The recruitment of foreign institutional investors to act as lead plaintiffs in U.S. securities class actions is a well-established practice. An interesting look into how these clients are obtained can be found in a breach of contract action recently filed by a plaintiffs’ firm against the lawyers it hired as “independent contractors” to develop international clients.
The agreement between the parties, which is an exhibit to the answer and counterclaim, stated that the lawyers would receive monthly compensation and 10% of any fees the plaintiffs’ firm earned in cases where a client obtained by the lawyers acted as lead plaintiff (with a deduction for the monthly compensation). The action arose when the lawyers decided to terminate the agreement after a few months and become associated with a different plaintiffs’ firm.
The 10b-5 Daily 