May 7, 2008

Backing Down on the Colorado War of Initiatives

Political reality prevails in Colorado -- for the moment -- as the Colorado Trial Lawyers Association agrees to pull back nine proposed initiated measures, while a sponsor of a measure limiting contingency fees also drops his ballot plans. "John Sadwith, executive director of the Colorado Trial Lawyer's Association (CTLA) said the decision was made late Tuesday after continuing talks with the group promoting the restrictions on how much lawyers could collect in successful civil actions. From the Denver Business Journal: "We didn't think it was the best interests of working people in the state" to go forward with gathering signatures and putting the measures on the November ballot, Sadwith said. " Alternative explanation: We looked like hubristic jerks, confirming the worst prejudices against trial lawyers. Earlier Point of Law post here. Still leaves more than 100 proposed initiated measures.

UPDATE (1:55 p.m.): More from the Rocky Mountain News, and the CTLA news release is here. The more we think about it, it seems possible that national leaders and Democratic officials could well have put pressure on the Colorado group to withdraw its initiatives. With the Democratic National Convention in Denver, nine intiated measures would have drawn unwanted attention to the cash connection between the plaintiff's bar and presidential candidates. Sure would be an interesting line of inquiry for Colorado reporters.

When contingency arrangements are nonstandard

Protecting unsophisticated clients dept.: The Massachusetts high court has asked an advisory panel to consider requiring lawyers to obtain a client's written consent "when a contingent fee agreement contains terms that 'materially departs' from the state's model agreement. The court also wants guidance on whether such agreements could allow a lawyer discharged by the client before the legal matter is resolved to collect more than the fair value of the attorney's services and expenses." (NLJ).

May 2, 2008

GOP House Leader Calls for Hearings into Milberg Weiss

Today, House Republican Leader John Boeher and Rep. Lamar Smith (R-TX), the ranking Republican on the House Judiciary Committee, sent a letter to Committee Chairman John Conyers asking for a hearing prompted by the criminal conspiracy and convictions involving the Milberg Weiss law firm. (Copy of the letter here.)

As the two note in their letter: "Mr. Lerach himself told the Wall Street Journal his illegal conduct and that of his law partners was an 'industry practice.' At his sentencing, one of his supporting letters quoted Mr. Lerach as saying, 'Everybody was paying plaintiffs so they could bring their cases.'"

The two ask for hearings by May 19th, the date Weiss is to report to prison. The questions they want asked:

How many of these cases are brought as a result of illegal payments to plaintiffs?

What other types of conflicts exist between trial lawyers and the injured investors they purport to represent?

What reforms should Congress enact to eradicate these abuses from our judicial system?

More at Shopfloor.org, where we conclude:

We would be naive to think partisanship didn't enter into this request. Trial lawyers represent a major political force within the Democratic party, much appreciated for their generosity in campaign contributions. If Chairman Conyers declines to hold a hearing, the Republicans will make an issue of it.

But so what?

UPDATE (11:59 a.m.) Nathan Koppel reports on the letter at the WSJ Law Blog, noting that Congress passed the PSLRA in 1995 to prevent this sort of thing. The point being?

April 30, 2008

Lawyer liable for failure to denounce other lawyer whom he knew was defrauding a client

A lawyer with close business ties to another attorney who pilfered funds from their common client may be liable to that client for damages if he knew about the thievery but kept silent, the New Jersey Superior Court, Appellate Division, ruled April 23 (Estate of Spenser v. Gavin, N.J. Super. Ct. App. Div., No. A-0424-06T5, 4/23/08) in what I consider to be an excellent opinion.

Although there was no partnership among the lawyers that would support a finding of vicarious liability, the court reasoned that direct liability is justified by principles of "legal ethics, tort law, and public policy" if on remand the plaintiffs can prove that the lawyer knew about the theft but said nothing.

One of the sources the court cited as support for its conclusion is New Jersey Rule of Professional Conduct rule that requires lawyers to denounce lawyers who breach their professional duties in a way that raises a substantial question about their honesty, trustworthiness, or fitness.

April 25, 2008

Colorado Trio of Activities: Legislate, Litigate, Initiate

Colorado's business groups and trial lawyers are fighting their latests battles via the initiated measure. Or measures, to be more precise. From The Rocky Mountain News.

The latest spate of ballot initiatives aimed at Colorado businesses comes from a group of lawyers that wants voters to back limits on executive pay and real estate commissions.

In an apparent retaliation for an earlier filing to limit attorney fees, the head of the Colorado Trial Lawyers Association has filed with the state to put nine measures on the November ballot.

"For too long, corporate interests have been put ahead of consumer interests in this state," said John Sadwith, executive director of the 1,200-member trial lawyers' group. "Real people in this state deserve a break."

The Denver Business Journal has more in "Battle raging again with dueling Colorado ballot initiatives." The trial bar's measures target doctors, real estate brokers, corporate executives and homebuilders.

According to the Secretary of State's office, initiated measures require 76,047 valid signatures to qualify for the ballot. The lawyers' language is not yet on the Election Divisions' website list of proposed ballot measures. The Colorado Trial Lawyers Association doesn't have anything on the measures yet on its website, although there's this:

Annual Spring Dinner
"An Evening with Valerie Plame Wilson"
Presented by Gersh & Helfrich LLP and Moriarty Leyendecker Erben PC
Thursday, May 1, 2008
Marriott Denver City Center

April 21, 2008

Still Waiting for the Congressional Hearings

In his latest column, "Stones Left Unturned," Kenneth Jost of CQ Press lists the predations of Melvyn Weiss and William Lerach, their decades of offenses angrily denied.

Today, those denials are inoperative, the firm has broken up, and Lerach and Weiss are headed to federal prisons after pleading guilty to felony charges. But the head of the American Tort Reform Association, Sherman Joyce, says the full story of ethical misconduct by plaintiffs' lawyers in securities fraud suits remains to be written -- and he wants Congress to investigate.

Joyce notes that, in a pre-sentencing interview with The Wall Street Journal, Lerach claimed his firm was just following an "industry practice" when it solicited and then paid shareholders who served as plaintiffs in securities suits. If Congress has time to investigate steroid use by baseball players, Joyce says, it ought to have time as well to look into the extent of unethical conduct over the years by plaintiffs lawyers in securities cases.

Come to think of it, we proposed something along those lines at Shopfloor.org last October:

It is time for high-profile investigations and oversight hearings from Congress into the lawsuit industry, demanding accountability from these spoilers. Let's investigate their impact on the economy, the abusive model that Milberg-Weiss established, and the harm their predations do to the children. Make the witnesses take the Fifth, if it comes to that. At the very least, the public shaming will serve an educational and deterrent effect.

April 18, 2008

Spent 247,000 hours on Enron suits? Please document

Josh Gerstein in the NYSun:

A federal judge in Texas is ordering lawyers seeking a record $695 million fee in a class-action securities lawsuit to submit records detailing the 247,000 hours they allegedly spent working on the case over the collapse of Enron Corp.

On Wednesday, Judge Melinda Harmon of Houston gave the plaintiffs' attorneys two weeks to file "contemporaneous time or billing records reflecting which tasks were performed, when, and for how long."

April 17, 2008

Third-party litigation finance -- for defendants?

In the U.K., it looks as if what used to be called champerty and maintenance isn't just for plaintiffs any more.

April 16, 2008

Contingent Fee Lawyers Lose Case, Use Outrageous Trial Tactics, Still Get $218M in Fees

The Daily Business Review reports that Miami-Dade Circuit Judge David C. Miller has awarded $218 million in legal fees Tuesday to Stanley and Susan Rosenblatt for work they did on the now-dismissed class action litigation against the nation's biggest cigarette markers. "I find it very reasonable," Miller said from the bench, referring to fee calculations estimating the couple worked for 77 hours a week on average at an hourly rate of $274. "These are reasonable and conservative hours."

"In fact, in some firms that would not have been acceptable billing," the judgee joked before a courtroom packed with at least 200 people.

Incredibly, the fees would come out of a common "guaranteed fund" of about $800 million that Big Tobacco put up as legally required collateral in 2001 to appeal the record $145 billion punitive verdict the Rosenblatt's had obtained against cigarette makers. The verdict was later thrown out by the Florida Supreme Court along with a class certification order uniting sick smokers in a single lawsuit. The court also rebuked the Rosenblatts' craven appeals to racial prejudice of jurors.

The judge still must determine how to distribute the rest of the $800 million fund.

Tobacco attorney Robert Heim, a partner with Dechert in Philadelphia, argued that "it would be wrong under common fund law" to award fees to the Rosenblatts, saying a guardian ad litem should be appointed to administer a fund "to protect the interests of the class."

This fascinating case is of course a mockery of the contingent fee (the lawyers collected nothing for their clients) and demonstrates the corrupting effect of supersedeas bonds.

April 15, 2008

Santa Clara v. Superior Court

On April 26 and May 19, Walter noted the important 2007 Santa Clara v. Atlantic Richfield Superior Court decision barring government entities from using contingent-fee attorneys to prosecute governmental claims grounded in public-policy balancing of costs and benefits like public nuisance abatement. The decision was a natural consequence of People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), where the California Supreme Court noted the ethical conflict of interest stemming from contingent fee agreements:

"[T]he abatement of a public nuisance involves a balancing of interests. On the one hand is the interest of the people in ridding their city of an obnoxious or dangerous condition; on the other hand is the interest of the landowner in using his property as he wishes. And when an establishment such as an adult bookstore is the subject of the abatement action, something more is added to the balance: not only does the landowner have a First Amendment interest in selling protected material, but the public has a First Amendment interest in having such material available for purchase. Thus, as with an eminent domain action [to which the absolute neutrality requirement applies], the abatement of a public nuisance involves a delicate weighing of values. Any financial arrangement that would tempt the government attorney to tip the scale cannot be tolerated."

So the appellate court has ruled in a remarkably poorly-thought-out opinion that, well, financial arrangements that would tempt government attorneys to tip the scale can be tolerated, so long as "in-house counsel retain control over all decision-making."

We'll see if the California Supreme Court believes that Clancy only applies to attorneys named Clancy or has broader precedential value. If the reversal holds, however, all is not lost for defendants: "The record before us contains absolutely no evidence [sic] that private counsel have ever engaged in any conduct that invaded the sphere of control exercised by the public entities' in-house counsel. ... No doubt the companies will seek disqualification of the public entities' private attorneys if they acquire evidence that the private attorneys are improperly exercising control over this action."

1) That "no evidence" line is remarkably disingenuous: the city of Oakland's fee agreement states private counsel have "absolute discretion in the decision of who to sue and who not to sue, if anyone, and what theories to plead and what evidence to present." The appellate court, reached to find facts to override it in Oakland's assertion that the agreement did not actually reflect the deal it had with counsel. It's one thing (and bad enough) for an appellate court to find facts, but it's another to blatantly misrepresent the state of the record. And one wonders if Oakland's contingent-fee counsel will be so eager to ignore the parol evidence rule down the road if there is a later dispute over the size of the fee.

2) Meanwhile, it sure sounds to me like the California appellate court just opened to discovery the internal workings of the relationship between the in-house and outside contingent-fee counsel. Which is normally impermissible under the attorney work product doctrine. Every time a brief is filed, it's cause for additional discovery and scrutiny of whether the line has been crossed. Such are the knots that the court has tied itself in to avoid the bright-line statement of Clancy.

The same appellate court rescued the illegitimate public-nuisance claim from a lower court dismissal in County of Santa Clara v. Atlantic Richfield Co., 137 Cal. App. 4th 292 (2006).