A prominent class action firm has been caught for at least the fourth time padding its complaint with information from “confidential witnesses” whose testimony fell apart when subjected to questioning under oath, according to one of its targets.
Robbins Geller Rudman & Dowd is accused of attributing false accounts of the inner workings of SandRidge Energy to former employees who either didn’t work at the oil and gas company at the time, denied seeing what was attributed to them or never worked there in the first place.
One woman supposedly told an investigator for Robbins Geller about a dramatic scene in which a top SandRidge executive pounded a table in anger over corporate misconduct. Questioned under oath, she said she never witnessed anything like it and the executive described as attending the meeting wasn’t there.
The allegations by SandRidge’s lawyers represent at least the fourth time Robbins Geller has been accused of filing lawsuits based upon unnamed “confidential witnesses” whose stories didn’t stand up to closer scrutiny. In one of the most prominent examples, U.S. District Judge Ruben Castillo sanctioned the law firm in for “repeated misconduct” in a securities lawsuit against Boeing that included “blatantly false” information from a confidential witness who had never worked on the project he supposedly oversaw.
Plaintiff attorneys began using confidential witnesses to bolster their lawsuits after courts tightened the rules for securities class actions to require specific information about the fraud alleged and evidence of scienter, or management’s knowledge of wrongdoing. In response, law firms hired investigators to find present and former employees willing to describe the alleged fraud, while trying to keep their identities secret from the defense.
That tactic has backfired repeatedly for Robbins Geller. In a 2011 lawsuit against Suntrust Banks, U.S. District Judge William S. Duffey expressed disgust after he denied a motion to dismiss based upon testimony of a confidential witness who turned out not to have been employed at the bank when events the witness supposedly described took place.
The judge said Robbins Geller allowed him to believe the confidential witness was reliable when a partner with the law firm had listened in on an investigator’s interview where it was clear the man had left the bank before the fraud occurred.
The judge said the law firm acted “erroneously, at least carelessly, or perhaps under the cover of plausible deniability.”
In the SandRidge Energy case, defense lawyers asked the judge in an April filing to reconsider their motion to dismiss in light of information they obtained trying to track down six confidential witnesses Robbins Geller relied upon to build its case. Defense lawyers began asking for the identities of the witnesses soon after amended complaints referring to them were filed.
Plaintiff lawyers stonewalled for months using a variety of arguments including the attorney-client privilege, attorney work product doctrine and a claim the witnesses feared retaliation even though none of them had worked for SandRidge for years.
After months of back-and-forth, lawyers revealed three names in a list of more than 30 potential witnesses but refused to identify which person was a confidential witness cited in the complaint. Months later, they identified the witnesses and defense lawyers issued subpoenas to question them.
One witness turned out to have a dual identity of “Former Employee Number 1” and “Former Employee Number 2”, SandRidge’s attorneys said. The witness, whose name was kept under seal, wasn’t employed by the company during the time of the alleged fraud and has vigorously evaded service; a process server described receiving a “single-fingered gesture” from a woman at the witness’ house who refused to open the door. Robbins Geller attorneys said they won’t help bring him for questioning.
Another witness, Michael Hale, was described as working on geological formations at the heart of the lawsuit during the supposed fraud. But he didn’t work on them until later and didn’t attend meetings he supposedly described during a 10-minute phone call with an investigator. And former SandRidge geologist Maggie Silvertooth was the supposed source for a vivid description of a meeting at which a senior vice president “slammed his hands on a table” and pulled former SandRidge CEO Tom Ward “out of a meeting to ask him why the land was being leased.”
Under oath, Silvertooth denied ever seeing the hand-slamming scene and said Ward didn’t attend the meeting he was supposedly pulled out of.
“The whole thing is not correct,” Silvertooth testified.
Ward left SandRidge in 2013 amid questions about transactions involving family members.
One witness said he never spoke to anyone associated with Robbins Geller, and lawyers with the firm didn’t challenge him when he revealed this during a deposition.
“We will be filing papers in opposition to defendants' motion in accordance with the schedule entered by the court that will show that defendants' arguments are without merit,” said Evan Kaufman, a partner with Robbins Geller.
SandRidge’s attorneys declined comment. The defense effort is led by Steven Bauer, a partner with Latham & Watkins who was a federal prosecutor before joining the firm’s white-collar defense practice. In court filings and correspondence, the firm has criticized attempts by plaintiff attorneys to keep the identities of confidential witnesses secret, saying there is no legal reason for withholding such information from the defense.
There is a tactical reason for plaintiff attorneys to refuse to interview confidential witnesses and leave the job to private investigators, as is the pattern with Robbins Geller. The lawyers could be called as witnesses themselves to address questions about misconduct. Lawyers generally waive the privilege to protect information they file as facts in a complaint.
SandRidge’s attorneys warn Robbins Geller in a footnote against countering its allegations about the confidential witnesses with investigative materials they haven’t previously disclosed. If that happens, defense lawyers said, “we will contend it is grounds to strike the opposition and to order a full waiver of all work product and communications concerning these witnesses.”