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Class Action Defense News-Class Action Law Firm Lerach Ordered To Pay Defense Attorney Fees For Maintaining Frivolous Lawsuit

Judge Grants Defense Motion for Attorney Fees Against Plaintiffs’ Law Firm Following Successful Defense of Class Action Lawsuit

Floyd Norris of the New York Times reports that federal district court judge Melinda Harmon awarded the defense in an Enron-related class action attorney fees against plaintiff class-action law firm Lerach, Coughlin, Stoia, Geller, Rudman & Robbins for maintaining class action claims against Alliance Capital, a money management firm, after it was apparent that the claims had no merit. The district court awarded the attorney fees under Section 11(e) of the Securities Act of 1933, despite acknowledging the existence of Second Circuit authority that Section 11(e) “was not intended to authorize an award against the parties’ attorney.” Mr. Norris summarizes the court’s reasoning as placing financial responsibility for the sanctions on the class action attorneys because “non-attorney clients more likely than not would not have the ability to determine at what point, based on what evidence, an action becomes legally ‘frivolous,’ while its licensed counsel should be and is held to such a standard.” Defense attorneys are quoted as stating that the court’s ruling punishes class action plaintiff lawyers for continuing to pursue “what was clearly an innocent party.” The amount of the fees have not yet been set, and Lerach promises to appeal the ruling.

Floyd Norris’ article, entitled “In Unusual Ruling, Law Firm is Told to Pay Opponent’s Legal Fees in Enron Case,” may be found in Section C. of the December 2, 2006 edition of the New York Times.