Wednesday, December 07, 2005

The Money Race

Well, looks like “it is time to decide which of the plaintiffs' law firms will win the money race.” That’s the way Judge Kent A. Jordan (D. Del.) put it in the lead plaintiff battle between Milberg and Lerach clients in the Molson Coors (don’t you love their stock symbol: TAP) securities class action. Judge Jordan immediately explained his comment by saying “by this observation, I mean no disrespect to these firms or others engaged in the representation of plaintiffs in securities litigation. I mean simply to be honest about what appears to be at stake. It is the lead counsel who stands to gain, not the lead plaintiff, as both the tone of the arguments and the logic of the incentives suggest here. The ‘pick me’ urgency seems far more likely to come from the lawyers than the parties because, in the real world, people are not so eager to undertake work that someone else will do for them.”

Want more? Well, OK. He continued “if another plaintiff is willing to shoulder the burden of supervising the litigation, one would think other class members would be pleased to step back. That, at least, is what one would could conclude is rational when, as is the case here, there is no persuasive suggestion that one group of plaintiffs will be any more competent at or dedicated to the job than the other. The incentives giving rise to the classic ‘free rider’ phenomenon, i.e., the inclination of people to take advantage of a benefit without bearing a commensurate portion of the associated burden, do not evaporate simply because securities are involved. They get overridden because securities lawyers are involved, lawyers who are vying for the chance to take the laboring oar in litigation and the monetary rewards that go with it.”

Still want more? All-right, but this is it. He concluded that "after going over the parties' submissions and counter-submissions, which, including appendices, run to hundreds of pages in length, it strikes me that this exercise is simply a business investment for the lawyers. They invest their time and consume judicial resources in the hope of scoring a significant financial return. That is perfectly rational from an economic perspective, but, from a public policy perspective, one might question whether the right incentives are yet in place. It is for others to determine the degree, to which the Congressional goal of making class action securities cases more client-driven and less lawyer-driven has been realized. At this stage of this case, however, it appears that the lawyers are still very much in the driver's seat.”

Result: Milberg’s client won the lead this time.

You can read In re Molson Coors, issued December 2, 2005, at 2005 U.S. Dist. LEXIS 30569.

Nugget: “These firms have a familial relationship. Milberg Weiss used to be known as Milberg Weiss Bershad Hynes & Lerach, the name change apparently reflecting Mr. Lerach's decision to launch the competing law firm that bears his name and is the rival to Milberg Weiss for lead counsel in this action.”

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