Civil suit against Milberg Weiss is score-settling

A plague on both their houses. Tell me you do plaintiffs’ class action work, you’ve told me all I need to know about your honor and integrity.

Cap Beatie hates Milberg Weiss and everyone else in the class action bar because they, unlike him, have been both professionally and financially successful at the practice of law. Milberg’s success was not attributable to any purported payments it made to small time clients. The harsh reality is that most Judges — correctly I believe — trusted Milberg to do a far better job in any litigation than the vanunted Cap Beatie — who is only a legend in his own mind.

Apparently trading off his mother’s telling him that he was the smartest and most beautiful boy ever, Cap believes that those riches rightly belonged to him. Hence, the sour grapes evident in Cap Beatie’s hating Milberg. One can rightly wonder whether a lawyer who actively professes to personal hatred for the defendants in a lawsuit can be adequate class counsel. Federal class action litigation is not an appropriate venue to vindicate a lawyer’s personal score with another person.

Cap is so “brilliant” that he has cobbled together a purported conspiracy including elements not mentioned in the government indictment, i.e., depriving his firm of a lead counsel position.

Here are some of the problems with that theory that immediatly come to mind: (1) they were known about long ago by Beatie and already ruled upon adversely to Beatie’s interest in the underlying cases: (2) in the case of MicroStrategy it is a poorly guarded secret that Beatie effectively shook down Milberg for a fair sized payment on appeal which would make Beatie a co-conspirator; (3) his having potential claims places Beatie in a position of actual conflict with the class because they are both potentially pursuing the same claims and he may bargain away the hypothetically (really very hypothetical) valuable class claims to settle his own personal claims; and (4) since Beatie knew about this conduct many years ago, his complaint, as pleaded, raises all sorts of interesting statute of limitations issues.

I’m unconvinced that the award of attorneys’ fees really were approved as “fair” by the courts because as a practical matter the courts are kept out of the informational loop as to how those attorneys’ fees actually are computed in the applications.

First, in the government’s memorandum of law in opposition to the Milberg Weiss defendants’ motions to dismiss, the government in one sentence of its brief stated that the defendants necessarily inflated their fees in order to provide the alleged kickbacks to the lead plaintiffs.

Second, many class action settlement agreements with the corporate defendants often include a so-called “clear sailing” provision pursuant to which the corporate defendants agree not to object to or otherwise contest the plaintiff class action attorneys’ fee application.

Third, the fee application includes only a conclusory identification of the number of hours worked by the attorneys but does not include the underlying support documents but merely state that they are available upon request by the court.

Fourth, the fee application does not include any side agreements that the class action attorney has made with the lead plaintiff, co-counsel or perhaps others.

Accordingly, in light of no objection by the corporate defendants and no underlying documents in support of the fee appliction, I am not sure if the approval by the court of the award of attorneys’ fees was made in consideration of all the factors by which fairness actually could be determined. As a practical matter, the class action has been on the court’s docket for a few years or more, the parties have agreed to settle and there is no objection to the fee application, and the court is unlikely to upset the apple cart and it provides little more than a cursory review of the fee award application in order to clear the docket.

I propose that prior to any approval of attorneys’ fees in a class action that the court be required to appoint a special master (to be paid from the attorneys’ fees) who both conducts discovery and drills down into the underlying documents in support of the fee application. This would eliminate the use of “clear sailing” provisions, determine what data in fact is relied upon in submitting the fee application to ensure that only legal services are included in the billable lodestar, duplicate work is not being compensated, and there are no undisclosed side agreements.

I

In addition to Milberg Weiss’ ill gotten gains I intend to pursue recovery of legal fees paid to other firms for work on every case effected by kickbacks and perjury. These fees were taken from the same settlements authorized by plaintiffs that were participants in Milberg Weiss fraud. Unless co counsel is ready to confess to everything they must say they did not know Milberg Weiss paid kickbacks and fixed these cases. Officers of the Court who were unknowing participants in Milberg Weiss fraud should not retain the financial benefits of participation in these tainted cases. This money was stolen from their clients and all absent class members by Milberg Weiss and should be returned without question or delay. Those that wish to demonstrate that they have clean hands should return the proceeds of decades of Milberg Weiss fraud to those to whom it rightfully belongs.

Although the Milberg Weiss fees were ultimately approved as “fair” by the courts, the decision by the courts were made based on incomplete data; specifically, the alleged undisclosed kickback arrangement between Milberg Weiss and its lead plaintiffs. According to the feds, at least three sitting federal judges are prepared to testify that the disclosure of the secret kickback agreements would have made a difference in the first instance on whether they would have selected Milberg Weiss and its lead plaintiffs to represent the class. The lawyer has a relationship with the class only because the court in the first instance appointed the applying lawyer and plaintiff as the leads. The judicial decisionmaking — the legal process itself — was corrupted and compromised by the alleged perjury of Milberg Weiss and its lead plaintiffs, and the class in particular and the society at large had the right to the court’s impartial decisionmaking based on the complete truth which Milberg Weiss and its clients deprived us all of by their alleged lies to the court.

Moreover, if a class member received a 100 percent recovery on his loss then I would understand the “no harm, no foul” argument. However, class members do not receive a 100 percent recovery, and there is only a limited and total amount of money that defendants (or their D&O carriers) are willing to pay for both class damages and attorneys fees. Accordingly, the courts uniformly have held that there in effect there is only a single constructive trust. On average a class member in a securities fraud class action recovers only 15 cents on each dollar of loss. If the court in approving the settlement and fee application knew that a portion of the attorneys’ fees were being re-distributed to the lead plaintiff, then the court may not have approved the settlement and fee award but instead evenly distribute the kickback amount to the lead plaintiff among all class members. Moreover, because the lead plaintiff was being secretly compensated for obscene amounts from the attorneys’ fee award, of course he would rubber stamp the class settlement agreement that left those class members whom he purportedly otherwise represented with nothing more than chump change. The class in fact was damaged.