Wall Street Journal (January 28, 2003 5:28 pm) — The front lines in the latest legal skirmish involving Wall Street are forming here in a crowded conference room tucked at the back of the ritzy Bellagio Hotel.

That is where, on a recent day, a group of more than 200 class-action lawyers, who have won millions of dollars suing multinational corporations over a wide variety of issues, including faulty breast implants and diet drugs, ponder new questions such as: What is a stockbroker?

The lawyers, including personal-injury-turned-mass-tort specialists James Hooper and his partner, Robert Weiss, concede they don’t really know their way around Wall Street. But they are hoping to profit from the fallout of the $1.4 billion global regulatory settlement over stock-research conflicts, seeking to file claims on behalf of investors. Getting a piece of the action, they say, is just a matter of transforming the skills they learned bringing mass consumer lawsuits against companies such as Wyeth (in the “fen-phen” diet-drug case) and Dow Corning Corp. (with breast implants).

“This is not brain surgery,” Mr. Weiss says during the recent “Mass Torts Made Perfect” conference. “This is a car accident. It just happens that your grandmotherly client was rear-ended by a Mack truck being driven by a CEO.”

Mass-tort lawyers often lurch from one hot topic to another, of course. Lawyers gearing up to take on the brokerage firms got a quick lesson on Wall Street at the conference, learning everything from what a stockbroker does to how the securities arbitration process works. But the recent push has ruffled some veteran securities plaintiffs’ lawyers, who warn investors that attorneys who jump into this area could risk making mistakes.

“Arguing securities law is worlds away from filing a fen-phen claim,” says securities lawyer Seth Lipner. “You really have to wonder about the quality of representation their clients will get from nonsecurities lawyers.”

What is clear is that investors already have begun filing private arbitration claims with the National Association of Securities Dealers, hoping to piggyback on the stock-research regulatory pact, which was announced last month. They argue that Wall Street firms duped investors and rely on findings regulators already have released alleging that analysts at Wall Street firms issued overly optimistic research reports to win investment-banking business from companies. In the coming weeks, regulators will release additional findings, which are expected to give plaintiffs attorneys even more ammunition, although securities firms will neither admit nor deny the allegations.

The assault by mass-tort lawyers on Wall Street has begun with nationwide advertisements seeking clients and the filing of a smattering of arbitration filings. Messrs. Weiss and Hooper say the formula is similar to traditional securities plaintiffs’ lawyers. The pair have spent a total of more than $1 million on television advertising alone, trolling for people who have lost money investing at big brokerage firms primarily in stocks like WorldCom Inc., which filed for bankruptcy-court protection last year.

An investor with a complaint against a brokerage firm is almost guaranteed to end up in arbitration, as brokerage contracts generally require customers to go that route, rather than to court. While most securities-arbitration panels consist of three people, one selected by the industry and two from the public, the NASD requires just one arbitrator for claims seeking less than $25,000.

Messrs. Hooper and Mr. Weiss recently filed 71 cases against Citigroup Inc. ‘s Salomon Smith Barney on behalf of investors who lost less than $25,000 a piece.

Mr. Hooper, a 46-year-old Orlando lawyer who sports a ponytail, got his start as a personal-injury lawyer. Like many mass-tort attorneys, he made a name for himself filing breast-implant and fen-phen claims against the companies that distributed those products.

He bought a television-production studio in 2000, partly to cut down the cost of producing his own commercials. His firm has hired an additional 20 to 23 staffers since July to handle calls from its 1.800 number, plans to add at least 12 more people in the coming months and is forming alliances with some veteran securities lawyers.

“So, you worked extra hard and you socked your money away so you could enjoy your retirement,” says one of Mr. Hooper’s television ads targeting Florida senior citizens. “And now you are left holding the bag. You might just have a claim against that brokerage house.”

His arbitration filings against the big firms don’t argue that investors were hurt by bad stock-picking calls. Instead, they claim that the Wall Street firms didn’t disclose to investors that their analysts issued the research reports to help win investment-banking business — such as mergers-advisory and stock-underwriting work — for their firms, material information that would have effected their client’s investing decision.

So far, the majority of his arbitration claims are on behalf of investors who lost less than $25,000, like Larry Andrews, a pharmacist from Clinton, Miss., where WorldCom is based. He heard about Mr. Hooper through a mailing and says he doesn’t mind that his lawyer has a mass-tort background. He bought 190 shares of WorldCom at $44 and says his Salomon Smith Barney broker discouraged him from selling when the stock hit $98. “He told me Grubman thought it would go to $120 so I hung on,” he said, referring to former star analyst Jack Grubman. Mr. Andrews, 57, sold his shares at $25 and is hoping to recoup about $5,000 through his claim.

Mr. Hooper maintains that Wall Street’s actions significantly hurt investors. “Citigroup’s research and breast implants have two things in common,” he says. “In both cases, a huge fraud was perpetrated and in both instances wealthy corporations are responsible.”

A spokeswoman for Citigroup said: “We’ve reviewed several of these claims and believe them to be without merit.” A lawyer for Mr. Grubman didn’t return a call seeking comment.

Mr. Hooper spent the better part of the Las Vegas conference working the back rooms of the conference at the Bellagio, encouraging other lawyers to begin advertising for potential claims against the Wall Street firms. Mr. Hooper was added as a last-minute speaker on the opening day, and Mr. Weiss was the star attraction at another panel on hot topics in mass-tort litigation. The pair is teaming up with Levin Papantonio Thomas Mitchell Echsner & Proctor PA, a large mass-tort firm based in Pensacola, Fla., known for its filings against the tobacco industry, among others. Lawyer Larry Morris says investor claims against Wall Street could reach the magnitude of those filed against the tobacco industry, and his firm has established an alliance with Mr. Hooper and is hiring staff with expertise in securities law. “We are quick studies,” he said.

Mr. Hooper concedes that he hasn’t been well-received by the traditional securities-law bar. He notes that the reception last fall at the annual meeting of the Public Investors Arbitration Bar Association, an umbrella group for plaintiffs attorneys, at their last meeting in Colorado Springs, Colo., wasn’t quite as warm as it was in Las Vegas. Says Mr. Hooper: “They don’t trust me.”

In the end, customer claims all will rise or fall on their own merits, says Charles Austin Jr., a Richmond, Va., lawyer and PIABA board member.

“Every claimant is still in a different situation, and while they can all claim material facts are omitted, not every claimant stands at the same level in terms of timeliness and damages,” Mr. Austin says. “As a result, I think some of these lawyers are in for a bit of shock.”