Just Desserts

It’s about time this firm went down. When I was in law school in the mid-’90s, this firm was the talk of the legal world, an upstart law firm making hundreds of millions from unfounded shareholder derivative suits. If you wanted to be a rich pirate, you went to Milberg, Weiss.

Here’s why: during the dot-com boom, Silicon Valley firms’ stock prices were fluctuating all over the place, based on anything from hard news to rumors. Milberg Weiss would file a suit against, say, Wahoo Inc., on behalf of a shareholder alleging that the previous week’s (or month’s, or day’s) massive stock-price drop in Wahoo must have been the result of some malfeasance by Wahoo’s Board of Directors or executive team, because, of course, that’s historically part of why companies undergo massive stock drops. Didn’t matter that the actual reason for the drop was probably that a bunch of lemmings sold Wahoo and bought Screaming Media based on something said on Motley Fool. Such suits by shareholders against the company itself are called shareholder derivative suits, and Milberg Weiss turned them into brutal, in-your-face, I-dare-you-to-fight-back high-dollar piracy.

How? Well, once the suit was filed, Milberg Weiss would get to go through the discovery process. In practical terms, that would mean Wahoo, Inc. would have to reveal details of their recent operations prior to the stock-price drop. Wahoo would have to be insane to let that sort of info out, so they’d settle. Milberg made millions of dollars, sometimes tens of millions, in settlement fees for each case, basically for doing nothing. They did this again and again.

I worked for a few years at a litigation support company, a technical house that handled the document flow in large litigation cases. We’re talking millions of pages per case. And I managed the documents for a case — maybe one of the first ones — where the targeted company fought back against Milberg Weiss. Seeing the gory details of that one was enough to break your heart.

Of course, Milberg could only do this if they had a shill plaintiff who happened to own a share or two of the targeted company’s stock, and who was willing to be lead plaintiff in a lawsuit. The running joke was that Milberg had a secret stable of little old men in Silicon Valley who each owned one share of every high-tech firm out there, paid under the table for their services. Looks like one of the little old men finally turned snitch. No honor among thieves, etc. It’s about time.