Class Action Criminality

By Casey, Lisa L. | Journal of Corporation Law, Fall 2008 | Go to article overview

Class Action Criminality


Casey, Lisa L., Journal of Corporation Law


I. INTRODUCTION
II. THE INDICTMENT OF MILBERG WEISS
   A. Congress Regulates Securities Class Actions
      1. Why Private Enforcement?
      2. Paid Plaintiff Practices Before Securities Litigation Reform
      3. The Case for Reforming Securities Litigation
      4. Congress Regulates Lead Plaintiff Selection and Compensation
      5. The Government's Investigation of Milberg Weiss
      6. Overview of the Government's Charges
   B. The Government's Honest Services Claims
III. CLASS ACTION CRIMINALITY EXTENDS THE HONEST SERVICES FRAUD
     DOCTRINE
   A. The Doctrine's Inception and Evolution Before McNally
   B. McNally, Carpenter, and Congress's Response
   C. Judicial Review of Prosecutions Under Section 1346
      1. Lessons from Recent Case Law
        a. United States v. Rybicki
        b. United States v. Brown
        c. Other Lessons Learned from Recent Case Law
      2. Attorneys' Liability for Honest Services Fraud
IV. PLAINTIFFS WERE NOT FIDUCIARIES WITH DUTIES TO ABSENTEES
   A. Classic Fiduciary Doctrine and Its Applications
   B. The Relationship Between Class Representatives, Class Counsel,
      and Absentees Before Reform
      1. Cohen and Roper
   C. What the PSLRA Did and Did Not Do
   D. Analyzing the Indictment's Theory of Fiduciary Duty
      1. Named Plaintiffs' Limited Authority and Functions
      2. Duties of Plaintiffs' Counsel in Securities Class Actions
      3. Judicial Supervision of Securities Class Actions
V. WHY CLASS ACTION CRIMINALITY SHOULD FAIL
   A. Applying Breach of Fiduciary Duty Analysis to the Indictment
   B. Lenity
   C. Other Considerations Weighing Against Class Action Criminality
VI. CONSEQUENCES AND CRITICISMS
   A. Consequences for the Firm
   B. Consequences for Private Securities Litigation Generally
   C. Consequences for Class Actions Generally
   D. Other Criticisms of the Prosecution
   E. The Call for Further Private Securities Litigation Reform
VII. CONCLUSION

I. INTRODUCTION

Long before their arraignments on federal felony charges last year, class action lawyers Mel Weiss and Bill Lerach stood before the court of public opinion accused of abusing the legal system to enrich themselves. The partners received national attention for filing shareholder lawsuits against some of this country's best known corporations, usually alleging that top company management defrauded investors. Over the course of some three decades, Weiss and Lerach recovered on behalf of shareholders billions of dollars from corporate defendants; companies sued by the partners almost always chose to settle the fraud claims rather than risk judgment at trial. Compensated with multimillion dollar fee awards, Weiss and Lerach built their law firm, Milberg Weiss, (1) into a litigation juggernaut, became multimillionaires themselves, and contributed generously to Democratic Party candidates and causes. In the process, Weiss and Lerach made numerous powerful enemies in executive suites from coast to coast. Directors and officers of public companies reviled Milberg Weiss and railed against defending lawsuits filed by its lawyers. (2)

In the early 1990s, Corporate America, Wall Street, and the accounting industry joined forces to lobby Congress for relief from securities fraud litigation. These politically influential interests complained to federal legislators that the plaintiffs' bar filed frivolous securities class actions and employed unethical, "abusive" litigation tactics to extract settlements from law abiding companies, (3) thereby profiting at the expense of the shareholders whom they purported to represent. (4) Proponents of litigation reform depicted Milberg Weiss and its two (in)famous senior partners as the primary corruptors. (5) Congress received testimony that Milberg Weiss failed to investigate its fraud charges before racing into court and filing boilerplate allegations against innocent companies, often within hours of a significant decline in the companies' stock price. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Class Action Criminality
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.