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On Sept. 7, the buzz in the cavernous Ceremonial Courtroom in Manhattan’s federal courthouse was deafening. Hundreds of lawyers from dozens of top firms had crammed into spectators’ benches, counsel tables, and even the jury box for a hearing before Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York. The scene was straight out of mass tort litigation, though with a gilded edge befitting this securities litigation crowd: lots of slicked-back hair, designer eyewear, and BlackBerrys. Looking out over the sea of gray suits, Scheindlin commented, “I hate to think how much this [lawyer] time is costing.” The source of the billable orgy was the hot new thing, IPO allocation litigation. So far this year, plaintiffs have filed more than 800 class actions in New York City — consolidated before Scheindlin — claiming that the tech IPO market of the late 1990s spawned a racket: Investment banks allegedly offered IPO shares in exchange for excessive commissions and guarantees by investors to buy more shares at an inflated price in the IPO aftermarket. In a moribund legal economy, the allocation litigation is a much needed salve, spreading its healing from the East Coast to the West. At least 40 of The Am Law 100 firms have cashed in on the securities bonanza — and that’s just so far. The plum assignment on the defense side has gone to Washington, D.C.’s Wilmer, Cutler & Pickering, which is representing Credit Suisse First Boston Corporation, the lead underwriter in many of the targeted IPOs. The bank is currently defending more than 600 allocation suits. Robert McCaw, the lead Wilmer partner, is a veteran securities lawyer, and Wilmer has a history of helping Credit Suisse out of high-profile pickles, having previously represented the Swiss bank in the protracted litigation over the assets of Holocaust victims. The next biggest banking targets are Morgan Stanley Dean Witter & Co. and Goldman, Sachs & Co., which each face more than 200 suits. Morgan has tapped Kirkland & Ellis partner Steven Bradbury; the bank’s relatively new general counsel, Donald Kempf Jr., is a former Kirkland partner, and Dean Witter was a long-standing client of the firm. Goldman has turned to its longtime firm Sullivan & Cromwell and litigation partner Gandolfo DiBlasi. Lawyers for the underwriters, which include most of the big names on Wall Street, say they’re being served with as many as five suits per day. “I get a big pile of pleadings every day,” says Andrew Frackman, a partner in the New York offices of Los Angeles-based O’Melveny & Myers, which is representing underwriter Robertson Stephens Inc. If thanks are in order, they go to a familiar place: Melvyn Weiss of Milberg Weiss Bershad Hynes & Lerach, whose firm is leading the charge for the plaintiffs. Weiss expects that 1,000 suits will be filed by the end of the year. Not surprisingly, he predicts astronomical damages. “The losses on the Internet stocks this past year exceeded all profits made [on those stocks] in the preceding five years,” he says. “This is the biggest [securities litigation] ever.” IPO issuers are also on the hook, though their lawyers say these companies were mere bystanders. Wilson Sonsini Goodrich & Rosati partner Nicki Locker says the litigation will not be a big revenue generator for issuer firms, since the litigation is focused on underwriters. Still, this hasn’t stopped defense firms — including Wilson Sonsini — from competing in beauty contests to win issuer work. “This litigation is high-profile,” says Locker, “and having a large number of issuers enhances your profile.” Wilson Sonsini and Brobeck, Phleger & Harrison are the top two issuer firms, each representing more than 20 companies that went public in the last two years and that now face claims from Milberg Weiss, et al. At press time the Sept. 11 terrorist attacks had temporarily derailed the litigation. Some of the law firms and defendants had offices in lower Manhattan, which were damaged or destroyed. And the Securities and Exchange Commission, which is conducting an allocation investigation, lost an investigative office at 7 World Trade Center. Once the litigation reaches its full glory, Judge Scheindlin may need to rent out Madison Square Garden. “I don’t recall a situation [in securities litigation] where you had this many different companies sued,” says Jack Auspitz, a partner with Morrison & Foerster, which was representing eight issuers at last count. “They [used] every last block of marble in Vermont in the Ceremonial Courtroom, and it still [wasn't] enough to house all the lawyers.” IPO DEFENSE TEAM
Underwriter’s Counsel
Law Firm Client
Wilmer, Cutler & Pickering Credit Suisse First Boston Corporation
Kirkland & Ellis Morgan Stanley Dean Witter & Co.
Sullivan & Cromwell Goldman Sachs & Co.
O’Melveny & Myers Robertson Stephens, Inc.
Clifford Chance Rogers & Wells Merrill Lynch Pierce Fenner & Smith Inc.

Issuer’s Counsel
Law Firm Client
Wilson Sonsini Goodrich & Rosati VA Linux Systems, Inc.; Goto.com, Inc.
Brobeck, Phleger & Harrison Autoweb.com, Inc.; PlanetRx.com, Inc.
Mayer, Brown & Platt Red Hat, Inc.; Corvis Corporation
Morrison & Foerster DoubleClick, Inc.; Digimarc Corp.
Hale and Dorr Bottomline Technologies, Inc.; SilverStream Software, Inc.

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