Predatory law firm's 'fraud on the court' 

In 2008, four of the Milberg Weis law firm's partners pleaded guilty to federal crimes after a scandal in which the firm had paid kickbacks to plaintiffs in order to initiate potentially lucrative securities lawsuits. The Milberg Weis scandal, which landed three of the partners in prison, rocked the legal world, specifically in the area of securities litigation -- that is, shareholder lawsuits against companies whose stock prices go down.

Earlier this month, the same firm -- now known as Robbins Geller -- suffered another humiliating defeat in a shareholder case they had brought against airplane manufacturer Boeing. The judge dismissed their case with prejudice, on the grounds that the plaintiffs had committed a "fraud on the court" and misrepresented their key confidential witness.

The class-action lawsuit, whose original plaintiff was the municipal pension fund of a Detroit suburb, alleged that Boeing had issued misleading statements in order to conceal from the public development problems with their new 787 Dreamliner aircraft, and the revelation of the problem ultimately caused the stock price to drop (although it subsequently recovered).

The judge in the case initially dismissed the suit without prejudice, viewing it as something of a fishing expedition. Thanks to the Public Securities Litigation Reform Act of 1995, shareholder lawsuits cannot go forward on a mere hunch -- plaintiffs must allege particular allegations of wrongdoing before they can begin demanding confidential documents and interviews with company executives.

The plaintiffs' lawyers kept their case alive by returning with a second amended complaint, containing  specific allegations that they said came from a "confidential witness," a high-ranking Boeing insider. But in deposition, it didn't turn out as they had hoped. That the witness recanted was only the beginning of the problem. Far worse was the fact that he wasn't even a high-ranking Boeing insider, didn't even work for Boeing, and had no access to the information he had supposedly provided the plaintifs' lawyers. As Judge Suzanne Conlon wrote:

After plaintiffs' disclosure of Bishnujee Singh as the confidential source, he was interviewed by defense counsel...Singh has consistently denied that he was the source of the information attributed to him in the second amended complaint. Indeed, he denies he was employed by Boeing. Rather, he attests he worked for an outside contractor at Boeing starting in late August 2009, months after the events at issue in this suit; he denies personal knowledge of the 787-8 testing documents or their circulation to Boeing executives in April and May 2009; he claims he never met plaintiffs' counsel until his deposition on November 17, 2010; nor was he ever shown the allegations attributed to him in the second amended complaint until he met with defense counsel on November 2, 2010.

How did that happen? It's hard even to imagine, except that this particular firm is not known for exercising dilience or caution when it launches lawsuits in search of large legal fees.

About The Author

David Freddoso

David Freddoso came to the Washington Examiner in June 2009, after serving for nearly two years as a Capitol Hill-based staff reporter for National Review Online. Before writing his New York Times bestselling book, The Case Against Barack Obama, he spent three years assisting Robert Novak, the legendary Washington... more
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