Wednesday, June 18, 2008

Milberg Update

There are several recent articles on the Milberg fallout. The first is an article in the American Lawyer by Alison Frankel on William Taylor III, Milberg LLP's counsel on its recent deal. Here's an excerpt:

In the end, says the lawyer who defended the Milberg firm for more than four years, he had no choice: If Milberg was to survive as a law firm, it had to reach a deal with Los Angeles prosecutors to avoid a guilty plea or conviction in the federal probe of kickbacks to lead plaintiffs in securities class actions.

"The firm had to accept terms which were onerous financially," says the soft-spoken William Taylor III. "I can't tell you I'm happy my client has to pay $75 million." But, he adds, "the firm will survive. Its lawyers can practice law. ... It will be tight [financially] but they have a platform that is well-established [and] they're very good at what they do."

Taylor said the government placed no restrictions on contributions to the firm's $75 million payment by the three one-time name partners who've pleaded guilty, including firm patriarch Melvyn Weiss. He declined to comment on reports that Milberg had asked spin-off firm Coughlin Stoia to contribute and had been turned down. Unlike Milberg, Coughlin Stoia was never indicted in the kickback case.

The other article is by Anthony Lin of the New York Law Journal and reports that ex-Milberg partners are now suing the firm for breach of financial duty. Here's a bit of the article:

Two former Milberg partners have sued the law firm's founder, Melvyn I. Weiss, and the three other firm leaders recently convicted of participating in a scheme that paid kickbacks to class action plaintiffs, claiming the four men's illegal conduct constituted a breach of their fiduciary duty to their partners.

The suits, which came just one day after federal prosecutors agreed to drop criminal charges against Milberg itself in exchange for the payment of $75 million in fines, could be the beginning of a tide of litigation against Weiss, William S. Lerach, Douglas J. Bershad and Steven G. Schulman, the former Milberg name partners who have pleaded guilty over the past several months to orchestrating the kickback scheme.

J. Douglas Richards, one of the two ex-partners to sue Tuesday, predicted as much in an e-mail to the Law Journal.

"Private litigation by those injured by the misconduct is just beginning," he said. Indeed, Milberg management committee member Sanford Dumain said in interviews Monday with the Law Journal and other publications the firm itself was exploring litigation against its former leaders.

Richards and Michael M. Buchman, both former antitrust partners who left Milberg together in January 2007, filed separate pro se complaints Tuesday in Manhattan federal court. Buchman named all four of the former name partners as defendants but Richards excluded Bershad. Richards declined to discuss this aspect of the case, but the exclusion is presumably to preserve diversity jurisdiction, as both Richards and Bershad are New Jersey residents.

Each suit is asking for $3 million in damages.

ECB

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