When the nation's largest class-action securities law firm Milberg Weiss Bershad & Schulman LLP was indicted in May in Los Angeles for allegedly receiving kickbacks, it sent a shock wave through the legal community.
Since then, Milberg has weathered a maelstrom of criticism in the mainstream press, but most other law firms have kept quiet and reserved judgment. Until now.
The first shot has come from L.A.-based powerhouse Latham & Watkins LLP, which has filed a motion in the U.S. District Court of Maine to dismiss Milberg as counsel for the class in an antitrust case in which Latham represents the defendant, Ford Motor Co. The motion could effectively cripple the class-action giant and is being watched carefully by the nation's legal community.
In its filing, Latham argues that Milberg's indictment hampers its ability to represent the class and threatens the integrity of the litigation. The motion, which points out that Milberg's clients could later appeal the case on the grounds that its counsel's ability to represent was impaired, puts a fundamental issue before the judge.
"They haven't been convicted," said Greg Keating, professor at USC Law School. "It would be a very severe consequence to say a firm that's been indicted can no longer represent plaintiffs. It would mean that the indictment itself was the kiss of death."
Milberg, in its opposition to Latham's motion, cites its experience and success representing classes the firm has won $45 billion in judgments for its class-action clients, more than any other firm and that other courts have expressed faith in the firm's ability since the indictment.
Last week, Milberg entered a plea of not guilty to charges of secretly paying more than $11 million in kickbacks over the past two decades to get people to take part in shareholder lawsuits. Both firms declined comment for this story.
The stakes are high for Latham, too. The firm is defending class actions against Milberg across the country and its motion characterized as "extremely aggressive" by several legal experts could severely hinder its ability to achieve equitable settlements for its clients.
The filing also is unusual in that if its motion is granted, the litigation will be delayed after three years of work on the Ford case. Most class action defendants, fearing negative publicity could drop their stock price, are anxious to resolve litigation of this type.
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