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Posts Tagged ‘kickback scandal’

I’m still on the road with plans to return to Denver later today, but in the interest of keeping the loyal reader completely up to date on the latest in class action news, here are a couple of quick items:

This Vancouver Sun article summarizes a NERA Consulting report on trends in securities class action litigation continues to rise in Canada.

The Scranton Times Tribune reports that class action lawsuits are being “mulled” by a nonprofit organization and a trial lawyer in the wake of a kickback scandal involving two juvenile court judges.  For related news, see this Overlawyered entry, Class action law firm announces “investigation.”

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AP writer Greg Risling reported today on the sentencing of former Milberg Weiss partners Steven Schulman and David Bershad for their roles in a scheme involving the payment of kickbacks to plaintiffs in securities class actions.  Both lawyers were sentenced to six month prison terms.  The scandal involved paying class representatives a portion of the oftentimes multi-million dollar legal fee awards obtained as part of large class action settlements.  In this way, the conspirators were able to provide a significantly greater incentive for a plaintiff to pursue the case than if he or she were limited to recovering an amount necessary to compensate them for their injury.  However, fee-splitting with non-lawyers is considered unethical under long-standing rules of professional conduct.  According to the article, available at Newsweek.com:

In a letter submitted to Federal District Court Judge John Walter, Bershad apologized for the deception.

“I now recognize that our behavior grievously injured the judicial process,” he wrote. “I will live out my days with the painful knowledge that our acts tarnished all of the good work we did.”

Co-conspirator William Lerach published an essay in Portfolio.com earlier this year entitled “I am Guilty,” in which he unapologetically blamed his conviction on zealous prosecutors, the bar associations, big business, and just about everyone other than himself.  Lerach’s diatribe makes the quote from Bershad’s letter seem downright contrite, until you look more closely at his word choice: “I now recognize.”  Though subtle, either the introductory clause reflects a lingering defiance, being code for “I know I need to say this but I don’t really mean it,” or Bershad was commenting on the difficulty of seeing anything wrong with his behavior in the first place: “how could I possibly have known that what I was doing was illegal?”  Either way, his failure to state simply that “Our behavior grievously injured the judicial process” reflects the warped sense of morality that underlies the actions of the lawyers involved in the scandal.

Bershad’s apology fails to recognize that his illegal acts didn’t just tarnish “all the good work” he believes he did, they took the “good” of the work entirely.

Essentially, the argument is that fee-splitting with clients, while concededly unethical and illegal, was a morally necessary tactic to level the playing field in taking on powerful interests.  “Whistleblowers” just needed an extra push to convince them to help the white knights seek justice against evil corporations.  Lerach’s essay even goes so far as to compare his crusade to that of the lawyers who brought the landmark civil rights decision Brown v. Board of Education, though his essay glosses over the small detail that those lawyers did not need kickbacks to persuade a plaintiff to help them do justice.

The “end justifies the means” argument does not work here.  Taking on wrongs in the name of public interest is what attorneys general and other regulators are for.  If public prosecution is not enough, and if there is a true problem in incentivizing victims to pursue a civil remedy without having to bribe them, then we should have a debate about how to change the system.  The kind of private vigilante justice that Lerach and his counterparts championed, where the rule of law is abandoned in the name of the common good, can only lead to exploitation and greed.  It can in no way be considered “good work.”

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Class action settlement issues provided fuel for commentary in the class action blogosphere this week, and there was still plenty of analysis and debate about the recent class action lawyer scandals.  Here are links to those and other blog postings that might be of interest to class action practitioners:

Class Action Settlements

Wage Law analyzes a series of recent decisions by the U.S. District Court for the Northern District of California reluctantly approving a settlement in a wage and hour class action, ultimately granting final approval, but reducing the fee award requested by plaintiffs’ counsel.  The opinions offer a warning to both sides in making sure to tend to the details negotiating and implementing a class action settlement:

http://wagelaw.typepad.com/wage_law/2008/06/the-emerging-tr.html

Trial Ad Notes has an interesting discussion of a provision of the Washington State version of Rule 23 that requires that a portion of “residual funds” from class action settlements be paid to the state’s legal aid foundation.

http://trialadnotes.blogspot.com/2008/06/cy-pres-and-class-action-funds-in.html

Unusual Activity profiles a “professional objector” to class action settlements.

http://www.unusualactivity.com/2008/06/profile-of-a-pr.html

The D&O Diary comments on the social utility of a changes made to the terms in a settlement in a options backdating derivative action that reportedly was preliminarily approved last week after an earlier settlement had been rejected:

http://www.dandodiary.com/2008/06/articles/corporate-governance/restatements-clawbacks-and-cfo-career-consequences/

Class Action Scandals

Overlawyered offers a rebuttal to disgraced class action lawyer William Lerach’s recent essay “I am guilty.”

http://overlawyered.com/2008/06/rebutting-bill-lerach-in-portfolio/

See the full rebuttal article on Portfolio.com here…

http://www.portfolio.com/executives/features/2008/06/16/Walter-Olson-Answers-Bill-Lerach 

…and the original essay here:

http://www.portfolio.com/executives/features/2008/06/02/Bill-Lerach-Essay

WSJ Law Blog reports on the testimony of class action “guru” Stan Chesney in the trial of two Kentucky lawyers accused of wire fraud in connection with the settlement of a fen-phen diet drug class action.

http://blogs.wsj.com/law/2008/06/17/class-action-guru-stan-chesley-takes-stand-in-fen-phen-trial/

Letter of Apology reports on the settlement reached between class action firm Milberg Weiss and the Department of Justice to resolve various criminal charges arising out of illegal kickback schemes involving several of its former partners.

http://letterofapology.com/2008/06/17/milberg-settles-criminal-case/

Class Action Decisions

The Complex Litigator comments on recent California authority on shifting of the burden of proof in wage and hour class actions.

http://www.thecomplexlitigator.com/2008/06/more-on-amaral.html

Technology Law Update discusses a recent class certification decision by the U.S. District Court for the Western District of Texas in a case filed against several online travel companies involving occupancy taxes.

http://brownraysman.typepad.com/technology_law_update/2008/06/texas-district.html

Virtually Perfect 3.0 discusses recent decisions on both class certification and the merits of a lawsuit filed under the Americans with Disability Act and several California laws against an online retailer for allegedly failing to make its Website accessible to the blind.

http://fritzboyle.edublogs.org/2008/06/11/legal-precedent-set-for-web-accessibility/

CAFA Issues

Classified offers multiple recent entries discussing CAFA (Class Action Fairness Act) removal decisions:

http://www.carltonfields.com/classactionblog/blog.aspx?entry=220

http://www.carltonfields.com/classactionblog/blog.aspx?entry=219

How Appealing details a Seventh Circuit opinion authored by Chief Judge Frank H. Easterbrook on the proper interpretation of the time limitation for appealing remand orders under CAFA.

http://howappealing.law.com/061108.html#029130

Civil Procedure

SCOTUSBlog recaps a recent U.S. Supreme Court addressing complex sovereign immunity and FRCP 19 indispensable party issues in an interpleader action brought to resolve a dispute over assets attached by a class of human rights victims who had previously obtained a judgment against former Philippines President, Ferdinand Marcos where the same assets were also being claimed in a separate action under Philippine law by the Republic of the Philippines.  If you think that description is complicated, read the opinion!

http://www.scotusblog.com/wp/opinion-recap-republic-of-the-philippines-v-pimentel/

Class Action Defense Blog reviews a recent order of the Federal Judicial Panel for Multidistrict Litigation (MDL) granting a home lender’s motion centralization of related subprime class action lawsuits filed in various federal courts.

http://classactiondefense.jmbm.com/2008/06/class_action_defense_casesin_r_96.html

Other Representative Actions

Mass Tort Litigation Blog and Drug and Device Law Blog review a recent U.S. Supreme Court decision addressing the concept of nonparty virtual representation:

http://lawprofessors.typepad.com/mass_tort_litigation/2008/06/taylor-v-sturge.html

http://druganddevicelaw.blogspot.com/2008/06/taylor-v-sturgell-on-virtual.html

Canadian Class Action Trends

thespec.com summarizes recent trends in Canadian class actions.

http://www.thespec.com/article/385060

The Bizop News discusses an unsuccessful Canadian class action in which the defendant was awarded a more than $200,000 in costs.

http://www.bizop.ca/blog2/canlii-2008-canlii-27822-on-sc.html

Class Action and Tort Reform

See these links for a spirited debate between the authors of American Courthouse and AttorneyButler.net about the merits of a proposed $1.6 billion tax break for lawyers who front expenses in contingent fee lawsuits.

http://americancourthouse.com/2008/06/05/a-16-billion-earmark-for-trial-lawyers.html

http://www.attorneybutler.net/2008/06/dan-pero-americ.html

and more on the news on the same proposed legislation from Point of Law:

http://www.pointoflaw.com/archives/2008/06/tax-break-for-trial-lawyers-bl-1.php

Law and More offers an analysis on possible ways to combat mass food contamination, offering litigation, including “the threat of class-action, individual, and shareholder lawsuits” and the imposition of strict liability against manufacturers. 

http://lawandmore.typepad.com/law_and_more/2008/06/a-lawyers-perspective-on-global-food-poisoning—bill-marler-in-london.html

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