No dispute on the Supreme Court’s 2013-14 docket has attracted more intense interest in corporate litigation circles than Halliburton v. Erica P. John Fund—and with good reason. I’ll immodestly quote myself to remind anyone who’s been snoozing why the case—set for oral arguments on March 5—could make a huge difference:
“For years the conservative majority of the Supreme Court has thrown up barrier after barrier to class-action lawsuits. Now the justices have taken a case giving them the chance to shut down a big part of the plaintiffs’ bar alleging securities fraud. The high court agreed … to hear an appeal by Halliburton (HAL) asking the justices to overturn a 1988 precedent that made it much easier for shareholders to band together to allege corporations have defrauded investors. The precedent, Basic v. Levinson, said that shareholders didn’t have to show that they had made investment decisions in reliance on a company misstatement. Instead, Basic enshrined the concept of “fraud on the market,” which assumes that misleading corporate assertions are reflected in a company’s stock price.”
No fewer than 23 friend-of-the-court briefs have landed at the high court, including one from the Justice Department, arguing in defense of robust securities class actions, and another from the U.S. Chamber of Commerce, bolstering Halliburton’s position. While awaiting the March 5 arguments—a decision is expected by early summer—one might seek momentary diversion in the hidden history of the case.
In 2002, Milberg, Weiss, Bershad, Hynes & Lerach, then the most feared plaintiffs’ securities law firm in all the land, filed suit against Halliburton. The alleged victim was the John Fund, which provides financial support to the Catholic Archdiocese of Milwaukee. What beef, you might ask, did the Wisconsin Catholics have with the Houston-based oil field services giant? Supreme Court briefs describe now-musty accusations that the archdiocese made as a Halliburton shareholder that the company falsified financial results and misled the public about its asbestos liabilities.
Dig deeper into the records, though, it becomes clear that Bill Lerach, the former Milberg Weiss partner who for a time controlled the case, actually had a bee in his bonnet about Dick Cheney. During a break from politics in the Clinton era, Cheney served from 1995 to 2000 as Halliburton’s chairman and chief executive. Lerach didn’t formally name Cheney as a defendant, but the plaintiffs’ 2005 amended complaint reads like a semi-hysterical indictment of the Republican stalwart, who, as we all know, had returned to Washington to serve as vice president to George W. Bush.
Lerach raised money for Democratic causes and politicians. He did not like Cheney. In their 2010 Lerach biography, Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees, Patrick Dillon and Carl Cannon described how Lerach essentially admitted that he viewed the Halliburton case as a means to afflict Cheney. After all, the prospect of deposing a sitting vice president under oath about his years as a corporate CEO would have excited any red-blooded Democratic-leaning litigator.
The story doesn’t end there. As the Halliburton case bounced around in the lower federal courts, Lerach encountered separate problems—chiefly, a criminal investigation into influential plaintiffs’ lawyers suspected of paying kickbacks to nominal lead clients in securities class actions. In 2006, the Milwaukee archdiocese, none too happy about any association with a federal criminal probe, sought to displace Lerach as its lead attorney, citing the indictment of two of his former partners and the obvious danger that Lerach himself would soon find himself in prosecutors’ cross hairs. (Authors Dillon and Cannon have a lively scene on p. 408 of Circle of Greed in which Lerach loudly protests his ouster.)
Stepping into Lerach’s shoes was another nationally prominent attorney: David Boies, famed for his spirited, if unsuccessful, representation of Al Gore in the disputed presidential election of 2000. For decades, Boies has been involved in numerous significant business-related lawsuits and, more recently, in the campaign to legalize gay marriage. Boies will represent the Milwaukee archdiocese in the Halliburton case before the Supreme Court. That alone guarantees an oral argument worth watching.
Lerach hasn’t been as fortunate. In 2007, he pleaded guilty to obstruction of justice in the kickback investigation and was sentenced to two years in prison. Subsequently the elders of the bar of California rescinded his license. Melvyn Weiss, Lerach’s former partner at Milberg Weiss, pleaded guilty in 2008 in a similar case and also went to prison. Their demise helped taint the plaintiffs’ securities bar and egged on corporate interests determined to rein in suits they contend are frivolous at best.
The archdiocese, meanwhile, has suffered its own difficulties. Three years ago it sought bankruptcy court protection from its creditors to fend off mounting claims of sexual abuse by priests. The Milwaukee Journal Sentinel recently described that mess, which involves 575 abuse claims, as “one of the largest and most contentious bankruptcies filed by Catholic dioceses around the country.”
As for Cheney, there appears to be little imminent likelihood that the retired politician will have to sit for a deposition in the Halliburton case.
