As a followup to yesterday's post on the possible indictment of famed plaintiff securities class action law firm Milberg Weiss, Jonathan Wilson has more on why kickbacks by class action lawyers to the named plaintiff in such suits are "dastardly":
The practices that Lazar is alleged to have engaged in are certainly dastardly. The principle of class action litigation is that the interests of many are adequately represented by a few named plaintiffs, allowing for a more efficient outcome than if each individual plaintiff were left to pursue his own remedies.That principle is utterly undone if, as alleged, the named plaintiff has a covert arrangment with class counsel for additional compensation that is not shared with other class members.The practice is especially dastardly because the mechanics of litigation (with the protection of the attorney/client relationship) cloak the transactions between the named plaintiff and class counsel. There is no third party to regulate those transactions and no mechanism to police wrongdoing.While judges have a responsibility to avoid collusive arrangements with class counsel and collusive settlements, in practice many judges lack the inclination and the legal tools to supervise these arrangements.While defendants may sometimes suspect inappropriate behavior, they too lack a mechanism to prevent it and may even lack the standing to complain about it.
