The indictments culminate a five-year investigation of the firm by the Justice Department.

The investigation began after Steven G. Cooperman, 64, of Connecticut, was convicted of insurance fraud in 1999 and revealed his role in the scheme with Milberg Weiss, allegedly receiving approximately $6.5 million in payments from the firm. Another man, Howard J. Vogel, 61, of Aventura, Fla., was also allegedly involved in the scheme, receiving about $2.5 million. Mr. Vogel is to plead guilty to charges of perjury in connection with the scheme and forfeit $2 million in payments.

Recently, a California attorney, Richard R. Purtich, 53, agreed to plead guilty to a felony tax offense in Los Angeles U.S. District Court. Among the charges, Mr. Purtich pleaded guilty to concealing $879,868 in income from Milberg Weiss in 1993.

In the plea agreement, Mr. Purtich admitted that he and others received checks from Milberg Weiss totaling more than $3.5 million between 1992 to 1996. The money was compensation to Mr. Cooperman for allegedly serving as a name for plaintiff suits that the law firm filed over the course of 20 years. Mr. Purtich never made referrals or did any work, or anything else to earn the money, the U.S. Attorney's Office said.

All three men are cooperating in the investigation.

In a statement, Milberg Weiss has denied all wrongdoing and said it plans to vigorously defend itself and its partners against the charges. It called the charges absurd and the indictment of the firm “completely unnecessary and unjust.”

The firm said it spent six months negotiating with prosecutors, but that unreasonable requests to give up attorney-client privilege and to make “unfounded statements accusing its own partners of crimes and otherwise become an agent for the government” made an agreement impossible.

Mr. Shappell said the action against Milberg Weiss could temporarily change the class action landscape should attorneys at the firm–seeking a more stable environment–begin to practice elsewhere, he said. (Some have speculated that this indictment could ruin Milberg Weiss, just like Arthur Andersen was ruined after its indictment in the Enron scandal.)

Mr. Shappell believes that eventually someone would step in to fulfill any need Milberg Weiss might leave behind. However, he said that pursuing D&O and class action claims requires a massive organization and not many are in a position to do that.

“The amount of work that plaintiffs and defense put into one of these claims is overwhelming,” he noted. “Not just any firm can pick up this work and fill the void. It will take some time for firms to develop the capacity and expertise to handle these cases. This is very complicated stuff.”

For insurers, this could mean a temporary reprieve in the number of claims faced and defense costs handled, Mr. Shappell continued. Even a successful defense could mean millions for insurers, and having less litigation “would be an enormous bonus” for insureds and insurers, he said.

He did note that other factors could be contributing to the decline in shareholder suits, including Sarbanes-Oxley having the effect of improving corporate governance and reducing the need for suits.

Mr. Shappell said he was skeptical Milberg Weiss' plight could mean the reopening of class action suits because he felt that few individuals in the class action would feel harmed and come forward to ask for an action. He reasoned that companies and insurers would vigorously oppose such a move, and that plaintiffs would not risk giving up their settlements and starting over.

“If claims got reopened, then that would be an enormous problem,” he said. “But I don't see it as a significant risk here. Judges have done a good job of confirming the reasonableness and fairness of settlements. I think there would be a pretty significant hurdle for plaintiffs to be successful and courts to start undoing settlements.”

Speculating further, Mr. Shappell said the law firm itself could have a huge errors and omissions exposure. But again, that would require plaintiffs to come forward and show they were harmed. He said it would be difficult for someone–who probably would have never filed a class action in the first place if it had not been for the law firm–to come forward and say they were harmed by the economic benefit they received.

By the same token, defendants would be hard pressed to reopen the issue. He reasoned that there would not have been a settlement unless there was some finding of error or wrongdoing, and a reopening would not change the final outcome.