The
Ninth Circuit U.S. Court of Appeals has scheduled
oral arguments in a case that could define the
limits of a judge's discretion in determining which
lawyers will run lucrative securities fraud class
actions. Last week, the court ordered that In
re Copper Mountain Networks Securities Litigation,
01-70772, be heard the week of Feb. 11. The appeal
by Milberg Weiss Bershad Hynes & Lerach claims
that plaintiff with the largest losses in a case
must be permitted to manage the litigation.
In
deciding the case, the Ninth Circuit could dictate
the standards for the "rebuttable presumption" outlined
in 1995's Private Securities Litigation Reform Act.
Under the legislation, intended to curb "lawyer-driven" litigation,
plaintiffs who suffered the largest losses are presumed
to be the party that should run the case for the
rest of the class. But the presumption can be rebutted.
Some federal judges invoke the loophole, citing pricey
fee agreements as evidence that a particular client,
and his firm, is not the best choice.
When
Copper Mountain Networks Inc.'s stock dropped, Milberg
sued on behalf of several clients. Eventually the
firm proposed a group of five investors to run the
case. One, David Cavanaugh, lost nearly $1 million.
But
U.S. District Judge Vaughn Walker instead named a
Beatie & Osborn client, Quinn Barton, to run
the case. Osborn's loss is estimated at $59,000.
While Milberg's agreement was a 20 percent to 30
percent sliding scale, Beatie & Osborn offered
a 10 percent to 15 percent scale. Walker cited Barton's
more favorable fee agreement, holding that selection
of counsel was a leading indicator of a plaintiff's
ability to lead a class action.
Milberg
then filed an appeal. Before the Ninth Circuit, CalPERS,
the largest public pension in the nation, filed an
amicus curiae brief supporting Judge Walker's decision. |
