Wyly v. Weiss

A class of investors reached a proposed settlement with Computer Associates International, Inc. (Computer Associates) and its officers and directors to resolve securities-fraud and irregular-accounting claims. At that time, the government was also investigating related issues. Although class member Sam Wyly (plaintiff) received notice of the fairness hearing on the proposed settlement, he did not attend the hearing. The district court approved the settlement, including an attorney-fee award of stock worth $30–$40 million to class counsel, the law firm of Milberg Weiss, LLP and others (defendants). After the settlement was approved, several officers of Computer Associates admitted to fraud, Computer Associates recharacterized $2.2 billion in revenue, and 23 boxes of new documents were located. When class counsel refused to reopen the settlement, Wyly moved the district court to reopen it. However, the court also refused, finding that the new evidence was either not surprising given the known existence of the government investigation or not meaningful. Wyly then filed a state-court action against class counsel for legal malpractice, claiming that class counsel had sold out the class too early for its own financial gain. At the request of class counsel, the federal district court issued an injunction barring the legal-malpractice action.