Legal News

Coughlin Stoia May Lose Class Counsel Spot in Coke Case

By Dan Slater

We spoke too soon. In the wake of Bill Lerach’s departure from the firm, it looked liked things were turning up all roses for Coughlin Stoia, the embattled firm Lerach — who was recently sentenced for his role in the alleged Milberg Weiss kickback scheme — co-founded in 2004

Let’s reconsider. On his Legal Pad blog, Roger Parloff is reporting that, on Wednesday, a special master in the federal shareholders class-action against Coke recommended that Coughlin Stoia, which has worked on the case for seven years, be barred from serving as class counsel because it allegedly purchased “stolen” Coke documents from a disgruntled former Coke exec. (The class action against Coke, filed in 2000, alleges that the company artificially inflated its revenues through “channel-stuffing” — or persuading distributors to buy more product than they need in order to make business look brisker than it is.)

“Class Counsel engaged in extremely troubling conduct,” wrote Special Master Hunter R. Hughes, III, “by paying for documents stolen from Coke, and then exacerbated the [situation] by refusing to accept responsibility for that conduct and by continuing, to this day, to defend that conduct through the use of arguments that appear to be pretextual.” Click here for the ruling.

Allegedly, about four months after the case was filed, the law firm (then still Milberg Weiss) signed a “consulting agreement” with two former executives who said they had about 3,000 Coke docs. The firm agreed to pay them $200/hr and no less than $75,000, if they would provide information to the firm “including . . . documentation in any form, written or electronic, concerning Coke.” Some of the docs handed over were then used in connection with an amended complaint filed in the case.

When the consulting agreement came to light more than a year ago, the firm and the executives argued that neither thought they were taking Coke docs without authority because Greg Petro, one of the executives, had been ordered, when terminated, to “clean out his office.”

Meanwhile, loyal law blog readers may remember from last fall that Coke’s lawyers were also trying to oust Coughlin Stoia from the class counsel post based on Bill Lerach’s guilty plea regarding the kickback allegations against Milberg Weiss. (see article) Parloff notes that Hunter rejected that argument.

Hunter’s recommendation was submitted to U.S. District Judge Willis B. Hunt, Jr., of Atlanta, who will wait to receive comments from the parties before deciding what action to take. The Law Blog, and Parloff, reached out to lawyers at Coughlin Stoia, but did not immediately hear back.

Full post as published by Law Blog - WSJ.com on February 29, 2008 (boomark / email).