John O'Brien Feb. 25, 2016, 2:38pm


NEW YORK (Legal Newsline) – A federal appeals court has unsealed a lawsuit filed by a former member of a prominent class action firm that he claims forced him to resign for exposing a kickback scheme during the firm’s representation of a Mississippi pension fund.

On Wednesday, the U.S. Court of Appeals for the Second Circuit ordered the unsealing of Bruce Bernstein’s now-settled lawsuit against Bernstein Litowitz Berger & Grossman.

Bernstein alleges the firm, in the course of helping Mississippi Attorney General Jim Hood’s office represent a public employees retirement fund, gave unnecessary work to an attorney and wife of a member of Hood’s staff that resulted in that wife being paid more than $100,000.

Bernstein claimed he was forced to resign after blowing the whistle and filed the lawsuit in 2014. It was to be under seal for 14 days, with a settlement coming on the 13th.

Three Second Circuit judges affirmed a district court ruling that said the complaint must be opened to the public against objections from both sides, who asked that it remain permanently sealed.

“(T)he complaint does not include information that is ‘likely to be embarrassing or detrimental to the client if disclosed,’” the decision says.

“Of course, the information may be seriously embarrassing to counsel (BLB&G and the AG’s Office), but not to the client, (Mississippi Public Employees' Retirement System).

The decision, authored by Judge John Walker, details allegations of a kickback scheme that included more than $100,000 in legal fees paid from Bernstein Litowitz to the wife of one of Hood's staffers. Bernstein Litowitz had used her as local counsel in the case.

“If anything, MPERS would appear to benefit from disclosure (of the complaint); the worst that can be said about it is that it was unlucky in its choice of counsel,” Walker wrote.

The issue arose in Bernstein Litowitz’s contract to represent MPERS in a class action against Satyam Computer Services. MPERS was one of four lead plaintiffs in the case.

Bernstein Litowitz used a Jackson, Miss., solo practitioner named Vaterria Martin as local counsel. It is alleged that she was to “occasionally check on the status of the case for MPERS, even though (Bernstein Litowitz) was already providing this information directly” to Hood’s office.

The case was settled in principle in 2010 for $125 million. After the settlement, Bernstein Litowitz partner Max Berger assigned an allegedly unnecessary legal research project to Martin.

Bernstein said he objected to the project. Eventually, Martin produced an 18-page memorandum and billed for 207 hours of work.

Bernstein said the memo drafted by Martin addressed the wrong pleading, contained no meaningful analysis and was “ridiculous.”

Martin was paid $112,500 from the funds received in the Satyam settlement. In a 2011 fee petition to the court, it did not disclose that payment.

As it turned out, Martin was married to DeShun Martin, then an assistant attorney general for Mississippi. When he had protested the unnecessary project given to Martin’s wife, Bernstein says he was told by a fellow partner, “Do you ever want us to work with Mississippi again?”

Bernstein says he raised his concerns about what had happened in several contentious meetings with partners at the firm and was threatened to be blackballed if he blew the whistle.

Still, Bernstein reported his concerns to federal prosecutors in New York City in December 2011.

After that, he says he became concerned with another agreement with local counsel that he says did not have relevant experience with the case.

He resigned in 2012 and claims the firm attempted to buy his silence by offering him funds from a future settlement in another case.

Bernstein did not file a brief regarding the unsealing of his lawsuit but says it should remain sealed. He doesn’t want to risk unwinding the settlement.

The Second Circuit held that pleadings, even in settled cases, are judicial records subject to a presumption of public access.

“Logical considerations also support a presumption of public access,” the decision says.

“Public access to complaints allows the public to understand the activity of the federal courts, enhances the court system’s accountability and legitimacy, and informs the public of matters of public concern.”

Bernstein Litowitz gave $10,000 to Hood's campaign fund in 2007. Hood also hired Vaterria Martin for a case against Standard & Poor's, though the major firm hired for that case is Cohen Milstein.

From Legal Newsline: Reach editor John O’Brien at jobrienwv@gmail.com.

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