The Recorder has a story today on the decision last week by Judge Vaughn Walker to deny preliminary approval of a settlement in the Chiron Corporation securities litigation.
While few would suggest that Judge Walker does not possess a great talent for defying convention, it must be noted that there is quite an interesting twist in his opinion. After spilling a great deal of ink on potential conflicts and adequacy problems with both lead counsel (Milberg Weiss) and the lead plaintiff (International Union of Operating Engineers Local No 825 Pension Fund), Judge Walker questions whether defense counsel has a possible conflict of interest, noting:
Lerach Coughlin has been represented during the pendency of this litigation by Skadden Arps Slate Meagher & Flom . . . Skadden Arps also represents defendants in this action. By accepting representation of Lerach Coughlin in criminal investigations, the court is troubled whether Skadden Arps is able to probe the adequacy of lead plaintiff and/or lead counsel lest a rigorous challenge uncover problems that might be traced back to Lerach
Now Lerach Coughlin (n/k/a Coughlin Stoia) was not appointed lead counsel in the Chiron litigation, but merely represented another lead plaintiff movant (Pipefitters Locals 522 and 633 Pension Trust Fund).
Given the near omnipresence of both Skadden Arps and Coughlin Stoia in securities litigation, the potential ramifications for Skadden at least could be quite troubling, if accepted by other courts. Skadden could be seen to have, under this reasoning, a potential conflict of interest in any case where Coughlin Stoia is lead counsel, or even seeks to be lead counsel. That could make Skadden a less attractive choice as defense counsel in securities litigation.