Submitted by Theodore A. Bechtold, Esq., Jul 24, 2007 02:27

Gaining the role of lead counsel is far from the only important benefit of having plaintiffs getting kickbacks. In practice the conduct of these cases is completely in the control of lead counsel. This power extends far beyond control of the legal fees. The Court simply does not evaluate or question in any way the judgment of lead counsel regarding conduct of a case. The only oversight of lead counsel is that of the lead plaintiff. This is the only protection afforded class members by the statutory scheme.

The house plaintiff will always be completely satisfied with the course of the litigation. The Court will only ask one substantive question of lead counsel – is the settlement fair and reasonable. There is never an objection to any proposed settlement from the house plaintiff. This is assured by the kickbacks they receive. Neither the Court approving the settlement, nor the class members that are legally bound by its terms know anything about the kickbacks. The house plaintiff is the only party legally entitled to challenge the absolute power of lead counsel to conduct the case and propose settlements as they see fit. How many plaintiff objections could we expect if any class was fully informed about the secret kickbacks made by lead counsel to the class representative selected by the Court? Was this is the reason they did not disclose these supposedly "benign" payments to the Court or were they afraid they would be embarrassed by stories of cash kickbacks at the HoJo in Newburgh.

The lead plaintiff can unilaterally kill any settlement proposal by lead counsel. Objections raised by the lead plaintiff have great weight with any Court. Institutional shareholders are preferred by most courts to serve as lead plaintiff precisely because of this oversight function. The legislative history of each rule change relating to this process clearly reflects the essential failsafe role that the lead plaintiff is expected to play in class actions. The only chance for oversight of the lawyers is eliminated by the payment of undisclosed compensation to house plaintiffs. Milberg Weiss was always in complete control.

This ongoing value of house plaintiffs is confirmed by the fact that Milberg Weiss continued to pay the undisclosed compensation long after the race to the courthouse was discontinued by statute. Counsel objecting to the term kickback in a racketeering case after codefendants and others have entered into cooperation agreements is a clear sign of desperation, which seems entirely appropriate given the likely outcome.

Note: Comments are screened, and in some cases edited, before posting. We reserve the right to reject anything we find objectionable.