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Milberg Weiss Class Action Defense Case-In re New Motor Vehicles: Federal Court Removes Milberg Weiss As Lead Counsel In Multimillion Dollar Antitrust Class Action Litigation

Indictment of Milberg Weiss Warranted Removal of Firm as Vice-Chair of Plaintiffs’ Executive Committee in Antitrust Class Action Maine Federal Court Holds

Several state and federal antitrust class action lawsuits were filed against most of the major automobile manufacturers and distributors. In June 2003, the class actions were transferred to federal district court for the District of Maine by the Judicial Panel on Multidistrict Litigation. To assist in managing the complex class action litigation, in November 2003 the district court approved a Plaintiffs’ Executive Committee consisting of nine law firms, and appointed Milberg Weiss Bershad & Schulman as vice-chair. In re New Motor Vehicles Canadian Export Antitrust Litig., 466 F.Supp.2d 364, 366 (D. Me. 2006). Extensive law and motion practice followed, leading to the court certifying a class action as to one of the claims and to two proposed settlements (one for $35 million and one for $700,000), id., at 365-66. In May 2006, a Los Angeles federal grand jury indicted Milberg Weiss and two of its named partners (David Bershad and Steven Schulman) charging that the class action law firm “has engaged in a kickback scheme, illegally paying millions of dollars to certain individuals to represent them as named plaintiffs and thereby achieve the role of lead counsel in class action lawsuits” and seeking criminal forfeiture of hundreds of millions of dollars, id., at 365. Due to the fiduciary duties owed to class members, the district court sua sponte raised the issue of whether Milberg Weiss should continue to serve in a “leadership role,” id., at 365-66. Defense attorneys thereafter moved to disqualify Milberg Weiss from serving on the Executive Committee and from further participation in the class action litigation; the district court removed Milberg Weiss from the Executive Committee “even though the Indictment does not refer to activity in this civil litigation and neither of the two partners actively participating in this litigation has been accused of any misconduct,” but did not grant the request to exclude the firm entirely id., at 366.

In analyzing whether Milberg Weiss should be removed from the Executive Committee, the federal court first noted that this issue does not involve (1) whether the law firm may continue to represent individual plaintiffs in the class action, (2) whether defense attorneys have filed the motion to gain some tactical advantage, (3) whether the law firm is presumed innocent until proven guilty, (4) whether removal would be “fair” to the law firm, or (5) decisions reached by other courts involving the law firm. In re New Motor Vehicles, at 367-68. The court stressed at page 367, “I as judge, not the parties, had and have the final say on who should be on the Plaintiffs’ Executive Committee, managing the activities of all the lawyers.” The only relevant inquiries were (1) what would best serve the interests of the class, and (2) what practical effect would removal of Milberg Weiss from the Executive Committee have on the class action litigation? Id., at 368. The district court ultimately concluded that the class was best served if Milberg Weiss was removed from the Executive Committee, id., at 368-69, and that the impact on the litigation did not dictate a contrary result, id., at 369-70.

The district court summarized its holdings at page 371 as follows:

If initially I had appointed Messrs. Buchman and Richards to the Plaintiffs’ Executive Committee rather than the Milberg Weiss firm and if the grand jury had indicted only other partners at Milberg Weiss, not the firm as a whole, undoubtedly the outcome here would be different. Misconduct (alleged or proven) by law partners in other cases would not disqualify Messrs. Buchman and Richards in this case. But those are not the facts. The entire Milberg Weiss firm has been indicted, with huge criminal forfeitures sought. I therefore Grant the defendants’ motion to remove Milberg Weiss from the Plaintiffs’ Executive Committee and Deny the cross motion of Messrs. Buchman and Richards to be appointed in its stead. Ongoing representation of individual plaintiffs depends upon the filing and disclosure requirements I have enumerated.

NOTE: The district court noted that it was not excluding Milberg Weiss from representing individuals in the class action, only from serving on the Executive Committee: “Because individual plaintiffs have rights to the counsel of their choice, I am not excluding Messrs. Buchman and Richards or Milberg Weiss from maintaining representation of individual clients…. But should any such clients wish to continue that relationship, they are required to state that desire explicitly in a letter to this Court by January 22, 2007, also stating that they have read this Order.” In re New Motor Vehicles, at 370. Also, the district court rejected a request by the two Milberg Weiss partners in charge of the MDL class action litigation, Michael M. Buchman and J. Douglas Richards, “to be named individually to the position now occupied by Milberg Weiss if the firm should be disqualified,” id., at 367.

Download PDF file of In re New Motor Vehicles Canadian Export Order