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Melvyn Weiss, senior partner of the world’s most famous class action firm, Milberg Weiss Bershad Hynes & Lerach, is more than happy to outline the factors that motivated him to found his firm a little under 40 years ago.

“I decided right at the beginning I wanted to provide for victims of wrong-doing,” he says. “I wanted to create a law firm that could compete with what corporate America retains to defend it.”

Weiss has been remarkably successful in achieving his aim. The legal practice he founded in 1966 has grown from a small outfit to a world famous 220-lawyer practice, which employs 500 additional staff including forensic experts, accountants and former FBI investigators.

But regardless of how far the firm has come, the road ahead remains a rocky one. The US plaintiff bar has come under ferocious criticism for its perceived profiteering and is now facing the possible fall-out from the Government’s much-vaunted provisions for tort reform.

Meanwhile, the Government’s crackdown on corporate fraud threatens to cut down on the scope of cases landing in the commercial courts.

And closer to home, the firm has announced a major division in its ranks, as the East and West Coast practices of Milberg Weiss Bershad Hynes & Lerach opt to go their separate ways.

If Mel Weiss is feeling the pressure, he is not showing it. “I am not planning on retiring anytime soon,” he remarks wryly.

Weiss started his career at Fried Frank Harris Shriver & Jacobson, before moving on to do a stint in the US Army. On his return he moved into roles at various small businesses to utilise his accounting degree, which he received two years before his legal qualification from the New York University School of Law in 1959.

“As a result of my accounting background, I got involved in corporate start-ups and companies that went public,” he says. “I was able to make observations about how public companies operated and how accountants performed.”

But it was the meeting with Larry Milberg, 20 years his senior, in 1965 that put Weiss onto the path that would make him a legal legend.

Milberg was a stockholder litigator and when the US Government passed the Class Action Rule in 1966 that allowed for cases brought for breach of federal rights, he and Weiss formed Milberg Weiss to target the new openings it created.

The principal target at the start were the then big eight accounting firms, specifically their conduct duties under the General Accounting Principles (GAP) and General Auditing Standards (GAT) governed by the American Institute of Certified Public Accountants (AICPA).

“The accountancy profession had never really examined what the GAP and GAS were really about because AICPA had never made any definitive pronouncements,” Weiss claims. “So between when AICPA was formed in the 1930s and the late 1960s, there had developed a cosy relationship between the auditors and the companies they audit.”

It was this “cosy relationship” that Weiss used to spur on his class action quest — an observation that is still very much applicable almost four decades later.

“The auditors forgot the watchdog function that they were franchised to perform in order to protect the investing public,” Weiss says.

Since the firm’s foundation, Weiss’ practice and portfolio has stretched way beyond the auditing profession to the great, and not so great, of corporate America — in fact it even stretches beyond claimant work.

Weiss also acted as defence co-counsel, together with Cravath Swaine & Moore, for IBM in relation to class actions brought against the computer giant.

That aside, Milberg Weiss has launched thousands of high-profile actions against many of the US’ major corporations, including Enron, Boeing, Credit Suisse First Boston, Deloitte & Touche, Microsoft and Sony, which have seen the firm reap $30bn (£16.1bn) in damages from corporate America and cement its name among the global business community.

One senior litigator with a New York firm remembers a debate he held with Weiss for the American Bar Association at the time his reputation was emerging. “[Weiss] talked about the belly of the corporation, taking a knife and slicing around into the corporation to find out what has gone on,” remembers the partner. “He was the only claimant lawyer in the room and he packed out the gallery. Everyone wanted to hear what he had to say.”

The success of his business model seems to have taken even Weiss by surprise. “I did not anticipate the number of major companies that would fall into the trap of mischief,” he says. “If you take a look at lawsuits in the recent past you will see dozens of cases against Fortune 500 companies, all allegedly involved in wrong-doings.”

While shaking the giants of corporate America is one thing, it is the cases with the more ‘human’ aspects that he likes to discuss — for example, the case he launched against Pfizer over children in Nigeria who had been wrongfully administered experimental medication during a meningitis outbreak. Or his most celebrated victory; recovering $6bn (£3.2bn) for survivors of the Holocaust against a group of Swiss banks and German companies.

The fact that the events leading up to the Pfizer case occurred in Nigeria and the majority of the Holocaust survivors were non-US has provoked Weiss to look to the international arena. Corporate scandals too are spreading across the globe.

“There is no question that more and more European companies are being accused of wrong-doing — last year 22 non-US organisations were sued for securities wrong-doings,” he says.

As part of his drive to internationalise, Weiss last year teamed up with Clifford Chance to tour Europe with a seminar for companies and investors on launching US class actions.

“We are trying to teach the European institutional community that they can play a significant role in corporate governance and recovering money as a result of wrongdoing,” Weiss says.

His push for an increased international focus seems to be bearing fruit. In November 2003, Milberg Weiss won a landmark ruling against Vivendi Universal that set a precedent for non-US investors.

In the ruling the judge found that not only purchasers of US depository shares could be included in a US class action, but also — in a pioneering move — that investors who bought shares on a foreign exchange could also join the fray.

However, Weiss is still cautious about branching into Europe and specifically the UK, on the grounds that companies there have traditionally have been reluctant to use litigation as a “deterrent and a remedy”.

This not only points to the differing attitudes of foreign companies but, crucially, the culture and structure that has allowed Weiss to galvanise such an intimidating reputation and successful practice — the US class action system.

“We view how justice works differently in the US, which gives people more access to the courts than most other societies,” he says pointing to contingency fees and the class action structure.

“The service we provide in the US is unique to the US.”

But the system that Weiss is so enthusiastic about has been under scrutiny by the US Government, notably via the Class Action Fairness Act, which is attempting to rein in the flood of speculative class action litigation that has hit post-Enron America.

Unsurpringingly, Weiss does not mince his words on the subject. “The ability to get access to the courts has been under attack recently from more conservative elements in our country,” he says. “‘Tort reform’ is a term used to stop victims of wrong-doing getting remedies rather than trying to stop the wrong-doing occurring in the first place.”

The act, which is experiencing a tortuous passage through Congress, is specifically aimed at introducing new limits on the success fees that claimant lawyers can charge in multi-party suits and push more claims into the federal courts.

Of course, the driving force behind initiatives like the Class Action Fairness Act is supposedly to protect the courts, and the claimants, from the aggressive and exploitative excesses of some plaintiff firms.

Actions brought against tobacco, asbestos and fast food companies have been accused of clogging up the US Courts and denying justice because of pointless and wasteful claims.

“Nothing in this world is perfect and for people to hop on the occasional excess in litigation is dishonest,” says Weiss. “There are so many rules in the US to protect defendants from excesses that I still can not understand how people buy into this criticism.

“Class actions are the most transparent type of cases because notice has to go out to the world and it gives everyone the opportunity to object.”
Weiss is adamant that the class action system is not only fair but vital in keeping corporate America in line. “I always felt that unless there is a threat of litigation as a deterrent, then the government has not been an adequate force to stop corporate wrongdoings,” he says.

Many US lawyers, including admirers of Weiss, do not share this view. One senior litigation head with a leading corporate firm gives a typically ambivalent verdict on Weiss’ legacy, praising the integrity of the “honourable boy from the Bronx” while questioning his contribution to the US’ litigation culture. “Look, I am not only a lawyer, I am a citizen too and I think [the amount of litigation] is nutty. Mel takes his fair share of the blame for that.”

Ironically, the US Government has brought in the Sarbanes-Oxley Act over the two years since the Enron scandal to clamp down on accountants’ and company officials’ conduct and legal obligations.

“The Government has reacted with reforms that we have been talking about for several decades,” Weiss says. “It is ironic that these reforms actually go against our economic interests, as the less fraud there is, the less work we have. To accuse us of overusing litigation is very self-serving for our critics and not justified.”

The Sarbanes-Oxley crackdown aside, Milberg Weiss is itself now at an important juncture in terms of the continuation of its sometimes controversial brand as its East and West Coast practices divide.

The dissolution, which shocked the market, will see the firm’s New York office take over leadership of its East Coast arm, while its San Diego-based West Coast practice breaks off to form a separate firm.

Many US lawyers have attributed the split to tensions between New York-based Weiss and high-profile San Diego head William Lerach, following Lerach’s aggressive tactics in a case against collapsed telecoms giant WorldCom.
Weiss dismissed the suggestion at the time the split was announced. “There are always personality clashes, but that is not why we are splitting. This will free up senior lawyers to do lawyering rather than managing.”

One New York-based PR veteran gives a different viewpoint. “Why is the firm splitting up? The truth is Mel did not like Bill Lerach getting all the headlines as the scourge of corporate America.”

At a time when he prepares to split the legendary law firm that he founded, Mel Weiss’s reputation as the most respected US plaintiff lawyer in history has never been so precious in pushing his half of the firm forward.

“We came to the conclusion that it would be more effective to separate into two entities rather than deal with the issues that one giant organisation possesses,” Weiss says. “The logistics of having 200 lawyers in eight different offices was never tested before and it makes for a lot of management complications.”

Even so, it will be a landmark moment when the firm splits this year, although the Milberg Weiss brand will stay in New York hands.

Despite his feared reputation and undoubted fame and notoriety, Weiss has also brought through the next generation of lawyers to continue his work. “If you look at the calibre of our CVs, most of our lawyers came out of the same background as the lawyers in big law firms that are hired as defence counsel,” he says. “There are dozens of wonderful lawyers so I am not afraid of succession — there are plenty of people bright enough to handle the job.”

Perhaps, but with Weiss in his sixties and Lerach going his own way, the talents of Milberg Weiss’ younger generation will be tested to the limits if the firm is to maintain its top-flight position at the securities bar.

Despite this attitude, Weiss undoubtedly faces a tough 2004 in terms of finalising the split of the firm and continuing the thriving practice he has built.

Looking towards the future, Weiss presents a mixture of optimism and wry realism.

“What does the future hold?” he mulls. “As a human being, I hope not a lot, because it will mean there is less wrong-doing in the world. But I am a realist and I have a pretty good panoramic view of the business world and the way fraud operates.”

Perhaps, in the face of splits, legislation and succession, the factor that Weiss takes comfort in is that companies and their advisers will continue to be driven by the same factors as they always have.

“I have said for decades that greed is a growth industry and it always will be,” he says. “So I suspect the services of my firm will be required for a long period of time to come.”

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