Milberg's '$75m get-out-of-jail card'
23 June 2008
17 June 2008
24 January 2007
7 January 2009
11 December 2006
12 June 2006
Plaintiff bar left 'reeling' by fine and lawsuit
One inhabitant of the defense bar, Brad Simon of Simon & Partners, summed up the situation as follows: "The greed of these individuals will make it much more difficult to bring suits and will subject suits to much more scrutiny by the courts. This is a shame, because many of the cases that have been brought are meritorious."
Last Tuesday (17 June), former Milberg antitrust partners Douglas Richards and Michael Buchman filed separate suits in the Manhattan Federal Court, each demanding $3m (£1.53m) in damages from the former Milberg quartet which, they claim, breached their fiduciary duties by operating a class action kickback scheme.
The suit came just 24 hours after Milberg struck a $75m settlement deal with federal prosecutors to dismiss the criminal charges laid against it for the scam.
Sanford Dumain, a member of the firm's executive committee, said in a statement that the firm was "pleased" that the government had specifically recognised that none of the lawyers currently at Milberg were involved in the misconduct.
"This favourable outcome now allows us to put a painful chapter behind us so that we can resume building one of the best-known plaintiffs firms in the country," he added.
The consensus among most New York lawyers last week was that Dumain's comments were a little optimistic for the future of his firm, and that the Milberg case itself may have ignited a long-simmering row between the US's plaintiff and defence lawyers.
"Their [Milberg's] competitive position has been significantly impaired with this case - they're not going to be a major player in the future," says one. "A significant proportion of the revenue at Milberg over the next few years will be going to paying off the settlement. That will make it a very difficult firm to work at. They're going to be working for the government."
Another lawyer in the city, who admits that there was "considerable Schadenfreude among defendant lawyers right now", says Milberg had played its "$75m get-out-of-jail card".
According to Lovells partner Marc Gottridge, the Milberg case and its business model are relics of a bygone era. Now, Gottridge argues, as a result of legislation in the 1990s, there is no longer any benefit to firms from having the first claim in securities class action cases and therefore lead plaintiff status (the key technique employed by the four Milberg partners in the kickback scheme). Instead a more subtle form of plaintiff lawyer influence is prevalent, known by defendant lawyers as 'pay to play'.
"What you're seeing now is plaintiff law firms making substantial campaign contributions to the campaign funds of the officials who run retirement funds as trustees or appoint those who do so," he says.
In particular, Gottridge is referring to the kind of matter typified by the case of New York State comptroller Alan Hevesi, who pleaded guilty to defrauding the government and resigned in 2006. The comptroller is sole trustee of the state's multibillion-dollar pension fund, which as a result of the legislative changes can qualify as lead plaintiffs in class action cases.
What Gottridge and other defence lawyers claim is the changed landscape has merely succeeded in creating a more powerful plaintiff bar - this time with clients that have deep pockets and political clout.
Hevesi's lawyer is Simon, who did not comment directly on the Hevesi case, but argues that there had been "a crusade" by the defence bar to rein in class actions for years. The Milberg case, he says, will inevitably make these cases more difficult in the future.
"Now there's a smell attached to class actions because of these guys," he says. "They were the kings of the class action bar and now they've been dethroned and found to be total frauds it plays into the campaign to put the brakes on class actions."
Yahoo! turns to Sheppard Mullin for Google ad deal
Sheppard Mullin cemented its relationship with Yahoo! this month when it advised the internet giant on its landmark agreement with Google. Simply not cricketPoor Heller Ehrman. On Wednesday (18 June) news broke that litigator John Benassi was leaving. Benassi's exit comes just a week after another Heller partner and litigator, Jessica Wolff, also joined Cooley. Out for crunchOn 13 June we reported that Simpson Thacher had snared Tristan Brown from Akin Gump. The backstory is that one Simpson partner had retired and another moved on in Silicon Valley, making Brown's hire essential.
In particular Sheppard Mullin partner Brian Pass added another deal to his long track record of advising Yahoo! on commercial matters. Pass was lead counsel to Yahoo! on its groundbreaking deal with Google, which was signed and announced on 12 June.
Yahoo!'s deal, seen by the market as a defensive strategy aimed at fending off a takeover attempt by Microsoft and activist shareholder approaches from Carl Icahn, will enable the internet company to run ads supplied by Google alongside its own search results and on some of its web properties in the US and Canada.
The agreement is non-exclusive, giving Yahoo! the ability to display paid search results from Google, other third parties and Yahoo!'s own Panama marketplace.
For Pass, the deal is confirmation of the importance of staying in touch.
"I joined Sheppard Mullin about one and a half years ago from Brown Raysman [Millstein Felder & Steiner] prior to its merger with Thelen Reid," says Pass. "I'd already represented Yahoo! on a number of commercial deals and originally got involved with them when I was advising Overture, which they bought. After that deal I was retained by Yahoo! to represent them."
On this latest deal Pass got the nod from Yahoo! deputy general counsel Julie Hsu in Burbank and Ron Bell in Sunnyvale. Pass admits that none of the previous deals on which he had advised the company were more significant than this latest instalment in its history.
"Microsoft's offer and Carl Icahn's interest arguably made a deal more imperative and urgent," Pass says.
Antitrust issues are likely to loom large in the deal, although the fact that both Google and Yahoo! have voluntarily agreed to delay implementation for up to three and a half months while the US Department of Justice reviews the arrangement suggests that it will clear any regulatory hurdles.
A team lead by Skadden Arps Slate Meagher & Flom New York partner Michael Weiner is advising Yahoo! on the antitrust review.
Partner Suzanne Bell at Wilson Sonsini Goodrich & Rosati in Palo Alto advised Google.