The Hypocrisy of the Milberg Indictment: The Need for a Coherent Framework on Paying for Cooperation in Litigation

Abstract

The indictment of the Milberg, Weiss firm and two of its named partners for allegedly illegal payments to lead plaintiffs stands at the intersection of important recent developments in both the expanding criminalization of corporate conduct and the federalization of corporate law. Many have noted the irony and hypocrisy of the Milberg firm's alleged use of illegal tactics to prosecute corporate illegality. However, the more important hypocrisy is that Milberg's prosecutors are essentially paying the same witness - Vogel - that Milberg is being prosecuted for paying. This case illustrates the need to need to develop coherent standards regarding payments to litigants and witnesses. These standards should take account of the incentive effects of the payments, rather than being based on a desire to discourage or encourage particular types of actions.

Keywords: Milberg Weiss, federalism, class actions, agency costs, lead plaintiffs, witness payments

JEL Classification: K10, K14, K22, K41, K42, H77