Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘class actions’

“$1 Billion Legal Fee Eyed in Enron Suit”

That’s what Bill Lerach, late of Milberg Weiss, could bag as Enron settlements mount toward $10 bmillion. It seems Lerach has a sliding-scale contingency-fee arrangement with his lead plaintiff, the University of California, starting at 8 percent and going upward from there. And — this is the beauty part — it seems there’s a good chance courts will simply extend the percentage rates to apply to the many other investors in the plaintiff class, even though they never signed up to be Lerach clients or were given a chance to negotiate fees with him. No wonder class-action lawyers are so concerned to butter up the universities, pension funds, unions and other big institutional plaintiffs who serve as their stalking horses in these actions. The university, it seems, did not employ competitive bidding to invite participation by other potential counsel.

A critic of class action litigation, Lawrence Schonbrun, said he is suspicious of the university’s claims that it has vigilantly overseen the Enron case. A retired judge the university hired as a consultant on the case, J. Lawrence Irving, was paid more than $1.4 million by the state school, before being hired this month as a consultant by Lerach Coughlin. “This was not the ideal choice to monitor plaintiffs’ counsel,” Mr. Schonbrun said.

(Josh Gerstein, New York Sun, May 31).

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Dog bites man department: another worthless class action settlement

These are so frequent that it’s almost not worth noting, especially because the Class Action Fairness Act means that these are (one hopes) the last of a dying breed, but Consumerist finds another class action settlement with little merit. The attorneys—who include class actioner Joe Whatley, who has mysteriously avoided being mentioned in Overlawyered before now—are seeking $5.5 million in the Kansas state-court nationwide settlement. Some class members get a $5 invoice credit from Sprint, but only if they sign a new two-year contract.

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Frozen dessert suit melts in NYC

Sad news for the boosters of obesity litigation: a Manhattan judge has dismissed a would-be class action which asked the maker of CremaLita frozen dessert to pay for weight-gain damages because it had wrongly advertised its product as fat-free and as having 60 calories per serving when in fact it had about 10 calories more than that. After a Consumer Affairs investigation had uncovered the misrepresentation, Stephen Brandt sued, claiming “that as a result of CremaLita’s alleged false advertising …he and countless ‘other members of the class’ were put at risk of ‘severe health problems, including but not limited to cardiovascular problems, mobility problems and cancer’ as well as the ‘negative self-esteem issues’ that the ‘social stigma’ of “excess weight gain carries” in today’s culture.'”

However, Justice Emily Jane Goodman ruled that Brandt was not an appropriate representative for a class action, in part because of his difficulty in demonstrating damages. To begin with, Brandt claimed to have consumed only one serving of CremaLita per week, which meant, said the company’s defense lawyer, that his extra calorie consumption would have amounted to only 10 calories a week. Brandt, whose weight ballooned by 41 pounds over a six-year period including the seven months in which he said he’d been a buyer of the dessert, also conceded that he’d enhanced it with crumbled cookie toppings.

In court filings, the defense was rather cruel about it all: “What Brandt fails to mention,” said its lawyer, “is that he regularly eats real ice cream, McDonald’s and Wendy’s cheeseburgers, french fries, pepperoni pizza, beer, corn chips, donuts, cookies, hard cheese, eggs, bagels, peanut butter, Chinese take-out meals and pasta, [and] that he never exercises.” Moreover, “although he provided no useful information regarding his weight gain during the period that he ate CremaLita, his medical records . . . show that he managed to pack on an additional 16 pounds in the nine months after he stopped” eating the confection. (Dareh Gregorian, “Suit melts away”, New York Post, May 25; Gothamist, May 25).

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Poland Spring fracas, cont’d

Boston Business Journal has a feature article catching up on the torrid fight between attorney Jan Schlichtmann (A Civil Action) and a squad of class-actioneers led by Thomas Sobol of Hagens Berman, over whether lawyers in pursuit of settlement fees sold out the interests of clients following lawsuits against Nestle’s bottled-water operation (Sheri Qualters, “‘Civil Action’ lawyer tangles with litigators”, May 19). Massachusetts Lawyers Weekly also has a big article which will however rotate off their online “Feature” page soon. Earlier coverage: Mar. 25, Mar. 20, etc.

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The danger of talking to plaintiffs’ attorneys? The Nano class action

An education in how class actions start: Jason Tomczak says that he posted on his blog about the iPod Nano, and was contacted by plaintiffs’ lawyers seeking to bring a lawsuit against Apple. Tomczak says that he told the lawyers he wasn’t interested in suing, but, nevertheless, the law firms of Hagens Berman and David P. Meyer and Associates filed suit naming Tomczak as the lead plaintiff. Two days later, they realized their mistake, and sent Tomczak a proposed attorney-client retainer, which Tomczak refused to sign.

Meanwhile, worldwide publicity named Tomczak as lead plaintiff, subjecting him to ridicule. (Our Oct. 27 post mentioned only Hagens Berman.)

At some point, Tomczak hired lawyers and filed a lawsuit against the law firms; his lawyers don’t seem to have explained to him the repercussions of challenging the plaintiffs’ bar, however, and, after what he calls a harassing deposition, the law firms have filed counterclaims against Tomczak, seeking their fees for defending themselves. Jason Tomczak now asks to clear his name: are there reporters out there who want to cover this David v. Goliath story? (See also Milt Policzer, “Who Needs Plaintiffs”, Courthouse News undated).

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NYT snoozes through Milberg scandal

I’ve got details at Point of Law, where there is also much additional Milberg coverage.

On the other hand, the Times today continues to show admirable persistence in tracking the Anthony Pellicano scandal, even though that one (unlike Milberg’s) doesn’t have its roots in New York. (David M. Halbfinger and Allison Hope Weiner, “Pellicano Case Casts Harsh Light on Hollywood Entertainment Lawyers”, May 23).

Also at Point of Law this week, in the “Featured Discussion” section, Jonathan B. Wilson and Larry Ribstein debate whether licensing lawyers makes sense.

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Stupid Class Action Settlement Dept.: Enterprise Rent-A-Car and Jeffrey Lowe

Two St. Louis attorneys (including Jeffrey Lowe (cf. POL Oct. 15)) will collect “up to” $975,000 in a settlement of a class action against Enterprise Rent-A-Car; their putative clients, a class of Missouri plaintiffs, will receive a 25%-off coupon that results in higher rates than standard discounts, and is thus entirely worthless. Consumerist (h/t Slim) has the details. The final hearing on the settlement is June 14. (“Judge OKs settlement in Enterprise class-action suit”, St. Louis Post-Dispatch, May 5).

The allegation against Enterprise? That a 5% surcharge (which the plaintiffs admit Enterprise can legally charge) didn’t clearly state what it was for. Enterprise isn’t lowering its rates, but will state that the 5% covers various local taxes that it pays—thus adding more bulk to a lengthy list of small-print disclosures that obscures potentially useful information, since customers care about the bottom line to themselves, rather than how their rental car company spends its money. How precisely has this lawsuit made consumers better off? More on class actions.

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“Inside Milberg’s Credenza”

I’ve got a lengthy op-ed in today’s Wall Street Journal (sub-only) discussing the indictment of Milberg Weiss. A few excerpts:

Since such payoffs are baldly illegal, prosecutors claim the firm took elaborate steps to keep them concealed from judges and others. They say Milberg funneled much of the money through law-firm cut-outs and other channels, including casinos, and drew on a stash of money kept in a safe located in a credenza in partner David Bershad’s New York office, “to which access was strictly limited.” Again and again, prosecutors add, the firm submitted sworn statements on behalf of its clients denying any receipt of the sorts of payments they were in fact receiving. …

With other class members absent, named plaintiffs are one of the few watchdogs against self-dealing or misconduct by the lawyers — specifically, the pursuit of settlements that result in high legal fees, whether or not they serve the interest of the class. … if the Justice Department’s allegations are correct, Milberg was taking no chances on the watchdogs staying pacified: It threw regular chunks of raw liver into their cages. …

The two celebrity lawyers who made Milberg famous, Melvyn Weiss and the now-departed William Lerach, have thus far escaped indictment: Of course, if they were prosecuting such a case, they would miss no opportunity to insinuate that misconduct by part of a team of top executives must have been at least tolerated by the others, that the rot goes straight to the top, that senior partners turned a convenient blind eye to signs of misconduct because they profited handsomely from that misconduct, and so forth. Messrs. Weiss and Lerach must count themselves lucky that such reasoning did not lead to their inclusion as defendants.

The Journal also has an editorial today on the subject.

Our earlier coverage: May 20 and links from there, May 21, as well as many posts at Point of Law. When The Economist profiled Melvyn Weiss three years ago, I told them, “A distinguishing characteristic of the Milberg Weiss approach is that the clients became tokens to be moved around a game board” (Jan. 17, 2002).

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