Institute for Legal Reform Applauds Federal Court Ruling

WASHINGTON, D.C. – The United States Chamber of Commerce's Institute for Legal Reform commended the federal district court for the Northern District of California for handing down an important ruling that shines the spotlight on unscrupulous plaintiffs' lawyers engaged in a fraudulent securities class action scheme.

In the ruling, In re Terayon Communications Systems, Inc., Chief Judge Marilyn Hall Patel concluded that Milberg Weiss, counsel for the lead plaintiffs in the case, claimed to represent Terayon's shareholders, but were actually serving the interests of short sellers engaged in a scheme to unfairly drive down stock prices. Lead plaintiffs in securities class actions are required to represent the interests of all shareholders.

"This ruling raises a real question about whose interests plaintiffs' lawyers are really representing," said Lisa Rickard, president of the Institute for Legal Reform. "How can plaintiffs' lawyers justify filing a class action case that purports to represent a company's shareholders, but instead serves the interests of short sellers who may have hurt those very same shareholders by unfairly driving the stock's price down?"

According to the ruling, the plaintiffs "appear to have participated, if not perpetrated, a fraud of their own on the market," and that Terayon's shareholders "may find they have a claim" against the lead plaintiffs.

The Court also expressed concern about the role of the lead counsel selected by the short sellers, the law firm of Milberg Weiss, stating the Court was led to "speculate whether counsel for plaintiffs actively participated in or provided advice to plaintiffs regarding their scheme to cause a fall in Terayon's stock price." The Court concluded, "…that it is probable that there is a conflict between Milberg Weiss and Terayon's shareholders."

The mission of the Institute for Legal Reform is to make America's legal system simpler, fairer and faster for everyone. It seeks to promote civil justice reform through legislative, political, judicial and educational activities at the national, state and local levels.

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

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