Judge Nixes Most of Milberg Kickback Claims
(CN) - A federal judge in Manhattan dismissed most of a lawsuit against Milberg LLP, brought by former clients who accused the law firm of paying them millions of dollars to serve as lead plaintiffs in class actions. The plaintiffs sought to recover their attorneys' fees.
U.S. District Judge Loretta A. Preska dismissed the plaintiffs' racketeering claims as time-barred, but kept alive a breach of fiduciary duty charge.
Melvyn Weiss, David Bershad, William Lerach and Steven Schulman, four ex-partners of the law firm, pleaded guilty to paying kickbacks to clients in order to induce them to file suits. Prosecutors said the fraud spanned more than 25 years.
The New York-based firm, formally known as Milberg Weiss, Milberg Weiss & Bershad, and Milberg Weiss Bershad & Schulman, specializes in suing corporations in securities fraud class actions.
Milberg attorneys allegedly paid kickbacks to lead plaintiffs, overstated the extent and nature of their clients' injuries, and caused plaintiffs to lie in depositions and court documents.
Dismissing the racketeering charges, Judge Preska said the plaintiffs had been given a "storm warning," but failed to sue within the required four years. She said the claims against the law firm "received an enormous amount of media attention."
"Considering the widely publicized nature of the grand-jury investigation of Milberg LLP, the court concludes that plaintiffs were on inquiry notice of defendants' conduct no later than March 4, 2002, the date of the most recent news article provided by defendants to the court," the judge wrote. "These news articles constitute uncontroverted evidence that clearly shows that plaintiffs were on inquiry notice of defendants' conduct more than four years before they filed suit in August 2007.
"Several of the news articles mentioned defendants' enormous market share for class action suits, and it would have been unreasonable for plaintiffs to assume, without inquiring, that their cases were not part of a common scheme of behavior," Preska added.
Preska allowed one claim for breach of fiduciary duty to proceed, saying it met the six-year statute of limitations.
Milberg LLP, founded in 1965, was responsible for 85 percent of all securities class actions in California in 2001, the judge said, citing an Associated Press report.
In 2007, it secured the largest class-action settlement on record at the time, when Tyco agreed to pay more than $3 billion to put to rest an accounting fraud scandal.