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Accused of misleading a judge and facing a motion for sanctions, Milberg Weiss Bershad Hynes & Lerach recently withdrew a shareholders’ derivative action it filed against an industrial wheel and tire maker. But the giant New York-based securities class action firm, known for its take-no-prisoners litigation style, didn’t merely discontinue the case, it also promised never to sue the tire company again. “In my mind, this was not a settlement,” said John Gazzoli, lead defense counsel for Titan International Inc.’s board of directors, the target of the Milberg Weiss suit. “They wanted to drop the litigation. We were negotiating the terms under which we would allow them to do that.” The suit, which accused the directors of running down the value of the company’s stock, was filed in June 2000 at the height of a three-year strike against Titan’s Des Moines, Iowa, facility by the United Steelworkers of America (USWA). In its sanctions motion, Titan’s lawyers accused Milberg attorneys of “repeated and continuing misrepresentations to the court” about the USWA’s involvement in the case. Milberg Weiss partner William S. Lerach, who was lead counsel in the case, denied the charge that the union was directing the suit, calling it “untrue.” Lerach had signed the stipulation of dismissal on behalf of his firm. “Our position was that the litigation was valid,” he said. Noting that the suit was filed in Titan’s hometown of Quincy, Ill., Lerach said, “There was a great deal of sympathy for the defendant. We came to the conclusion that [the suit] was not going to be successful.” Asked why he agreed to forebear from suing Titan ever again, he called the provision “meaningless,” adding that it was insisted on by the corporation’s counsel. But, in exchange for Lerach’s discontinuance of the derivative case, Beck v. Taylor, No. 00-L-30, Titan’s lawyers released Milberg Weiss and three other firms involved in the suit from all potential claims related to a Racketeer Influenced Corrupt Organizations Act (RICO) action filed by Titan against the USWA and its operatives. None of the three individual plaintiffs represented by Milberg in the derivative action was released from any liability. Those three plaintiffs, Merrill Beck, Laurence Breuklander and Marvin Glass, were each members of USWA Local 164 in Des Moines and each was a striking Titan employee when the derivative suit was filed. Local 164 went on strike at Titan’s Des Moines plant in June 1998. They stayed off the job for 40 months. According to the industry trade publication Rubber & Plastics News, it was the longest strike in tire industry history. Milberg Weiss filed the derivative action in June 2000, alleging that during a bull market Titan management had allowed the company’s stock price to fall from more than $24 per share to less than $5 per share. Brett Gorman, an attorney with the Quincy firm of Schmiedeskamp, Robertson, Neu and Mitchell, represented the corporation in both actions. Based on the plaintiffs’ identities, he said his client suspected the union was behind the case “from the minute the suit was filed.” But when it confronted Milberg Weiss, the Titan defense team was “faced with an outright denial by Milberg Weiss” about the union’s involvement. Court documents and transcripts from court hearings show that in appearances before Illinois Circuit Court Judge Mark A. Schuering and in papers filed with the court, Milberg attorneys steadfastly denied that the firm had filed the suit at the behest of the union. However, discovery turned over by the USWA in the RICO action gave Titan’s attorneys the evidence they were looking for. The discovery included a draft Milberg Weiss retainer agreement that, based on a fax cover sheet and fax numbers on the retainer agreement, appeared to have been sent first to plaintiff Merrill Beck, then to USWA Local 164 President John Peno, then to an official at the USWA’s Pittsburgh headquarters and finally to its assistant general counsel, David R. Jury. Jury refused to confirm or deny that the document came from his office. Asked how the retainer found its way into a union attorney’s files, Lerach answered, “I don’t know.” The retainer bore the handwritten notation, “Titan/Campaign.” So-called corporate campaigns, explained labor lawyer Kenneth R. Dolin, are sometimes conducted by striking unions seeking to put pressure on corporations by indirect means, including lawsuits, hoping that management will capitulate to union demands. Defense counsel Gazzoli of St. Louis’ Lewis, Rice & Fingersh, called the suit “a classic campaign tactic.” Dolin, a partner in Chicago’s Jenner & Block, said that such tactics are usually seen in protracted labor disputes “where a union is trying to raise the stakes.” In response, he added, management will sometimes counter by filing a civil RICO action against the union, its local and its operatives. Detroit attorney Robin K. Luce, who chairs the RICO and Labor Law Committee of the American Bar Association, said, “When management has opted to bring a RICO suit, it’s because management feels that the union’s actions are outrageous.” She said that to the best of her knowledge, no RICO suit filed against organized labor by management had ever gone to trial. Both Luce and Dolin said that they had never seen a stipulation of discontinuance that included an express agreement not to sue a company again, although Luce speculated that there may sometimes be private agreements to that effect. AN IMPROPER SUIT? Production of the Milberg Weiss retainer by the USWA prompted Titan’s attorneys to ask Schuering to dismiss the derivative action, award attorney fees to Titan and to impose sanctions on Milberg Weiss for filing an improper claim. Gazzoli said that the suit was improper because a stockholding plaintiff in a derivative action is actually representing the corporation in a claim against its directors and is not supposed to have an interest that is antagonistic to it, which the union did. The striking plaintiffs had an “inherent conflict,” he said, because “the same people claiming to help the shareholders were at war with the corporation in the strike.” Taking a slightly different stance, Gorman said that as Titan stockholders, each of the plaintiffs had the right to sue, but that they had an obligation to disclose if they were suing on behalf of the union. In Lerach’s opposition to the sanctions motion, he also sought sanctions against Titan, citing the court’s prior refusal to dismiss the complaint for failure to plead viable causes of action. His court papers also characterized plaintiff Merrill Beck as both a long-time Titan shareholder and somebody who, when concerned with the performance of the company’s stock, sought out the union’s advice in selecting an attorney. According to Lerach, it was Beck who persuaded co-workers and union members Breuklander and Glass to join him as plaintiffs. “The Steelworkers’ union is not paying Milberg Weiss’ fee,” he wrote. “We defy the defendants to produce evidence of this serious accusation or finally abandon it — put up or shut up.” Lerach also noted that a nonunion plaintiff, Tommy Allman, had petitioned the court for leave to intervene in the shareholders’ suit. This, Lerach said, was further proof that the USWA was not directing the litigation. Gorman said that the case was withdrawn before Allman could be deposed. Gazzoli said that the parties spent a full day before Schuering, arguing the merits of the sanctions motions. But the parties agreed to the stipulation before Schuering ruled on the applications. Two weeks ago, Lerach, based in San Diego, and name partner Melvyn I. Weiss, based in New York, confirmed that their 200-attorney firm was breaking up into East Coast and West Coast operations. Weiss said he was unfamiliar with the Titan case and declined to comment on it. No timetable has been given for the firm’s dissolution.

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