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Plaintiffs’ firm Milberg, Weiss & Bershad voluntarily dismissed a nationwide employment class action late last year against Wal-Mart, saying that the retailer three months earlier had changed its policy on health care coverage. But the move to dismiss came just two weeks after the Atlanta federal judge handling the case told defense attorneys they could probe “highly irregular” payments to the lead plaintiff by the local counsel. The New York plaintiffs’ firm has come under increasing scrutiny by defense attorneys and judges since its indictment in May 2006 on charges of paying kickbacks to lead plaintiffs. The Atlanta Wal-Mart Stores Inc. case appears to be the firm’s first-other than those alleged in the indictment-to involve questions about payments to a lead plaintiff. The case involves a discrimination action on behalf of hundreds of thousands of female workers at Wal-Mart who were forced to pay for prescription contraceptives not covered under the retailer’s health insurance. Lisa Smith Mauldin v. Wal-Mart Stores, No. 1:01-CV-2755 (N.D. Ga.). In December 2006, Milberg Weiss agreed to dismiss the five-year-old suit because Wal-Mart made changes to its coverage effective on Jan. 1. Milberg Weiss, which was lead counsel, did not seek attorney fees or monetary damages. The dismissal came after a federal judge in Georgia allowed Wal-Mart’s attorneys to conduct more discovery regarding payments to Lisa Smith Mauldin by George Stein, the Georgia lawyer who was serving as local counsel at the time. The judge also refused to allow Milberg Weiss to appoint a new lead plaintiff in the case until the discovery had been completed. “Stein’s payments to Mauldin are highly irregular and at the very least create the appearance of impropriety,” wrote U.S. District Judge Julie E. Carnes of Atlanta in a Nov. 22, 2006, order. “Moreover, Milberg Weiss was recently indicted on charges of recruiting and paying plaintiffs to participate in class action lawsuits.” ‘Degree of skepticism’ Janine Pollack, a partner at Milberg Weiss and lead attorney in the case, did not return calls. Marina Ein, a firm spokeswoman, e-mailed a statement that Milberg Weiss “is pleased that Wal-Mart has agreed to provide coverage for prescription contraceptives through its employee health plan beginning January 1, 2007.” She added that “the case was voluntarily dismissed following the decision by Wal-Mart to offer this coverage.” She declined to comment further. The case is the latest to scrutinize Milberg Weiss since prosecutors returned indictments last year against the firm and two of its senior partners, David Bershad and Steven Schulman, on allegations that they made $216 million in attorney fees by paying $11.3 million in secret and illegal kickbacks. “Courts right now, because of the indictment, are viewing Milberg with a certain degree of skepticism,” said John C. Coffee Jr., a professor at Columbia Law School who is following the Milberg Weiss criminal case. “Judges are going to be more cautious than in the past because they don’t want to be embarrassed to find that something happened on their watch involving under-the-table payments.” In a separate ruling involving Wal-Mart, the 9th U.S. Circuit Court of Appeals last week affirmed class certification of more than 1.5 million female Wal-Mart workers alleging discrimination over pay and promotions. In the Georgia case, Mauldin brought suit under the Pregnancy Discrimination Act seeking injunctive relief and reimbursement for contraceptive purchases. In August 2002, the judge certified a class of more than 700,000 workers. Four checks In August 2005, Mark Casciari, a partner at Chicago’s Seyfarth Shaw and lead counsel for Wal-Mart, filed papers under seal about a phone call he received a year earlier in which a woman told him that Stein had paid Mauldin for agreeing to sue Wal-Mart. The papers were later unsealed; the caller turned out to be an employee of Stein’s. Casciari referred phone calls seeking comment about the matter to Wal-Mart spokesman John Simley, who did not return calls. In an affidavit, Stein admitted giving four checks totaling $2,250 to Mauldin to help pay for car repairs and a sponsorship to her daughter’s cheerleading academy. He also said that Milberg Weiss had no knowledge of them. “I have never paid, nor offered to pay, nor suggested I would pay Lisa Smith Mauldin, or anyone else, to sue Wal-Mart Stores Inc.,” he said in the affidavit. “No attorney, person, or employee of Milberg Weiss has ever suggested, asked, or inferred to me at any time that any money be provided, loaned or made available to Lisa Smith Mauldin for any purpose or reason.” Stein, who withdrew from the case, did not return calls seeking comment, and Mauldin could not be reached for comment. In October 2005, Milberg Weiss replaced Stein with John C. Bell, a partner at Bell & James in Augusta, Ga. Bell told The National Law Journal that Stein’s payments to Mauldin were “inappropriate because of the way it looks in this case, but there’s nothing wrong with lawyers being nice to people. When you are expecting some special treatment, that’s different.” Still, he admitted that with the indictment looming over Milberg Weiss, the payments “didn’t look good. “It raised problems, and the easiest way to solve the problems are to get new class reps,” Bell said. Wal-Mart’s change In March 2006, the judge, while acknowledging that the payments were “highly irregular, and at the very least create the appearance of impropriety,” noted that Wal-Mart did not mention them until a year after Casciari received the anonymous phone call. “Defendant has not explained its delay, and the Court is not convinced that further discovery is warranted,” she wrote in the order. The judge also allowed Milberg Weiss to name a new lead plaintiff. Milberg Weiss named two new plaintiffs who sought to “piggy-back” onto Mauldin’s original Equal Employment Opportunity Commission (EEOC) charge. In response, Wal-Mart’s attorneys said the charge could be improper or illegal, especially in light of the recent indictment against the firm, court papers say. Milberg Weiss disputed any connection. In her Nov. 22, 2006, order, the judge refused to dismiss the case but allowed Wal-Mart’s lawyers to find out more about the payments. “Given the evidence of suspicious payments to Mauldin, and the recent indictment of Milberg Weiss for recruiting plaintiffs to participate in class action lawsuits, discovery is warranted to ensure that Mauldin’s EEOC charge was not fraudulently procured,” she wrote in court papers. On Dec. 6, Milberg Weiss filed an unopposed motion to dismiss, citing Wal-Mart’s decision in September 2006 to change its health care policy. Since Wal-Mart changed its coverage, “the central purpose of this lawsuit has been achieved,” the firm wrote in court papers. Milberg Weiss, which sought no attorney fees or costs, said both sides discussed the dismissal prior to the judge’s order. The judge granted the dismissal on Dec. 20. “It made more sense to accept the change in the plan and not prolong the case,” said Dina Lassow, senior counsel at the National Women’s Law Center, of counsel in the case. She declined to comment on the payments issue, noting that Milberg Weiss “did a very good job in this case.”

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