[JURIST] Officials at the US Chamber of Commerce's affiliate, the Institute for Legal Reform (ILR) [official website], said in a report [text, PDF; press release] released Thursday that the system of heavy securities class action litigation in the US is inefficient, unnecessary, and harmful to the US economy. The report says that the current securities class action system forces companies to settle with plaintiffs rather than risk trial, and that it most benefits trial lawyers while harming companies and failing to protect consumers:
This flawed system is not needed to monitor and punish securities fraud: the ample regulatory, civil, and criminal enforcement powers of the Securities and Exchange Commission, the Department of Justice, their state counterparts, and financial services self-regulatory organizations more effectively deter wrongdoers and compensate shareholders without the inefficiencies of the class action litigation system.ILR suggested Congressional action to fix the system, such as increasing litigation oversight and transparency through the enactment of the Securities Litigation Attorney Accountability and Transparency Act [text and materials], which was been introduced in the House of Representatives, and by reforming the discovery and appeals processes. Legal Newsline has more.
The report specifically highlighted the recent related legal troubles of securities firm Milberg Weiss [JURIST news archive]. Prosecutors alleged that since 1984, the firm had paid up to $11.3 million in bribes to people who agreed to serve as lead plaintiffs in class action and shareholder derivative lawsuits and were promised 10 percent of the attorney fees eventually received by the firm. In April, Reuters reported that partner Melvyn Weiss' former law firm, now known as Milberg LLP, had entered into negotiations [JURIST report] with federal prosecutors to settle accusations. Three people pleaded guilty in connection with the bribery agreement in May 2006 after a federal grand jury indicted [JURIST reports] the firm.