Class Action Criminality

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					Casey Post-Macro                                                                                             12/2/2008 10:41 PM




                                      Class Action Criminality

                                                  Lisa L. Casey*

 I. INTRODUCTION........................................................................................................... 154
II. THE INDICTMENT OF MILBERG WEISS ....................................................................... 162
     A. Congress Regulates Securities Class Actions ...................................................... 162
          1. Why Private Enforcement? ............................................................................. 162
          2. Paid Plaintiff Practices Before Securities Litigation Reform ......................... 164
          3. The Case for Reforming Securities Litigation ................................................. 167
          4. Congress Regulates Lead Plaintiff Selection and Compensation ................... 168
          5. The Government’s Investigation of Milberg Weiss ......................................... 171
          6. Overview of the Government’s Charges ......................................................... 175
     B. The Government’s Honest Services Claims ......................................................... 177
III. CLASS ACTION CRIMINALITY EXTENDS THE HONEST SERVICES FRAUD
     DOCTRINE ................................................................................................................. 179
     A. The Doctrine’s Inception and Evolution Before McNally ................................... 180
     B. McNally, Carpenter, and Congress’s Response ................................................... 185
     C. Judicial Review of Prosecutions Under Section 1346 ......................................... 189
          1. Lessons from Recent Case Law....................................................................... 190
              a. United States v. Rybicki ............................................................................. 192
              b. United States v. Brown............................................................................... 195
              c. Other Lessons Learned from Recent Case Law .......................................... 199
          2. Attorneys’ Liability for Honest Services Fraud .............................................. 204
IV. PLAINTIFFS WERE NOT FIDUCIARIES WITH DUTIES TO ABSENTEES ........................ 206
     A. Classic Fiduciary Doctrine and Its Applications ................................................. 207
     B. The Relationship Between Class Representatives, Class Counsel, and
        Absentees Before Reform ...................................................................................... 210


      * Associate Professor of Law, Notre Dame Law School. For their helpful comments and discussions, I
thank Tricia Bellia, Jay Brown, Jim Cox, Jimmy Gurulé, Sara Kraeski, John Nagle, Bob Rodes, and Julian
Velasco. I thank Jennifer Curfman, Nicholas Monaghan, Dwight King, and Warren Rees for their excellent
research assistance. I would also like to thank my husband and children for their love and support.
Casey Post-Macro                                                                                                12/2/2008 10:41 PM




154                                      The Journal of Corporation Law                                                       [34:1

          1. Cohen and Roper ............................................................................................ 214
     C. What the PSLRA Did and Did Not Do ................................................................. 216
     D. Analyzing the Indictment’s Theory of Fiduciar
				
DOCUMENT INFO
Description: This Article contributes to the literature on shareholder litigation by examining some important effects of the indictment. Part II describes, in brief, the events leading to the indictment of Milberg Weiss. Part III examines the Justice Department's case for finding Milberg Weiss criminally liable and, more specifically, considers prosecutors' efforts to extend the honest services provision of the mail and wire fraud statutes to cover fee sharing by the law firm. Part IV assesses the central premise of class action criminality -- that investors acting as named plaintiffs owe fiduciary duties to putative class members and, thus, can be held criminally liable, along with their attorneys, for breach of those duties. After examining the inchoate relationship between representative plaintiffs and absent class members, Part V evaluates the honest services fraud charge leveled against Milberg Weiss based on that relationship. Part VI completes the analysis by considering the normative implications of class action criminality as well as some consequences of the Milberg Weiss prosecution.
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