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JUNE 5, 2006
Guess Who's Rooting For Milberg Weiss The class action firm, under indictment, gets unlikely support from courtroom foes Suddenly, Milberg Weiss is a hero, even in the eyes of some of its most bitter foes. The law firm's defiant refusal to cooperate with federal prosecutors has resulted in its indictment on kickback charges. But rather than gloat, corporate advocates who in the past might have decried Milberg's aggressive litigation tactics are applauding its gutsiness in the face of a prosecution that could doom the king of class actions. "Milberg Weiss, God bless them, decided that the principle was more important than the result," says corporate defense lawyer Lawrence J. Fox, a partner at Drinker Biddle & Reath and former chairman of the American Bar Assn.'s ethics committee. Even the U.S. Chamber of Commerce has slammed Justice's demands of Milberg as "fundamentally wrong." The reason for this unlikely sympathy? The government's insistence that, to avoid indictment, Milberg Weiss Bershad & Schulman had to turn over confidential communications among its members and with its outside criminal defense attorneys. Milberg said no, resulting in the government announcing its indictment on May 18, along with that of two veteran partners of the firm. Corporate defense lawyers admiringly note that the case marks the first time a high-profile business targeted for alleged white-collar crime has gone to the mat over prosecutors' efforts to pierce attorney-client privilege. The Justice Dept. increasingly has made this demand a condition of resolving such cases without a full-fledged prosecution. "Whether we are on the natural sympathy list for Milberg or not is irrelevant," says Susan Hackett, general counsel of the Association of Corporate Counsel. "We are against the government's policy." If Milberg survives long enough to make it to trial, the case could become an important test of this prosecutorial gambit. Beyond the issue of attorney-client privilege, another striking reaction has emerged within corporate legal circles: an admission that Milberg lawyers are people, too. Long, brutal depositions in sterile hotels far from home breed a certain camaraderie. Ralph C. Ferrara, a partner at LeBoeuf, Lamb, Greene & MacRae, says that he and founding Milberg partner Melvyn I. Weiss "have beat up each other with baseball bats in courts coast to coast: state courts, federal courts, magistrate courts." A former general counsel of the Securities & Exchange Commission, Ferrara has battled Milberg lawyers for 25 years. "While I've never thought there was a case they brought that they should win," he says, "I can say they always fought those cases honorably." "SYMBIOTIC RELATIONSHIP" Peel back another layer of the relationships between plaintiffs' and defense lawyers and a shared economic interest becomes evident. For every case Milberg has settled, there has been at least one corporate defense firm on the other side earning healthy fees. "For many, many years, defense lawyers, including myself, have had this symbiotic relationship with Milberg Weiss," says a partner at a big New York firm. "If they weren't suing our clients, we'd be selling pencils." Not since the 2002 Enron-related prosecution and ultimate collapse of accounting giant Arthur Andersen has Justice indicted an entire business organization for alleged misconduct by some of its executives. Andersen's trial conviction was reversed by the U.S. Supreme Court in 2005, but by then the firm was history. Some executives of companies hit by Milberg suits have taken a grim pleasure in watching the 120-attorney firm grapple for six years with a federal investigation of its allegedly improper payoffs to lead plaintiffs in class actions. But lawyers at the firms that defend those outfits say their clients may have more in common with Milberg than they realize -- namely a vulnerability to zealous federal prosecutors. "For all those corporate executives chortling over the situation that Milberg finds itself in," Ferrara says, "remember that but for the grace of God, there go you."  By Lorraine Woellert, with Michael Orey Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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