Law firm discovers it sued own client in Pokemon case

By Don Bauder 

September 24, 1999

San Diego law firm Milberg Weiss won't be suing the distributors of Pokemon after all.

As it turns out, the firm discovered yesterday that one of the companies it accused of being involved in an illegal gambling enterprise was its own client.

One week ago, the aggressive San Diego firm, officially known as Milberg Weiss Bershad Hynes & Lerach LLP, charged Nintendo of America and Wizards of the Coast, along with 4Kids Entertainment, with promoting illegal gambling in their distribution of the popular children's cards called Pokemon.

Yesterday, the firm belatedly realized that it is corporate counsel to New York-based 4Kids Entertainment.

Therefore, Milberg Weiss has withdrawn as lead plaintiff in the case, and also will not defend the lawsuit as corporate counsel for the defendant it represents.

"If you think this makes me happy, it doesn't," Melvyn I. Weiss, New York-based co-managing partner of Milberg Weiss, said with a groan yesterday morning.

The firm's other co-managing partner is San Diego-based William Lerach.

The suit will be pursued by three other firms -- one in New Jersey, one in Los Angeles and one in San Diego.

"I have to withdraw from the whole thing," Weiss said. "I am conflicted in this case."

Large law firms have elaborate systems, often computerized, for spotting potential conflicts of interest. Before taking on a new client, firms typically check to see if they are already working for or against that client. If the new case would conflict with the long-running representation, something is worked out.

"We have been prosecuting these alleged (Pokemon-related) gambling activities for the last several years," Weiss said. "When this matter came in as a potential additional case, apparently the conflicts check by the litigators did not pick up that the corporate side was representing 4Kids."

Because of its earlier association with 4Kids, the law firm "probably couldn't appear counsel of record as defendant's counsel," said Todd Stevens, president of the San Diego County Bar Association, who did not know the identity of Milberg Weiss when asked the question. "It would perhaps put up a fire wall with respect to work as corporate counsel for this piece of litigation."

In other words, whoever defends 4Kids in the case, Milberg Weiss should stay away completely, Stevens said.

Pokemon, first introduced in Japan, has become a craze among American kids. The trading cards feature more than 150 different imaginary creatures. The cards can be used to play a game, though many children simply collect and trade them.

Milberg Weiss attorneys earlier explained that Pokemon qualifies as a gambling enterprise because of three elements: Kids must "pay to play" by purchasing packets of the cards; they can "win" rare prize cards, intrinsically more valuable than other cards; and there is an element of chance because the higher value cards are inserted randomly into Pokemon packets.

Attempts to get comment from Milberg Weiss lawyers involved in the 4Kids litigation were unsuccessful yesterday.

Top executives at 4Kids Entertainment also could not be reached.

"I don't know if they are tight-lipped or out of the office," said Tisha Ford, a marketing department executive with the company.

Milberg Weiss, known as a plaintiffs' law firm, represents very few companies; 4Kids was its first corporate client, said Weiss, who wouldn't name other such clients.

Milberg Weiss, the nation's largest class-action law firm, is best known for suing companies over ethics matters -- typically, charging that insiders dumped shares while concealing bad corporate news.

The Pokemon lawsuit charges that 4Kids' and its co-defendants' conduct in the Pokemon trading card business "included and involved the mailing of papers, writings, advertisements, and/or representations concerning illegal lotteries and/or gambling, which are indecent and immoral" as defined by the U.S. Code.

But if that's true, why didn't Milberg Weiss, as 4Kids' corporate counsel, inform the company that its activities were considered indecent and immoral?

"It could be that they weren't asked," Stevens said.

Weiss could not be reached to comment on that question.

Don Bauder is a senior business columnist. Union-Tribune library researcher Erin Hobbs contributed to this report.

Copyright 1999 Union-Tribune Publishing Co.