Legislation & Lobbying

House Leader Seeks Probe of Plaintiffs Firms' Class Action Kickbacks

Updated: The Republican leader of the U.S. House of Representatives is asking the House Judiciary Committee to launch an investigation into whether it is common practice, as a convicted attorney has claimed, for plaintiffs firms to pay kickbacks to lead plaintiffs in class actions.

Rep. John Boehner expects to send a letter to the committee chair today calling for the investigation, reports the Wall Street Journal Law Blog. In addition to Boehner, Rep. Lamar Smith, the committee’s ranking Republican, joined with Boehner in seeking the investigation and signing the letter.

Boehner’s call for a judiciary committee investigation was prompted by the indictment and subsequent guilty pleas of several former Milberg Weiss partners, including Bill Lerach, concerning $250 million in kickbacks they and their firm allegedly arranged to be secretly paid to securities class action plaintiffs. Lerach, who worked at Milberg, as the firm is now known, before forming his own firm (now known as Coughlin Stoia Geller Rudman & Robbins), claimed that “everybody was paying plaintiffs so they could bring their cases,” Boehner states in his letter to Rep. John Conyers Jr.

“If in fact the crimes committed by Mr. Lerach and his colleagues are an ‘industry practice’ as Mr. Lerach himself confessed, then the United States Congress is sitting idle while criminal behavior in the trial lawyer industry threatens American jobs and feeds like a parasite on the prosperity of working families,” Boehner writes.

Although the kickbacks admittedly paid by Lerach and other former Milberg partners may well have cost corporate defendants money, directly or indirectly, in terms of higher settlements, damages awards and legal fees, it isn’t clear that they have cost consumers. (Even after their convictions, plaintiffs securities lawyers involved in the kickbacks case contended their legal work had benefited American consumers.) However, Boehner’s letter indicates he believes the litigation wasted taxpayer dollars and judicial resources, and cost Americans jobs by driving corporations out of business in the U.S. and encouraging them to establish overseas operations.

Boehner called for a committee hearing on May 19 to begin looking into the issue.

Additional coverage:

Reuters: “US Republicans call for hearing on Milberg scandal”

The Crypt’s Blog (Politico): “Boehner, Smith Want Conyers to Investigate Milberg Weiss”

Updated at 4:30 p.m. to include Reuters link.

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