Ever wish you could just take the money? Would you like some to see you as a hero? And others fear you? This is your road.
In literature and mythology, thieves are often villain-heroes—Robin Hood and Jesse James—stealing from the rich, giving to the poor. Sounds romantic, even if it is fiction. But wait, you can legally steal and be a hero as a plaintiffs’ lawyer (PL)—today’s Robin Hood. Idolized by Hollywood, PLs posture themselves as crusaders for the helpless—fighting big bad business to save the little guy—winning huge awards in well-publicized show trials big on headlines and emotion. My apologies to other lawyers and law students if this sounds harsh, but it’s true: Most plaintiffs’ law is a perfectly legal twist on thievery and thuggery.
Other lawyers do OK financially. Most work too hard for OK (or even very good) hourly pay on fairly dull but necessary functions, like estate planning, contract or transaction law, regulatory law, or labor law. A lifetime of hard work, some frugality, OK investment returns (Chapter 10)—and they may end up with $2 million to $30 million. But at what cost? Family life can suffer, since most lawyers bill by the hour, so many work endlessly. The big money is in legal stealing—plaintiffs’ work.
Question: Are these guys crusaders or pirates? The original crusaders left comfy European castles to reclaim the Holy Land from those they saw as godless and evil. Are PLs bringing evildoers to justice—fighting the big and mean to help the little and poor? No, they’re pirates seeking booty. And if they had their way, they’d rarely set foot in court.
What they really want is to bring an action and settle out of court—be paid to go away—basic thuglike extortion with huge payouts and little work. If you sport a bit of the dark side and part of you likes playing the heavy, this is the best possible road for you. And you needn’t think of yourself as bad. PLs always, always convince themselves they’re crusaders and feel great about themselves. Go down this road and you will, too.
But if PLs were really crusaders for truth and justice they wouldn’t blackmail. They wouldn’t set up cases just to get paid to go away. Real crusaders would take cases all the way through the conclusion of a trial, always, for justice. That PLs overwhelmingly seek to be paid to go away—and usually are thereby extorting their targets—demonstrates the fallacy in their crusader self-image. They’re thieves. In their bones!
That’s a great part about this road—that part of our society with a thieving bent can take this road, steal legally, make a boatload of money, and feel great about themselves at the same time. You can do it, too. Be a hero! There’s no other road linking all these qualities. Other roads are about voluntary transactions. Not this one.
If you’ve always had a childhood fantasy to be a pirate, but don’t like the physical risk—or maybe just get seasick—this road has all the other benefits. You can scare the hell out of people. You can force folks to pay you the same basic way mafia protection rackets used to. You can swagger and loot. Huge chunks of society will see you as a crusading savior. And you will believe your victims deserved it—that is, if you go about this correctly, as I will describe. And it’s exciting—simply swashbuckling! One of the most famous PLs of all time, Bill Lerach (now an ex-con living the life of Riley in La Jolla—details later), openly bragged of scotch drinking being his prime exercise when he wasn’t terrorizing CEOs.1 He claimed a great scotch arm—just like a pirate at the wharf pub. Arrr, matey!
Pirates couldn’t care less about pedigree. Forget fancy schools. Their success isn’t about a degree; it’s about who they are (pirates). Top PLs often went to mediocre colleges and lackluster law schools. Fact: You won’t need a fancy school, either. You needn’t go to law school at all to pass the bar exam in California, Maine, New York, Vermont, Virginia, Washington, DC, and Washington.2 No law degree required to blackmail, extort, loot, pillage, and raid. And what is a pay-to-go-away class action suit if not a raid?
Law school is a popular choice today, but many law school graduates don’t become lawyers! Why? Again, most law requires grueling hours. Graduates ask, “Do I really want to do this?” Yet, despite so many choosing law school but not a law career, the number of lawyers has grown staggeringly. In 1972, we had one lawyer for every 572 Americans. In 2016, one for every 247.3 Do we need so many? Don’t know, but there is endless competition now. I won’t describe how to become a normal lawyer, pick law schools, apply, pass the state bar, or even get that first job. There are lots of books on all that. No, this chapter and road isn’t about being a normal lawyer. It is about being a PL. But in contemplating that and why being a PL is a road to riches, it’s worthwhile to see why normal lawyers don’t normally get super rich.
You graduate law school and go work for a major law firm. It will be subdivided into practice areas like litigation, estate planning, securities law, and general business law. Different firms have different specialties. The biggest firms tend to cover the waterfront. Each practice area is managed by one or several partners, and the firm is managed relatively collegially by partners. Fresh out of law school you’re what’s called an associate. If you’re really good, in seven to nine years they may make you a partner. If not, you probably leave.
Average 2015 associate pay at the 20 top-paying US law firms was in the $200,000 range.4 That’s for third-, fourth- and fifth-year associates. Seem good? Remember, first you pay for law school and likely have huge school debt. You suffer negative cash flow and then endure the grueling first few years of legal work—infamous for 80-hour weeks. Only then might you make $200,000—if you’re average at a top-paying firm. What if you’re below average at a midtier firm? It’s tough, competitive, and these folks work hard.
Worse, top firms are in the biggest, most expensive cities. And top lawyers aren’t typically that frugal—but you must be and invest well to build a nest egg as a normal lawyer. Consider this: Median pay for all lawyers is $115,820 (as of September 2016).5 Less than you’d think. Yes, this includes government lawyers, charity and pro-bono lawyers doing social work (who often are real crusaders), self-employed lawyers who can’t get clients, and first-year associates at lousy law firms in tiny towns. Many lawyers make not all that much. Even the better-paid ones are still working by the hour. It isn’t poverty, but with these salaries you must save and invest well to retire with $2 million to $30 million. It’s possible, but no more or less than anyone with an OK income on the “Road More Traveled” (Chapter 10).
Bigger bucks come from becoming a law firm partner—which is tough! It takes an average of seven to nine years, and few associates make it at all. Many firms have “up or out” cultures—if you haven’t made partner by year nine, they can boot you. Yet 77 percent of associates don’t make it past year five!6 Odds are worse at the top firms. But if you make it, the pay is good. Top partners might bill $500 an hour or more. Five firms’ top partners now bill near $1,500 an hour, with fees growing 6 to 7 percent a year.7
I’m just showing you the clear demarcation among the bulk of the legal profession, which requires the Road More Traveled and doesn’t get you mega-rich—versus the one area that does.
For the biggest lawyer bucks, there’s only one road—plaintiffs’ law—dealing only with civil cases or the “tort” system. It’s huge—tort costs totaled $265 billion in 2011—almost 2 percent of US GDP!8 (Double the average of other developed nations.9 America is a PL’s dream!) Of that, only 22 percent actually goes to reimburse victims. PLs get an additional 50 percent more than their clients—collecting 33 percent of the $265 billion!10 A piece of that can be yours.
Other lawyers bill by the hour. Example: You run over your neighbor’s petunias. She sues. Your defense lawyer gets paid by the hour. Your neighbor’s PL gets a percentage of any judgment received—20 to 40 percent typically, plus expenses. Suppose they convince the judge the petunias were so rare and the suffering sufficiently acute to merit a $10 million verdict. The PL might get $3.5 million, plus expenses. No one in law makes more than PLs when they do it right—nobody. (One potential exception is a legal counsel to a startup firm that booms hugely, getting rich off options as a ride-along—see Chapter 3.)
Case in point: The late Joe Jamail (net worth $1.5 billion before he passed in 2015)11 was fabled as the “King of Torts”—a legendary PL. He won huge verdicts, including one for $3.3 billion—his fee there was about $400 million.12 What case? Who cares! Four hundred million! (OK—he represented Pennzoil against Texaco for screwing up its planned 1980s Getty Oil merger.)
Almost as impressive, Jamail won $6 million for a client paralyzed in a collision with a commercial truck. Sound easy? Maybe so, except Jamail admitted in court, on the record, his client was drunk—completely pluto-ed—his blood alcohol content fully triple the legal limit. Yet Jamail convinced the jury that, though sloshed, his client was otherwise driving responsibly, therefore not at fault.13 That takes some serious skills. Arrr, matey!
So how can you steal in PL mode, make big bucks, strike fear in some folks’ hearts, while seeming like Robin Hood to others and having the media adore you? First, you need a client folks sympathize with. Kids, sick ones, are great. (Or kids with the possibility of being maybe exposed to something maybe dangerous. Maybe.) Deadly maladies are great—better if work-related or “created” by a big corporation. Clients needn’t actually be sick. You can build a huge class action suit with one guy who died from possible exposure to Chemical X—though he was 89. But Chemical X may have added to his untimely death! From him you build a class of others who may have been exposed. Then extort Chemical X’s maker for the possibility all those folks may die.
The extortion part comes in because the publicity and accusations of the chemical maker’s culpability will damage the firm as they drive shareholders and customers away to other vendors. To stop the losses, the chemical maker settles—pays you to go away. It pays part of what it estimates you can do in damages from lost business—plus a piece of the not-insignificant legal costs it would spend defending itself. Even a small class action will cost at least $2 million to defend and will drag on for at least two years for the defendant—incurring opportunity cost on top! Usually, the company will pay a piece of that just to have you sail away.
Your subject matter should also be confusing, murky, with little-tested, archaic laws applied in perhaps unintended ways. Gray areas are best. Complicated chemicals. Rare medical diseases of which scant is known about the definitive cause. Cancers linked to industrial building products, like mesothelioma. Drugs with side effects like alopecia. Big, complex, multisyllabic technical terms jurors can’t quite fathom—always use “alopecia” instead of “hair loss.” Sounds more science-y. The more obscure and complex, the more the trial ends up about whom the jury likes more. Possibilities are endless. Work-related suits are good because big business always has a bad image and employment laws across America are often foggy, gray, and vary by state. And workers are about as all-American and sympathetic as you can get!
Using sick kids is tried and true—and immortalized in Julia Roberts’s Oscar-winning role in Erin Brockovich. If you saw the movie, you know Ms. Brockovich as a plucky nonlawyer, down on her luck, working at a two-bit law firm. She stumbles across a pattern of medical oddities in Hinkley, California, and investigates. That Erin! No legal background, no investigative training, but she’s got grit, determination, and . . . well . . . if you’ve seen the movie, you know.
She convinces her boss to take the case. Lo and behold, evil Pacific Gas & Electric (PG&E) had been intentionally dumping hexavalent chromium (multisyllabic, complicated chemical compound) in Hinkley’s drinking water. Some kids there had cancer. (Sick kids!) Why would PG&E do it? (In movies, businesses are always evil.) In this film, it was because they knew Hinkleyans were too poor and powerless to fight back. Powerless—until they met Ms. Brockovich and boss—real crusaders—who won them a big boodle in court. Then Ms. Brockovich got a big raise, a new car, and endless hot pants. Hooray! Roll credits.
In reality, this case settled in private arbitration and never saw the inside of a courtroom. Were they real crusaders, Brockovich and boss would have tried the case. PG&E admitted no guilt. I’m not saying PG&E was guiltless and kids didn’t get sick. I don’t know. Most scientists say hexavalent chromium, when ingested as alleged, is not toxic to humans. It just passes through.14 But “facts” and “science” aren’t the issue. A trial takes years, generates huge negative publicity for the stock, and drives away customers and general goodwill. PG&E’s side of the story doesn’t make a sexy movie.
PG&E paid $333 million to make them go away. Ironically, damage to their reputation from Steven Soderbergh’s fictional movie must have been massively bigger—but it would have been bigger still with a trial. Note: This is a $31 billion market valuation stock with $15 billion in annual sales. The settlement seems big, but not settling likely would have hurt more. To prevail in a trial like that would have taken years and years. En route, they would have been dragged through the mud publicly. People recall accusations more than when a court finally, quietly, rules for the defendant. There’s no news then. Nothing happening is not news.
But for Brockovich and boss, you, or another PL, that’s a fine payday. According to their contract, they got 40 percent plus $10 million for expenses—$143.2 million in all. And there were sick kids, whether hexavalent chromium caused it or not. What did they get? Class members with documented medical complaints reported getting only $50,000 or $60,000—not much when you’re suffering from cancer.15 Where did the rest go? Class members seem confused about that.16 But you can bet Julia Roberts isn’t concerned about having deceived the public. She played a classic Robin Hood role. America loved her for it.
Folks like finger pointing when something goes awry—it’s human nature—whether in medicine, in investing, in love, anything. Scapegoats help us cope. Behaviorists call this regret shunning. PLs succeed by pointing at scapegoats for otherwise random or nonrandom tragedies (or nontragedies). Scapegoats pay PLs to make the finger pointing stop.
Former senator, vice presidential and presidential candidate John Edwards is legendary for actually taking cases to trial. He repeatedly claimed cerebral palsy is entirely avoidable—caused by physician error during birth. In one famous case, he “channeled” his young client, addressing the jury as if he were the young girl in her mother’s womb begging them to do the right thing—that is, find for his client. They did. Edwards’s client walked with $2.75 million from the hospital and $1.5 million from the doctor—$4.25 million in all.17 His success spawned a mini-industry. You’ve seen the commercials: “If your child has cerebral palsy, it may be medical malpractice. You can sue! Call Dewey, Cheatem & Howe.”
Cerebral palsy cases are perfect. They involve afflicted kids and a little-understood disease. One Florida couple sued the Jacksonville Naval Hospital for $150 million.18 But according to the American College of Obstetrics and Gynecologists, cerebral palsy is in all likelihood linked to genes, prenatal infection, or other issues beyond doctor control more than anything else.19 Try telling that to a jury or the media when they’re witnessing tear-jerking theater.
Our tort system is extra tough on small firms. Legal defense costs and public relations damages may overwhelm relative to their size—making extortion threats more successful for you. Small corporate defendants are always scared to death and prone to caving in. Many PLs seek targets they suspect can’t afford not to cave. As the case starts, they privately demand to be paid to go away. Usually, the defendant settles. Settlements are usually covered by the firm’s insurance, making it easier for the defendant to do it. It’s so much easier to pay PLs to go away than fight that this becomes your opportunity.
Even better, in this process these settlement discussions aren’t admissible at all in court. The defendant can’t scream at the judge, “But he told me if we would just pay $1.5 million he would drop everything—this is so bogus.” Isn’t that cute? Protects you as a PL.
So ideally, you want targets that are either big and visible—so the suit hurts their reputation with customers and shareholders, like with Erin Brockovich—or you want many small firms that frighten easily.
There’s a step in normal court proceedings where the defendant routinely asks for dismissal. Judges almost never grant these. This is good for you as a PL. You get more extortion time. Judges believe they should be judicious and hear the matter to ensure they don’t dismiss something real with real damages. The judge, by acting judiciously, decreases the odds his or her decision gets overturned later on appeal. Getting overturned is maybe what judges hate most. So the case runs and you can keep scaring and damaging the defendant into settling.
Once started, defendant damage grows daily whether the defendant ultimately prevails or not. Here, there is no such thing as innocent until proven guilty. Defendants never really “win.” Trials take two to four years if the defendant prevails through the end. Defendant costs easily exceed $2 million—bigger cases, much more. But you as a PL have minimal costs—your time, minor travel, expert witnesses, copying, clerical—not that much. This stacks the odds in your favor. Every month costs them much more than you. The actual payout may be covered by insurance, but defendants’ defense costs aren’t unless they allow their insurance firm to run their defense, which means giving up control—usually meaning lousy legal work. So simply by moving forward every month, you put increased pressure on the defendant, motivating them to pay you to go away since they didn’t get that message at first. You want to ask to be paid to go away immediately, then again after the judge refuses the defendant’s request for dismissal, and then about every four months right up until the end.
If defendants do go all the way through the trial, it means they either are confident they did nothing, are tough, or, in ways you as a PL may not understand, consider themselves simply unable to settle. (We’ll get to that later.) But if they prevail all the way through the trial, you again ask for money, much less, or else you threaten to appeal. If they won’t pay you, then appeal. That will be another year, easy, and you can keep asking to be paid to go away. From beginning to end, you want to keep hitting them with body blows. What kind of blows are best?
PLs pretend they don’t seek media coverage—doing so irks judges. But they usually do, and on this road you need to milk the media as hard as you can, particularly if the defendant has brand value you can damage—like the Erin Brockovich case. A little-known, major dirty secret in our culture: PLs are one of journalists’ most important sources. Most negative articles are pirate-initiated. Journalists will do anything to keep their “source,” the PL, concealed (again, the judge would hate it). Under First Amendment protection, they can.
The media is your partner on this road because you feed them good dirt, and dirt equals bad news, which sells best. Meanwhile, the media campaign scares away your defendant’s customers and potential customers, making the defendant more settlement-prone. If, as PL, you contact a major business journalist offering an exclusive on your new suit filed against a high-profile corporate defendant, I promise you will receive a warm reception.
Our tort system is set up for this process to run to your advantage. The defendant has two choices: Fight to the end, enduring damages and costs to prevail, which they’ll never recover; or pay you to go away. Most will pay.
As a defendant (all business owners become a defendant, multiple times, once they get over a certain size—and it’s smaller than you think), I try to be rational about this as a business cost. My legal team considers each case individually. But sometimes as a defendant, we see things in ways you as a PL might not quite fathom. Example: Some years ago, we were attacked by a San Diego–based PL attempting to bring a class action against my firm, claiming misleading advertising via a slimy law provision the judge said didn’t apply for such suits. The suit sought a return of fees to all our clients. I not only knew they were dead wrong and hence we should be able to prevail in court, but also believed that if I paid them to go away to save the costs and media nightmare, my firm’s clients would never believe we hadn’t done something wrong. If we hadn’t done anything wrong, why would we settle?
In an integrity matter like that—claiming we misled clients when we knew otherwise—my stance hardened to no settlement, at any price, at any time. Our client reputation was on the line. In my field, that is critically important. And by our standards, the PL wasn’t overly frightening. So we fought—all the way. We prevailed. But the whole way through, the PL kept asking to be paid and couldn’t fathom why we simply wouldn’t. My lawyers kept bringing me their latest offer and I kept returning them with a simple message: Go to hell, PL.
To me, it was worth the millions we spent and the time our senior people, me included, diverted from our primary functions to conclude and prevail. I wasn’t going to have our clients see us paying for something we hadn’t done and have that hang over our heads forever. That would have damaged our integrity! At first, the PL wanted big bucks to go away, and at the end asked almost nothing—the amount stair-stepped down as the years ran. But the PL never got that we wouldn’t pay under any circumstances. If you go down this road, you will run into these kinds of cases, and you’re better served to figure them out quickly. When the defendant simply won’t pay, make sure you really have a case. You probably don’t and should stop wasting your time immediately.
Another great feature for you as a PL is when you run a really rancid suit and screw up terribly—maybe you sue the pope for child molestation and embezzlement with no evidence at all, pushing it all the way through trial, losing huge, and in the process breaking basic procedural rules like lying to the judge—it’s still very hard for the defendant to collect damages against you. When they do, it’s piteously small. You just don’t have that much to lose. In the aforementioned case, we won right down the line and the PL made some egregious errors. We did win the almost impossible standard of being awarded costs—beyond rare. Still, all we got was a measly $13,000. You, as a PL, have a tough time losing more than your time. Great for you!
I’ve paid PLs to go away twice, totaling $5 million. Both involved class action complaints against my firm, alleging we violated California employee wage and hour laws. These suits are routine and don’t justify a trial defense. We did nothing wrong. But employment laws on this are murky. And it would’ve cost more to defend ourselves than to pay these guys to leave. And these suits aren’t about something like fraud impacting clients’ perceptions. They were about how we treat our employees—who already know exactly what we are and aren’t—so their views of us couldn’t possibly be hurt by these silly claims.
Pretty much all California firms have these once they hit a certain size. It’s just a cost of business in some states (see Chapter 9). The PL doesn’t want to go to court—it just wants the booty. It’s cheaper to settle than fight. Fighting wins nothing. It’s great and easy PL booty with scant work. There’s a whole industry doing this—your industry on this road. You can hit a group of employees at a firm once—then you need a different employee group. The key is figuring out which firm has just become big enough to merit going after. It happens at about 500 employees. It’s like finding an undefended treasure ship at sea. Just be there first and do it before another pirate finds it.
Beyond socially sympathetic clients (workers, kids), you want a corporate target that can pay and wants to settle early before you work much. Big business is easy to demonize.
Pharmaceutical firms are great targets. The big ones are massive—huge market caps, hence big settlements. And big profits make them unsympathetic to our society. Pharma is a perfect marriage of sympathetic clients, complicated, technical subjects, and easy-to-villainize targets. Recall Merck’s Vioxx hoopla? Vioxx is a COX-2 inhibitor (complicated), intended as a pain reliever for folks with osteoarthritis and sensitive stomachs—meant to be taken for brief periods. Further testing (done by Merck) showed increased cardiovascular problems if taken beyond 18 months. So Merck yanked it from shelves.20 But Vioxx wasn’t meant for long-term usage—so no worries, right? Wrong. When the news hit, Merck’s stock tanked. Soon, its credit rating was cut by ratings agencies fearing litigation and payouts.21
By October 2007, Merck was named in approximately 26,600 lawsuits. 26,600! Some could be yours. At last count, the company had paid about 35,000 claimants, shelling out at least $6 billion overall in penalties, judgments, and settlements. Of that, $950 million went to the federal and state governments in 2011, and most of the rest to claimants and PLs. One case settled as late as January 2016, for $830 million plus attorneys’ fees.22 Estimates say PLs will have pocketed nearly $2 billion overall when all is said and done.23 Can you make your client sympathetic enough to collect huge fees from a “villainous” target?
When I was young my father taught me to look both ways when crossing the street and never smoke. Forget there’s been a surgeon general’s warning since 1965 that cigarettes cause cancer. Anyone habituated since then was duly warned. But PLs keep finding new angles. You can, too. Tobacco firms look bad, always.
Asbestos is a great target. Asbestos may eventually outshine tobacco as a cash cow. There are 50,000 to 75,000 new asbestos lawsuits filed yearly. Most of them—over 600,000 by year-end 2000—were filed by defendants who didn’t have any asbestos-related disease and may never get one.24 Great pirate’s work!
A hot recent target is vaccine manufacturers for an alleged link to autism from thimerosal—a mercury-based preservative. (Complicated chemical—sick kids—big pharma!) Probably the increase in autism diagnoses is because they actually diagnose it now—10 and 20 years ago, these kids would just be called “slow” or “off.” But maybe I’m wrong. Either way, it’s hot for suing.
You can also get in on the phthalate craze! This chemical makes plastic bendy and near-indestructible. It’s used in children’s toys, and also IV bags and other hospital gadgets. Greenpeace decided it’s “bad” and California issued a statewide ban. Greenpeace prefers a replacement compound that makes plastic more brittle—meaning your kids’ toys break more easily into handy, choking-size pieces. We’ll likely soon be phthalate-free and choking-suit rich! Never mind the founder of Greenpeace himself thinks phthalates are fine and perfectly safe.25 It’s complicated and near unpronounceable!
A classic is suing public stocks whose prices plummet. Pirates find one shareholder and sue, alleging the firm should have disclosed something earlier or somehow otherwise avoided the drop (through magic?). These never made sense, but they’re ubiquitous. The media loves them—painting firms as evil and intentionally defrauding the shareholder proletariat.
It works like this: Firm X trades at $50 a share—worth $10 billion. Earnings turn sour. When news hits, the stock drops 20 percent to $40—down $2 billion. A PL sues on behalf of shareholders for the full $2 billion. Firm X settles for $60 million. The PL gets $20 million. Note: Corporate payments to shareholders come from shareholders—it’s zero sum. The only difference is, some past shareholders may no longer be shareholders and new shareholders may have bought in. All current holders pay and suffer for the benefit of a few prior shareholders, so now current shares are worth even less. This is like stealing from Peter to punch Paul in the face. If you were and remain a shareholder, it’s like getting a small dividend and paying the PL a 30 percent finder’s fee. These suits are common.
So when does legal piracy become illegal? When you break the law. Ask Melvyn Weiss and Bill Lerach (of the well-toned scotch arm). For decades, no two words struck more terror in CEO hearts than “Milberg Weiss.” (Well, maybe the word “Lerach” did.) Founded in 1965 by Melvyn Weiss, Milberg Weiss claimed to fight for blue-collar workers duped by evil corporations into losing life savings on crummy stocks. As the workers’ savior, Milberg Weiss collected over $45 billion from firms for “cheated investors.” $45 billion! In 1976, Bill Lerach joined in the fun, opening Milberg West in San Diego, and was as feared as Weiss (if not more so).
They eventually had over 200 lawyers nationally—bigger than any rival—a machine, bringing in a case a week at their peak. Lead partners made hundreds of millions. They took on everyone! Some firms multiple times. Ninety percent of cases settled—they weren’t interested in trying cases.26 Lerach was famous for personally threatening CEOs with poverty and worse.27 Pirate talk. Arrr!
To get these cases, you must file in court before another PL does. This is called the race to the courthouse steps. He who files first gets the case. How can you make sure you’re first? Weiss and Lerach knew. Every class action needs a lead plaintiff—a normal person who represents typical damages. Finding one takes time—slowing you in the courthouse race. So Weiss and Lerach built a stable of potentials with predrafted complaints.
How can you have a plaintiff and complaint beforehand? Weiss and Lerach drafted folks to buy tiny positions in thousands of stocks and wait. When one tanked they went straight to court. For this, that draftee got a cut—say, 7 to 15 percent of the lawyers’ take—leading to a $1 million-plus payout one time. They reused plaintiffs—40 times for one man. This is illegal—a felony. Lawyers are routinely asked if they made additional payments to plaintiffs. For decades, Weiss and Lerach lied under oath. As did these star plaintiffs.
News flash! Stocks are volatile. Sometimes they drop. Them’s the risks. Punishing firms for normal volatility just redistributes profits and hurts shareholders and stock prices. This doesn’t help the little guy. This is simple extortion. But firms settle just to make PLs go away.28
A formal investigation started in 2001. You might think Weiss and Lerach would slow down. No! Their scheme continued—at least until 2005. In all, prosecutors claimed they paid kickbacks in over 150 class action cases.29 Lerach pleaded guilty and got two years and a $7.75 million fine.30 Weiss pleaded guilty, too, to racketeering (like a mafia Don!), and got 33 months and paid $10 million.31 The firm settled for $75 million to avoid a criminal trial (interesting a law firm is so anxious to avoid court).32 Despite guilty pleas and fines, Bill “Scotch Arm” Lerach still insists that what they did “was merely standard industry practice.”33 Yikes.
On this road or any other, never, ever break the law. You don’t want to end up in the big house like Lerach and Weiss, even if you can retire to your own big house afterward. As I detail in the next chapter on “Other People’s Money,” breaking the law is always bad business. On any road, orange prison jumpsuits are just ugly. Be a PL. Steal it . . . but do it legally, never illegally. Don’t Lerach yourself.
Then again, these two felons served only part of their sentences, as happens with almost all felonies. An imperfect rule of thumb is that convicts serve about a third of the stated sentence. Lerach and Weiss spent less than two years behind bars. They’re banned from legal practice forever, but they’re rich. No one knows how rich but them. Recall from Chapter 4 that entertainers don’t end up as wealthy as folks commonly think. I’ll bet Weiss and Lerach are both wealthier than any TV or movie personality except Oprah. Lerach spends his time tending his garden and bird watching at the aviary on his $24 million seaside La Jolla estate.34 For having screwed it up so badly, they aren’t so bad off. See it another way: America has tens of thousands of petty pirate-like criminals who would love to trade a year or so in the big house if they could sail quietly away afterward into the sunset, a fraction as wealthy as Lerach or Weiss. This form of pirate’s life is lined with booty.
PLs won’t openly admit this (but will in private): Success is rarely about the law. In civil trials, arbitrations, or even nonbinding mediations, the key is your ability to convince the jury, judge, arbitrator, or mediator that you’re the good guy. Judges won’t admit it, but pretty much once he or she, or the jury, decides who are the good and bad guys, the rest is detail and degree of judgment. The law slides in around that character judgment. Once you convince the judge you’re the good guy and the other the bad guy, it’s basically over. This is why top PLs don’t need top law schools. It’s investigation, theatrics, and street-savvy reading of the judge and players—not legal nuance. Winning is strategizing—then creating the image convincing the judge or jury somehow, some way, you’re good and your opponent’s bad. Pretty ironic in a world of pirates!
There is an inside track. Many top PLs belong to the Inner Circle of Advocates. Join—if you can! It’s an honor. (Visit them at www.innercircle.org.) They let in only the top-earning PLs. Membership is limited to just 100. Can you qualify?
Typically, applicants are expected to have at least three verdicts of one million dollars or a recent verdict in excess of ten million dollars to be considered for membership.35
There are obviously many more than just 100 top PLs. Lots of famous ones aren’t on the list. Yes, John Edwards was once a member. And actually, only seven are women. This road definitely has a male bent at the top. Yet these 100 have taken down some serious bucks. Maybe some of that can be yours.
Because these books teach you to persuade and negotiate, they’re useful for anyone—not just those on the pirate road.