Risk Management

On the Hill, Trying to Put Plaintiffs’ Bar on the Defensive

With Lerach now preparing for jail, a pair of Republican congressmen push to investigate the practices of class action lawyers.
Kate PlourdMay 5, 2008

With class-action attorney William Lerach almost set to start his two-year prison sentence, some Republican lawmakers in Washington are giving Corporate America more to celebrate as they seek to turn up the heat on the conduct of class action lawyers across the country.

Last Friday, House minority leader John Boehner (R-Ohio) and Lamar Smith (R-Texas) sent letters to the chairman of the House judiciary committee, John Conyers Jr.(D-Mich.), and to House majority leader Nancy Pelosi (D-Calif.), demanding an investigation into the practices of the class actions litigation industry.

“The United States Congress has an obligation to take action — by holding hearings to determine the extent of the trial lawyer scandal and the threat to our economy, identifying appropriate legislative remedies and sending them to the President without delay,” they wrote.

Reps. Boehner and Smith asked congressional leadership to hold the hearing on May 19, the day Lerach will begin his prison sentence for conspiracy to obstruct justice. He pleaded guilty to the charge in September, admitting that he paid off plaintiffs in some of the 150 shareholder lawsuits he brought to court.

The lawmakers cite a statement Lerach made to the Wall Street Journal after he was sentenced this February to two years of probation, 1,000 hours in community service, and payment of $250,000, in addition to his two years in prison. He told the Journal that plaintiff kickbacks schemes, like the ones he was involved in at his former law firm Milberg Weiss, were “industry practice.”

Wrote Reps. Boehner and Smith, “The Republican-led Congress responded aggressively to the Enron and WorldCom scandals earlier this decade. Now the Democrat-led Congress needs to do its job and examine the scandal at Milberg Weiss, which potentially has deeper and more far reaching implications.”

According to the letter the congressmen seek to investigate:

• The number of class action lawsuits brought as a result of illegal plaintiff payments

• Other conflict of interest between trial lawyers and investors they represent

• Reforms that Congress can make to rid the judicial system of such abuses.