Judge Questions ‘Gross Conflict’ by Coughlin Stoia
A federal judge thought he saw a “gross conflict of interest” when a pension fund administrator revealed in a court hearing earlier this month that a securities class action law firm was monitoring its portfolio for potential lawsuits.
The firm, Coughlin Stoia Geller Rudman & Robbins, offers the service at no charge, accepting payment only if it sues and succeeds, the American Lawyer reports.
U.S. District Judge Jed Rakoff appeared aghast, according to the story. “If that isn’t a gross conflict of interest in violation of the most elementary fiduciary duties, I don’t see what is,” he said.
But a Coughlin Stoia lawyer told Rakoff that the practice is common, the story says. Another pension fund representative agreed, telling Rakoff that 12 plaintiffs firms monitor its funds for free.
Stoia argued in a brief submitted to Rakoff that there is no conflict because the firm didn’t have authorization to automatically file suit and because the pension fund could hire a different law firm to sue.
“Did the judge overreact?” the American Lawyer article asks. “Or did he uncover an ethical morass encompassing a huge swath of the plaintiffs bar? We couldn’t reach the lawyers who attended the hearing, but a partner in another large securities class action firm told us that the practice is indeed common.”
