Attorneys who defend insurers said the absence of high-profile plaintiff lawyers Mel Weiss and David Bershad from the class-action scene hasn't cut the volume of such lawsuits, while the pair's know-how at settlement talks is missed.

"Where you'll really feel the impact is settlement discussions," said Jeffrey Rudman, a defense attorney for Wilmer Hale in Boston, speaking at the Professional Liability Underwriting Society's D&O Symposium earlier this month.

With Mr. Bershad and Mr. Weiss missing because of legal difficulties, rookie class-action lawyers for plaintiffs have arrived who are drawing out the litigation process and bringing a new level of nastiness to proceedings, other defense attorneys said.

Last year, Mr. Bershad and William Lerach, once members of the firm Milberg Weiss--one of the most active plaintiff firms in filing securities class actions--pleaded guilty to charges that they paid secret kickbacks to individuals who agreed to act as plaintiffs in such cases.

Early last week, Mr. Lerach was sentenced to two years in federal prison. Mr. Weiss is still fighting criminal charges.

With Mr. Bershad and Mr. Weiss, there were "real adult[s] to deal with," and "one could have a dispassionate, honorable, sensible conversation, [and] they were able to bring along everyone else at the table," Mr. Rudman added.

Now, he said, defense lawyers find themselves having to deal with less experienced attorneys he described as "overcaffeinated 35-year-olds...It's not a better world."

Mr. Rudman's comments regarding Mr. Bershad and Mr. Weiss came after he and other litigators debated reasons for a decline in securities cases during 2005, 2006 and the first half of 2007. (They have since spiked upward.)

Sean Coffey, a plaintiffs' lawyer with Bernstein Litowitz Berger & Grossman in New York, listed factors such as Sarbanes-Oxley corporate governances rules, stronger enforcement from the Securities and Exchange Commission, and better behavior by corporate officers among possible reasons.

"It's interesting that you left off your list...the fact that some very prominent plaintiffs' lawyers and firms have gotten into trouble," remarked Evan Chesler, a defense lawyer for Cravath, Swaine & Moore in New York.

Mr. Coffey responded: "I think the Milberg effect is not an effect." And he asked: "What case would Milberg have brought that no one else brought?"

"There are a lot of firms out there that file these cases," he said, suggesting that if there were 15 major firms before and only 14 now, it makes little difference except perhaps to the firms that were previously "elbowed out" by Milberg's high success rate in getting lead plaintiffs.

The exchange prompted Denise Amantea, a partner with insurance broker Woodruff-Sawyer in San Francisco, who was sitting in the audience, to ask the defense lawyers on the panel whether they were now seeing a slew of new, inexperienced firms stepping up to fill any gap that Milberg might have left.

Mr. Rudman said such firms would not change the number of cases filed, and then went on to mention the impact on settlement talks.

Mr. Chesler agreed with Mr. Rudman that Mr. Weiss and Mr. Bershad, with their experience, had "a salutary effect on the settlement process."

In addition, Mr. Chesler said, the new lawyers are importing tactics from product liability cases, resulting in "an increasing inexorable tide of nastiness and incivility."

In particular, he referred to tactics such as filing discovery sanction motions, noting that while good-intentioned people on the defense side are trying to find "millions of pieces of paper," they are being accused of "all sorts of high crimes and misdemeanors" by these younger attorneys who are "hijacking" the litigation process.

"The mindset that prevailed for a long time" in product liability and other types of civil litigation until now "hadn't invaded securities litigation," he said.

The new mindset makes each lawsuit "about the process of litigation rather than about the merits," and it will ultimately result in increased defense costs to insurers, he predicted.

Countering what he said was a popular notion among insurers that defense lawyers would welcome this because "they like to run the meter," he said he finds these developments "distasteful and time-wasting."

"It's not why I went to law school," he said.

Jordan Eth, a partner for Morrison Foerster, a defense firm in San Francisco, believes the newer firms are having an impact on settlements and cases filed.

"For years, there was an equilibrium. You had repeat players on the other side," he said, adding that since everyone knew everyone, lawyers knew what motions worked and what didn't.

Now, smaller firms are "flexing their muscles" and raising arguments that experienced firms "wouldn't raise with a straight face anywhere," he said, suggesting that they're involved in a lottery to "see what works."

Panel moderator Boris Feldman, a partner for Wilson Sonsini Goodrich and Rosati, a Palo Alto, Calif.-based defense firm, said he believes new players create increased risks for directors and officers liability insurers.

They are changing "one of the most efficient litigation markets in the world" that involved "very sophisticated repeat players and very sophisticated insurers," he said.

The resulting predictability that allowed insurers to "pretty much size up the risk a couple of months into it" will go away with new players that "don't follow the traditional playbook," Mr. Feldman said.

Loss of high-profile plaintiff attorneys due to legal woes opens field to less experienced newcomers.

Special Reports /

D&O Insurer Attorneys Face Meaner Class-Action World

Related Stories

Recommended For You