A friend of mine in steady employment forwarded me this story Fallen angels of the US plaintiffs' bar this morning. Executive summary; the US legal firm of Milberg Weiss is under investigation because of claims that they paid - in fact cultivated - potential class action litigants against major US companies. If the claims prove out, what the firm did was to encourage people to buy shareholdings in different US corporations specifically so that they'd be pre-positioned as lead plaintiffs in class action law suits against the corporations if their earnings weren't as expected. Apparently, this is against a number of specific rules governing the behaviour of lawyers in the US; in other news, there are apparently rules governing the behaviour of lawyers in the US.
Since there is no conceivable news about lawyers which would actually shock me, this didn't exactly rock me in the aisles when I read it. What did annoy me enough to take up the cudgels is the editorial coda of the piece, which I reproduce below for your reading pleasure.
After all, the temptation to pay a lead plaintiff would only arise in a situation where there was competition from other lawsuits: Messrs Lerach and Weiss wanted to be first at the courthouse because others were right behind them. If they had not sued corporate America, it would have made little difference: someone else would have done (and did).First paragraph; there's nothing wrong with this because if they hadn't done it, someone else would have. If that's a valid response to the issue, then there's no such thing as a crime at all. And if it's not intended to make that point, what the hell point IS it making?
It is "absolutely unjustified" to suggest that the indictment proves the lawsuits brought by Milberg Weiss were fraudulent, says John Coffee of Columbia University law school, a securities law expert. The main victims were other law firms, possibly other plaintiffs, and the US legal system, which suffers whenever anyone commits perjury. He does not think corporate defendants "were hurt in any way that the law would recognise as injurious" since other law firms had already sued them and would have controlled the cases if Milberg Weiss had not done so.
Indeed, other legal experts argue that paying lead plaintiffs is good for everyone in the plaintiff class: it gives them a bigger incentive to fight hard for a win or settlement. And their kickback, after all, is alleged to have come from Milberg Weiss's own fees. So where is the harm?
This is market-based justice: let the one with the strongest self-interest win. It is not pretty, but it is our system. Get over it.
Second paragraph; the main victims are other law firms, possibly other plaintiffs and the US legal system, none of whom apparently matter.
This paragraph, and the two "Screw You, Greed is GOOD" paras which follow are what really gets my motor running. They seem to proceed from the idea that there is no social cost to predatory behaviour. This is arrant nonsense, and I expected better of the FT. There is no such thing as a free lunch. If someone makes a predatory profit, someone else, somewhere else is taking it in the neck. In a monetised world, that's the only way these things work.
So if Milberg Weiss and their clients make out like gangbusters on the back of their scheme and everyone else loses, those losses are real. And because they're real, either the people suffering the losses will have a less pleasant time than they otherwise would have had, or they will recoup their losses from someone else in turn. These things trickle on down. Reagan was wrong about benefits trickling down, but by god the bad stuff is always going to keep moving downwards until it hits an immoveable obstacle. So when the law firms lose out, they up their bills to compensate, and the people paying their bills have to shoulder the increased costs.
And let's not lose track of where all the windfall money is coming from; the corporations which got targeted. They pay out, and that's money they don't have to do other things with. So people get fired, or the price of what the corporation does goes up. Either way, the larger social grouping gets hit with the true price of the windfall to one group of lawyers.
Now take that a step further, as other corporations look at what happened to Milberg Weiss' targets and cut their costs to make sure that they don't get hit the same way. And the community as a whole gets to pay the price of those cost cuts, whether it's outsourcing of jobs, punching up the price of the product or skimping on environmental protection. All so that Milberg Weiss and the other legal firms it was competing with can make money from something completely unproductive.
Last, but not least, the airy dismissal of the US legal system as a victim with any real interest to hurt. People don't give it very much thought, but the legal system in any country is essentially the thing which stops us from settling our disputes with machetes and living in armed camps. The knowledge that there's a system in place to vindicate our claims and protect our safety is what gives us the confidence to trade with strangers and walk around in public without feeling the need to carry a weapon. Erode that confidence and you're on the beginning of the trail that leads to anarchy. Which looks pretty cool in Mad Max, but in real life it's more like Black Hawk Down.
I don't mind too much when some fool in a bar can't figure this kind of thing out, but people actually read the Financial Times expecting it to have some relevance to their decision making.