Client yearning to fire attorney Lerach says Fortune story was last straw
In papers filed last night, a class action plaintiff says that after discreetly and unsuccessfully trying to fire attorney Bill Lerach and his law firm for five months, it was finally prompted to take court action by a Fortune cover story about Lerach's former law firm, Milberg Weiss Bershad Hynes & Lerach.
That's when the "situation became intolerable," according to a brief filed in federal court in Dallas by an attorney for the Archdiocese of Milwaukee Supporting Fund, the lead plaintiff in high-profile shareholder litigation that has been pending against Halliburton (HAL) since 2002.
Lerach and his West Coast office of Milberg Weiss split away from that firm in 2004; the remainder of Milberg Weiss was indicted this past May, along with two of its name partners. Lerach reportedly is still a target of the ongoing investigation. The Fortune cover story, written by editor-at-large Peter Elkind and published on October 30 (cover dated November 13), is available here.
"Due to the strong manner, tone and factual information stated in Elkind's article, I feel that I am left with no choice but to direct you to remove Lerach and his firm from the Halliburton case," wrote Paula John, the executive vice president and general counsel of the AMS Fund in a November letter to an attorney at Scott + Scott, the firm then acting as the fund's co-counsel along with Lerach Coughlin Stoia Geller Rudman & Robbins. On November 22, after attorneys at Scott + Scott refused to help the fund boot Lerach Coughlin, the AMS Fund formally moved to have both Scott + Scott and Lerach Coughlin replaced by Boies Schiller & Flexner, the firm founded by superlawyer David Boies.
The Fund says it is seeking Lerach Coughlin's removal because it is concerned about the substance of the allegations of the indictment, which "includes specific allegations against Lerach that go to the heart of a lead counsel's duties to absent class members and the court"; about the likelihood of additional media coverage and additional factual revelations; about the ability of Lerach to adequately perform his duties as class counsel as the criminal probe continues; and "the revelation that the DOJ was concurrently investigating both Halliburton and Lerach."
In yesterday's filing, the AMS Fund says its principals had been "stunned" by Milberg Weiss's indictment in May. They allege that Lerach never disclosed to them either that federal prosecutors were investigating his former firm or "that Lerach was one of their primary targets." The May indictment alleges that Milberg Weiss paid three plaintiffs $11.4 million in secret kickbacks in more than 150 cases over almost a quarter century, and that its lawyers repeatedly lied about those arrangements in court. (In essence, the firm is accused of having paid the plaintiffs to pretend that they were exercising independent judgment on the class's behalf, when in fact Milberg Weiss was pulling all the strings. That backdrop is, at the very least, ironic in the context of the current power struggle, in which Lerach Coughlin appears to be trying to wrench control of the suit away from an all-too-genuine plaintiff, the AMS Fund.)
The Fund also cites as a factor in its decision to seek Lerach Coughlin's ouster an interview Lerach gave in the July 10 issue of The Nation , in which, the Fund's lawyer argues, Lerach personal agenda appeared to be taking precedence over the interests of the class. In the article (link to it here), William Greider wrote that Lerach had "reformulated the Halliburton complaint to pointedly portray [former Halliburton CEO, now Vice President Dick] Cheney and 'Cheney's team' as the wrongdoers who fabricated and deceived," and that Cheney, though not named as a defendant, faced "grilling under oath by Lerach." Greider also speculated that "a high-profile case against the Veep could help protect [Lerach] against retribution by Congress" in the form of more class-action reform legislation.
In addition, the AMS Fund brief alleges that when confronted with the plaintiff's determination to remove Lerach, both Scott + Scott and Lerach Coughlin "began a campaign to intimidate" it into changing its mind by "impugning its efforts to protect the class." It also contends that those firms implied in a letter that they might get a particularly favorable hearing from presiding U.S. District Judge Barbara Lynn, since they had retained two retired federal judges, one of whom (Lawrence Irving) "worked with Judge Lynn earlier in this case" and the other of whom (Joe Kendall) "knows Judge Lynn and the Dallas federal courthouse quite well," according to excerpts from the letter quoted in the briefs.
In a final turn of the screw, the Fund's motion also appears to denigrate the independence of the three pension funds Lerach Coughlin now wishes to elevate to lead plaintiff status (to replace the AMS Fund), by alleging that that they have served as plaintiffs for either Milberg Weiss or Lerach Coughlin in more than 50 cases over the past five years.
The AMS Fund is represented on the motion by Dallas attorney E. Lawrence Vincent and, it also receiving assistance from Neil Rothstein, a former partner at Scott + Scott who left the firm in March. (Prior to 1993, Rothstein also worked directly with Bill Lerach at the then unified firm of Milberg Weiss.) Boies Schiller & Flexner is not yet involved in the case--at least formally--though a BSF attorney has acknowledged in an affidavit that it is ready, willing, and able to step in.
Though at least two federal judges have prevented Milberg Weiss from serving as class counsel because of its indictment, none has yet disqualified the Lerach Coughlin firm on those grounds, and that firm probably remains the dominant class action firm in the country today. Its recoveries for securities holders in the Enron securities litigation--more than $7 billion so far--are the largest ever obtained.
For more details about the Halliburton dispute, see my earlier posting on the subject here, or a still earlier Forbes article here.
Lerach Coughlin's and Scott + Scott's response papers to the motion to remove them, filed December 12, stressed that removal of the firms at this stage of the litigation would cause needless expense and delay, and also alleged that the Boies firm had a conflict of interest. The alleged conflict involved the Boies firm's current defense of Tyco in shareholder litigation; two of the pension funds Lerach represents in the Halliburton case are also class members in the suit against Tyco International (TYC).
(Disclosure: Lerach takes the position that any article I or Fortune write about his firm is retaliation for shareholder litigation Lerach is currently bringing against AOL Time Warner, the former name of Fortune's parent company, on behalf of about 70 institutional clients, seeking about $3.5 billion.)
I hope that Leracdh is successful in his lawsuit against Halliburton. Cheney should be in jail and so should the criminal executives who run HAL. I wish that Lerach would sue HAL for ripping off the taxpayers as well. If Time Warner doesn't print my message, I would not be surprised. Time Warner are cover-up artists for corporate criminals, when they aren't busy creating phony sales of their own to bolster their stock price.
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