that is partly because practitioners are distancing themselves from the aggressive tactics that made Lerach, 61, and his former partners courtroom legends and lightning rods for critics of the civil justice system.
In some instances, judges have balked at certifying class actions they have deemed frivolous and in others have rejected settlements for paying attorneys at the expense of plaintiffs, sometimes citing the ongoing prosecution of Lerach's former firm, once known as Milberg Weiss Bershad & Schulman.
Lerach left in 2004 to found a San Diego class-action practice now called Coughlin Stoia Geller Rudman & Robbins. Lerach resigned from that firm in October, days before he pleaded guilty to one count of conspiracy.
"What you're watching is a bit of a transition from a world in which class-action practice did have some disreputable aspects to a different model that's much more responsible, publicly oriented and closely regulated," said Stephen Bundy, who teaches law at Boalt Hall, at UC Berkeley.
Lerach's trademark vitriol -- he famously threatened to "destroy" companies that balked at settling -- and his fondness for television cameras may belong to the past. Lawyers who now dominate the field are far less confrontational, Bundy said, and their resumes resemble those of their big-firm opponents.
Several factors may explain the drop in securities class-action filings from the peak years of 2000 to 2004, including, until recently, rising stock prices.
Bundy said, though, that the decline also reflects an evolution from "smaller, informal and slightly shady firms" to more mainstream law practitioners.
Federal rules helped push the change.
Until 1995, the first law firm to file suit could direct the class action and reap the largest legal fees. The rules favored firms with a stable of ready-made plaintiffs: people with a few shares in many companies who were willing to immediately lend their name to litigation. That year, Congress changed the law so the lead law firm should be one that represents the plaintiff with the most significant holdings at risk.
These days, state pension funds and other institutional investors are the major plaintiffs in shareholder suits. Such big-money investors are reluctant to discuss their legal strategies, but litigation watchers contend that they are choosing their lawyers more carefully -- examining a firm's ethical record, for example, and even its campaign contributions.
"There's heightened concern," said San Francisco lawyer Richard Heimann, who represents plaintiffs in securities class actions. Fund managers who have approached him want reassurance "that there weren't any skeletons in our closet," he said, often asking for written declarations from prospective lawyers that they have not been indicted or disciplined by the bar.
The Milberg Weiss prosecutions also are likely to make lawyers more careful, said Stephen Gillers, who teaches legal ethics at the New York University School of Law.
"It has to worry them even if they're doing nothing wrong because the Justice Department has shown its willingness to look into how they do business," he said.
Some institutional investors have opted out of class actions in recent years, believing they would do better on their own, Heimann said.
His firm represented Merrill Lynch in a securities class action against McKesson HBOC a couple of years ago. Class members ultimately recovered 15% of their losses in that case, he said, but Merrill Lynch recouped $150 million -- more than its monetary loss -- by opting out of the class and settling with McKesson separately.
Heimann also helped settle a case last year in which two Alaska public funds recovered 90% of their economic losses by bowing out of the class. It was many times more than they would have gotten if they'd remained in, he said.
Some legal experts say the Milberg Weiss probe also has prompted judges to more closely monitor these cases, particularly those involving that firm or Coughlin Stoia.
Federal rules require judges to ensure that class-action settlements are fair and adequate for individual plaintiffs.
Noting those rules, several companies targeted by Milberg Weiss or Lerach's former firm have asked judges within the last year to refuse class-action status, citing the firm's indictment or Lerach's guilty plea. The motions have met with mixed results.
Lawyers split on whether the case is casting a shadow beyond the two law firms.
New York plaintiffs' lawyer Sean Coffey sees no evidence that judges are scrutinizing settlements or fee requests from other firms more closely. But a Los Angeles defense attorney said that since the prosecution, he has been called into the judge's chambers to justify the legal fees in the case and how much money class members will get.
Those settlement agreements "used to be accepted more readily," said the lawyer, who requested anonymity out of concern that pending settlements might be jeopardized. "Now they make you really explain."
Until his guilty plea in October, the pugnacious, Brillo-haired Lerach was one of the most feared lawyers in the nation, boasting of having wrung billions over the years for investors from Enron Corp., WorldCom and Intel Corp. and a roster of blue-chip corporations.
Many clients and consumer groups credit Lerach with defending them against what he called the "dishonorable and despicable greed" of corporate America. Corporate executives denounced the lawsuits as extortion but usually chose to settle rather than roll the dice at trial, paying out millions to plaintiffs.
Two former partners at Milberg Weiss -- David Bershad and Steven Schulman -- also have pleaded guilty to fraud charges as part of an alleged scheme to pay $11.4 million in illegal kickbacks to clients who agreed to serve as ready-made plaintiffs in class actions. The two men await sentencing for their roles in the conspiracy which, prosecutors allege, earned the firm $250 million in fees from dozens of cases stretching back more than 20 years.
The law firm and co-founder Melvyn Weiss have pleaded not guilty, but the probe has triggered an exodus of lawyers and clients. A trial is scheduled for August.
John Beisner, a Washington lawyer who faced Lerach in a number of fraud suits, said the case marked a milestone. The guilty pleas, he said, have sidelined "some of the great lions of the plaintiffs bar." |
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Kan. Court Blocks Abortion Grand Jury
Legal Career News |
2008/02/05 11:07
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The Kansas Supreme Court on Tuesday temporarily blocked a grand jury from obtaining patient records from a physician who is one of the nation's few late-term abortion providers. The grand jury is investigating whether Dr. George Tiller has broken Kansas laws restricting abortion, as many abortion opponents allege. The grand jury subpoenaed the medical files of about 2,000 women, including some who decided against having abortions. Abortion opponents forced Sedgwick County to convene the grand jury by submitting petitions, the second such citizen investigation since 2006 of Tiller, who has long been at the center of the nation's abortion battle. His clinic was bombed in 1985, and eight years later a woman shot him in both arms. Tiller's attorneys asked the Supreme Court to quash the grand jury's subpoenas, and the court agreed to block their enforcement until it considers the issue. Chief Justice Kay McFarland said Tiller's challenge raised "significant issues" about patients' privacy and a grand jury's power to subpoena records. The Sedgwick County prosecutor presenting evidence to the grand jury had objected to the attempts to block the subpoenas, noting that the grand jury's term is limited, but McFarland said the grand jury's term can be extended. The court set a Feb. 11 deadline for legal arguments in favor of allowing the subpoenas. Tiller's attorneys then have until Feb. 25 to respond. Mary Kay Culp, executive director of Kansans for Life, the state's largest anti-abortion group, called the high court's decision "extremely disappointing." "There is no way to determine if the reasons for these late abortions were done within the narrow legal criteria without looking at the records themselves," she said. "His lawyers say they are worried about women's privacy. They are worried about protecting Dr. Tiller." Tiller's attorneys, Dan Monnat and Lee Thompson, did not immediately return calls seeking comment Tuesday. The grand jury is seeking records of all women who visited Tiller's clinic between July 2003 and last month and were at least 22 weeks pregnant at the time. The grand jury also subpoenaed information about current and former employees and referring physicians. The edited patient records would not have the women's names, but they would have patient identification numbers. Tiller's attorneys claimed in court last week that in an earlier investigation, former Attorney General Phill Kline was able to track down patients' names using the identifying numbers on patients' files. A spokesman for Kline, who is now Johnson County district attorney, denied that any patients had ever been identified. Kline eventually filed 30 misdemeanor charges against Tiller before leaving office last year, only to see the case dismissed for jurisdictional reasons. |
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11th Circuit lifts stay of execution for Alabama inmate
Legal Career News |
2008/01/31 15:50
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federal appeals court has lifted a stay of execution for James Harvey Callahan, who is scheduled to be executed Thursday, but it could be delayed again by the U.S. Supreme Court. Callahan asked the Supreme Court Wednesday afternooon to stop the execution. The Supreme Court on Jan. 7 heard oral arguments in a Kentucky challenge to lethal injection, a case that has delayed executions nationwide. A ruling is unlikely before spring. Alabama uses lethal injection in its executions.
In a 2-1 decision, the Atlanta-based 11th U.S. Circuit Court of Appeals on Tuesday lifted the stay granted by U.S. District Judge Keith Watkins in Montgomery on Dec. 14. The court said Callahan waited too late to challenge the method of execution. Callahan, who is now scheduled to die at 6 p.m. Thursday at Holman prison near Atmore, was sentenced to death for the kidnapping, rape and murder of Jacksonville State University student Rebecca Suzanne Howell on Feb. 4, 1982. Authorities said she was abducted from a coin laundry in Jacksonville and raped before being strangled and dumped in Tallasseehatchee Creek. In lifting the stay, the 11th Circuit ruling said it did not make any finding on "the relative merits of Callahan's constitutional claim because we conclude the claim is barred by the statue of limitations." Judges Gerald Tjoflat and Susan Black, forming the majority, said the two-year time deadline began on July 31, 2002, when Callahan selected lethal injection as the method by which he would be put to death. They said he waited more than two years after the deadline expired to challenge lethal injection. In dissent, Judge Charles Wilson said the time period to file a challenge does not begin "until the prisoner knows or has reason to know the facts giving rise to his claim and the prisoner's execution becomes imminent." Wilson said the majority's approach "requires a death-sentenced prisoner to file a method-of-execution claim years before his execution is to take place, during which time the challenged protocol could be materially changed." In his Dec. 14 order, Watkins wrote that the public interest would not be served by an unconstitutional execution, and Callahan's constitutional challenge should be resolved first. The judge said it would be "a waste of judicial resources" to hold a trial on Callahan's suit before the U.S. Supreme Court rules in the Kentucky case. The state attorney general's office had opposed a stay and appealed to the 11th Circuit. On Dec. 5, the Supreme Court stopped the execution of another Alabama death row inmate, Tommy Arthur, one day before he was scheduled to die by lethal injection at Holman prison. That stay also stemmed from the pending Kentucky case. |
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Breyer Keeps Up Bush Speech Attendance
Legal Career News |
2008/01/29 16:57
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Four Supreme Court justices donned their robes to attend this year's State of the Union, but only one among them could boast a perfect attendance record during the Bush presidency. Justice Stephen Breyer, appointed by President Clinton and a one-time aide to Democratic Sen. Edward Kennedy, has been in the House of Representatives for all seven of Bush's State of the Union speeches. On three occasions he was the only justice to cross the street from the court to the Capitol. In addition, Breyer also was the only justice at Bush's first speech to Congress in 2001, a couple months after the justices voted 5-4 to stop Florida's ballot recount and ensure Bush's presidency. Breyer had opposed halting the recount. Breyer was joined Monday by Chief Justice John Roberts and justices Samuel Alito and Anthony Kennedy. Roberts and Alito, Bush's two court appointees, have attended all three speeches since joining the court. The last time Breyer missed the State of the Union was in 2000, in Clinton's last year in office. He had the flu. That speech was the only time in recent memory when no justice was present, other than in 1986, when the speech was rescheduled because of the explosion of the Challenger shuttle. Justices typically have said little about why they do or don't attend the speech. One exception is Justice Antonin Scalia, who hasn't gone in at least nine years. Scalia, commenting in 2000, said the speech has become increasingly partisan — a potential problem for justices who customarily refrain from applauding anything even remotely political. "One side will clap for this, and then the other side will clap for that," Scalia said. "And you know, we sit there like bumps on a log." ___ Put the second woman on the Supreme Court together with the first woman on Great Britain's highest court and what do you get? A conversation about bathrooms, of course. "Everybody's got a bathroom story, haven't they?" said Lady Brenda Hale, the first woman Law Lord, at a recent forum at Georgetown University's law school with Justice Ruth Bader Ginsburg. Ginsburg recalled that when she joined the court in 1993, court workers altered the woman's bathroom adjacent to the room where the justices put on their robes to make it as large as the men's room. But it took a letter from advice columnist Dear Abby to get the court to change its tradition and open public women's bathrooms before 9 a.m., she said. Sandra Day O'Connor, named to the Supreme Court in 1981, "had taken care of most of the irrationalities before I got there," Ginsburg said. Hale told her own tale of being informed there was no women's restroom at the Privy Council, the final appeals court for the British empire. The trailblazing judges also discussed recent changes in England that include renaming the high court the Supreme Court of the United Kingdom, moving the court from Parliament to its own building and instituting mandatory retirement at 75. Hale, also known as the Baroness Hale of Richmond, said the age limit was a response to colleagues "who went on long beyond it was sensible for them to go on, but were not sufficiently incompetent to be removed." Ginsburg noted with relief that there is no retirement age for U.S. judges. She will turn 75 in March. |
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Kentucky Elk Importation Law Challenged
Legal Career News |
2008/01/22 09:47
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A Tennessee elk and bison ranch and a national deer farmers' group are challenging Kentucky's law banning deer or elk from being transported into the state. Two Feathers Elk and Bison Ranch in McMinville, Tenn., and the North American Deer Farmers Association are asking a federal judge to declare Kentucky's law unconstitutional, arguing that it illegally restricts interstate commerce. "We don't believe they are interpreting the law properly," said Shawn Schafer, executive director of the deer farmers association, an 800-member group based in Lake City, Minn. The farm and the group have sued Jonathan Gassett, the commissioner of the Kentucky Department of Fish and Wildlife Resources, and Karen J. Alexy, division director of wildlife for the department, on Friday in U.S. District Court in Lexington. Phone calls to Gassett and Alexy after 5 p.m. Friday were not immediately returned. But Morgain Sprague, general counsel for the fish and wildlife department, has sent the attorney for Two Feathers ranch a letter warning that any animals confiscated in Kentucky would be destroyed. He said the law is Constitutional and is being interpreted correctly. "Your clients are free to use the interstates surrounding the Commonwealth of Kentucky to import cervids into Tennessee," Sprague wrote. Kentucky state law bans the importation of elk and deer to protect the state's elk and white-tailed deer herds from chronic wasting disease. State officials have enforced the law to prohibit anyone from bringing deer or elk across state lines, even if the animals are destined for another state. Violating the law is a felony, punishable by up to $10,000 in fines and five years in prison. That has posed problems for Two Feathers ranch, which wants to ship animals to and from Kansas and pass through Kentucky on the interstate, Schafer said. The ranch applied to Kentucky for permits to transport the animals across state lines but was refused, Schafer said. But Schafer said he believes the ban violates the Commerce Clause of the Constitution. The Kentucky law is also discriminatory because it allows deer and elk farmers in the state to move their animals around, he said. Schafer said Kentucky is the only state his group knows of that interprets the law to ban deer and elk from even crossing state lines. "When I take a load of horses down to Florida, I don't have to call ahead and check with all the states in between to make sure it's OK to drive through," Schafer said. In September, Wildlife and Fisheries agents arrested Timothy Cory Looper of Livingston, Tenn., as he passed west of Paducah with a load of elk and deer. The animals were destined for a hunting lodge in Tennessee, but the state destroyed the animals. Looper was charged with six felony counts of illegally importing elk and deer into Kentucky. His case is pending. |
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Court: Judge's Fantasy Tape Isn't Public
Legal Career News |
2008/01/18 12:51
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A court has ruled that a judge's audiotape of personal "graphic fantasies" — a recording that shocked investigators — is his private property and should not be made public. Circuit Judge John B. Hagler of Cleveland, Tenn., resigned last month after the local prosecutor, an investigator and the Chattanooga Times Free Press asked him about the tape he had recorded years earlier. The newspaper, The Associated Press and other news organizations had asked that the tape be released, but Hamilton County Chancery Court Judge Frank Brown ruled Thursday that it is not a public record and should be returned to Hagler. "Private documents do not become public just because someone provides them to a law enforcement official," the judge said in the ruling. Hagler's attorney, Roger Jenne, said that while Hagler was "extremely grateful" for the ruling, investigators should "get back and investigate what is really behind" the leak of the tape's existence. Chattanooga police investigated the tape in 2005, after a secretary who had just been fired by Hagler turned it over. She said she found the recording of the judge's voice on a tape that also contained legal dictation. Few details of the tape's content have been made public, but police testified during a court hearing that it was disturbing and sounded like someone being tortured. They said they initially thought the tape might be linked to the unsolved 1997 shooting death of an Episcopal priest, the Rev. Charles Martin "Marty" Davis, 35, in Chattanooga. But Brown said in the decision Thursday that there was no apparent link. Brown disagreed with Chattanooga police who said the tape was needed in their records as exculpatory evidence in the Davis killing. He said it was no more related to the Davis case than "books written about Charles Manson." About two years after the investigation ended, the tape made its way to the prosecutor in Hagler's district, District Attorney Steve Bebb. After the Times Free Press learned about the recording from an unidentified source in December, Hagler confirmed it and resigned. Bebb said in December that the tape "would disturb any human being who heard it," and that he sent a copy to the state Court of the Judiciary, which handles complaints against judges. The court, however, has no jurisdiction because Hagler resigned, a court spokeswoman said. Hagler, who had been a circuit judge in Cleveland since 1990, has said that he did nothing wrong but that the recording had caused great embarrassment to friends, relatives and the courts. He strongly suggested the leak was committed by someone with a grudge against him, perhaps someone he ruled against. In a statement issued last month, he said describing the recording as "graphic fantasies" was "accurate and sufficient ... and all any decent person would want to hear of it." Brown said the newspaper and Chattanooga officials who had previously agreed to release the recording would have 30 days to contest it. The Times Free Press has not decided whether to do so, said its publisher and executive editor, Tom Griscom. Jenne said there is a question as to whether someone "leaked this information in retaliation for decisions he has made in the past." "Find out who the culprit is," he said Jenne said release of the tape by anyone other than the parties in the case would bring a "pretty significant lawsuit." |
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