Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach

The law firms Milberg Weiss Bershad Hynes & Lerach and Cotchett, Illston & Pitre (defendants) represented claimants in a lawsuit against American Continental Corporation and consulting firm Lexecon Inc. (plaintiff). The claimants accused Lexecon of providing inaccurate information about the financial condition of Lincoln Savings and Loan, American Continental’s subsidiary. Multiple lawsuits arising out of Lincoln’s failure were consolidated and transferred to Arizona federal court for pretrial proceedings before Judge Bilby. The parties reached a resolution under which the claimants voluntarily dismissed their claims against Lexecon. Lexecon then sued the two law firms in the Northern District of Illinois, alleging the prior claimants dismissed because the claims were meritless and no more than a vendetta. When Judge Bilby learned of Lexecon’s allegations, he issued an order describing his markedly different understanding of the parties’ resolution. Lexecon appealed Judge Bilby’s order to the Ninth Circuit. Meanwhile, the two law firms filed a motion with the Judicial Panel on Multidistrict Litigation to consolidate Lexecon’s lawsuit against them with the Lincoln Savings litigation still in pretrial proceedings in Arizona. Judge Bilby recused himself because of the order he wrote, but the panel transferred the case to Arizona assigned to another judge. Over a year later, Lexecon asked the Arizona federal court to transfer the case back to the panel to remand back to the Northern District of Illinois. The law firms opposed the motion as pretrial discovery was still underway and asked the Arizona federal court to “transfer” the case to itself for trial. The Arizona judge agreed with the law firms and Lexecon appealed. The Ninth Circuit affirmed the self-assignment order, but the Supreme Court granted review.