The Further Adventures of Milberg Weiss

Apparently, there is no love lost between former law partners, especially when they land on opposing sides of a federal indictment that charges them with crimes directly related to how they ginned up class actions complaints for decades.

We speak, of course, of the ongoing melodrama among partners past and present of Milberg Weiss, once the king of class actions and scourge of corporate America. The firm and several of its former and current partners stand accused of paying kickbacks to some of the named plaintiffs in securities class action suits the firm handled.

Steven G. Schulman, a former partner, lost a round against the firm this week. A New York judge denied his bid to force Milberg Weiss to continue to pay his legal costs.

Federal prosecutors have been investigating Milberg for at least seven years. In May 2006, with an indictment against the firm and two of its partners imminent, Schulman took a leave of absence.

From then until September 2007, his defense costs were split between Milberg Weiss and Coughlin Stoia — the latter being the firm William S. Lerach created after he and Melvyn Weiss split in 2004.

Schulman's defense tab ran to $4.5 million before he copped plea on October 9, agreeing to cooperate in the case. At that point, funnily enough, Milberg Weiss stopped paying his legal bills.

Turns out, Milberg Weiss may have had a point: In a decision released today, New York Supreme Court Judge Helen E. Freedman denied Schulman's demand that the firm pay his unpaid legal fees, which had mounted to $1.2 million by November 1, 2007.

When Schulman took his leave of absence, the firm agreed to pay his legal bills until his conviction was upheld on a "final non-appealable court order." Given that Schulman has struck a deal with prosecutors and agreed to testify against the firm, Milberg Weiss argues the conviction is in fact final.

Judge Freedman noted the argument, but did not pass on it: she simply ruled it was "unclear at this time whether the likelihood of success on the merits" weighed in Schulman's favor.

Schulman, whose unpaid legal bills are already the subject of an out-of-court arbitration proceeding, was pushing for a preliminary injunction, which requires a high standard of proof. Judge Freedman also mentioned that Schulman had not demonstrated "irreparable harm" — another legal hurdle one must get over to win a preliminary injunction. "Petitioner has not demonstrated he is without resources."

If that weren't bad enough, Schulman may have shot himself in the foot with his own lawsuit: In passing, it points out that he was "among the highest compensated partners at Milberg Weiss" in recent years, earning more than $15 million in 2005. Surely, Schulman saved some of that.

A trial against Milberg Weiss is set for August in Los Angeles. But the way his lawyers are burning through the billables, he may have "irreparable harm" by then.

by Karen Donovan