Hubris, Hypocrisy and Greed: George Will and William Lerach
J. Robert Brown | Monday, November 19, 2007 at 11:43AM George Will wrote an editorial over the weekend slamming John Edwards, using it as an opportunity to rale against Milberg Weiss and Bill Lerach. Will adds nothing to the preexisting discussion and provides incomplete, if not misleading, analysis. He knows better. In other words, his result oriented approach is a reflection of his own hubris and hypocrisy.
As is well known, some attorneys at Milberg Weiss apparently kicked back to plaintiffs a portion of the attorneys fees as an inducement to bring actions. Will is right that at the time (and no longer true today), lead counsel was often determined by the first to file the suit, putting a premium on the race to the courthouse and providing benefits to those with a ready stable of plaintiffs. Will then goes on to make the utterly inconsistent point that these suits were somehow invalid ("How do you convict a company of the crime of having the price of its stock fall? . . . Often you do not prove it, or even plan to. Rather you threaten to be such a costly nuisance that the company pays you to go away.").
Several observations are worth making. First, if the lawyers at Milberg paid kickbacks to be the first to the courthouse, it is nonetheless clear that other firms would have brought these cases (why, otherwise, would they pay to be first?). In other words, there is nothing about the kickback scheme that resulted in even a single additional case being brought. Second, paying kickbacks to be first does not in any way suggest that the cases lacked merit. If anything, it is the reverse. Counsel would want to be first in the best cases. Thus, to even suggest that somehow the kickback scheme resulted in meritless lawsuits is an unfortunate fiction and analytically indefensible. An example of hubris, in short.
Finally, we note that securities class actions brought before the PSLRA took on average around four years to resolve. It required firms with deep pockets to pay all of the costs of litigation, with the payout only coming years later after considerable sunk costs. In a race to the courthouse environment, firms that filed first were not necessarily the best representatives for shareholders. They might lack the skill and resources to pursue the case adequately. In other words, as a result of the kickback scheme, the attorneys at Milberg were able to circumvent the dysfunctional system that determined representation not upon the quality of counsel but upon the speed of arriving at the courthouse. In the cases where counsel paid kickbacks, plaintiffs received the benefits of a firm with deep expertise and deep pockets.
It doesn't make what Milberg and Lerach did right. But violating legal requirements in making improper payments to plaintiffs is not at all the same as saying that companies were improperly sued or shareholders improperly disadvantaged. Before George Will accuses others of hubris and hypocrisy, he should pay more attention to his own positions.
Reader Comments (3)
There's certainly a separate debate to be had about the number of securities class actions that are meritless (certainly you would concede that at least a FEW are?), but I think your post mis-characterizes Will's piece.
And note that Will's use of "hubris" was simply recited from another source...
If Will does come right out and say that
the illegal conduct is proof of a lack of merit of the cases. He says that they were illegally paid to pretend to be injured investors.
"According to prosecutors, some of Milberg Weiss's phony plaintiffs were getting millions of dollars in kickbacks -- generally about 10 percent of net attorneys' fees -- for their charade as injured investors."
In fact the paid plaintiffs were injured investors, they weren't paid "for their charade." They were paid to be Lerach's plaintiffs.
It's a fair point that this sentence might carry such a suggestion, and although I don't read it that way I'll go ahead and say fine - there's some suggestion in this one sentence that phony plaintiffs = phony lawsuits.
But what prompted me to comment was Professor Brown's characterization of the piece as a whole, and his attitude in general towards the piece and George Will. In describing as "utterly inconsistent" the points that (1) these lawyers broke the law, and (2) these lawyers brought allegedly meritless lawsuits, and also in concluding that "violating legal requirements in making improper payments to plaintiffs is not at all the same as saying that companies were improperly sued or shareholders improperly disadvantaged," I think Professor Brown is mischaracterizing Will's overarching message. Notwithstanding the one sentence that you quoted, in my view a fair statement of Will's overall message is NOT that he thinks that Weiss/Lerach brought meritless lawsuits, AS EVIDENCED BY THE FACT THAT THEY PAID OFF PLAINTIFFS; rather, I think the main thesis was the two-part indictment of the character of Weiss/Lerach that I sketched out in my original comment (and with which, not surprisingly, I agree).
So I think Professor Brown kind of read his own point into the piece and then responded to his own mistaken interpretation. And even that is not so horrible (I'll concede that I've probably misinterpreted more than a few op-ed pieces over the years, and I'm no professor), except that in concluding a post that mischaracterizes the original piece, it seems especially abrasive to sanctimoniously advise that the person whose piece he's mischaracterizing should "pay more attention to his own positions."