BOSTON (Legal Newsline) - The judge who cut the fees of prominent class-action firm Lieff Cabraser by more than $1 million for alleged misconduct in a long-running lawsuit against State Street Bank & Trust now says he needs his own lawyer to defend that decision before the U.S. Court of Appeals for the First Circuit.
In a brief order coming after more than eight years of legal wrangling, U.S. District Judge Mark L. Wolf said he will appoint an attorney to represent his court as Lieff Cabraser appeals his February opinion trimming the firm’s fees for its involvement in a scandal that included double-billing of attorney hours and failing to halt a suspicious $4 million payment to an attorney who did no work on the case.
Lieff Cabraser helped negotiate a $300 million settlement of the securities lawsuit against State Street in and was initially awarded $75 million in fees, along with co-counsel including Labaton Sucharow and the Thornton Law Firm. Then the Boston Globe published a story revealing how the law firms had miscounted an accounting to the court for hours racked up by attorneys they swapped among themselves. That was followed by revelations Labaton had paid $4.1 million to Damon Chargois, a Texas lawyer whose only role in the case was to introduce the New York-based securities litigation firm to officials at the Arkansas Teachers Retirement System, which served as a lead plaintiff in the State Street case.
After hearings last year at which Labaton and Lieff Cabraser strongly objected to nearly every charge against them, Judge Wolf in February ordered their fees cut by about 26% on top of the millions of dollars they paid for the special master to investigate their behavior in the case. The judge said Lieff Cabraser “was seriously deficient in its performance as counsel” in the case for signing off on a fee request that included a misleading analysis of fees paid in similar class actions and for failing to catch the payment to Chargois. The order would cut Lieff Cabraser’s fees by about $1.1 million to $15.2 million.
Only Lieff Cabraser has appealed the fee cut. In a 63-page filing earlier this month with the First Circuit, the law firm says it shouldn’t be subject to “strict liability” for behavior by its co-counsel. The law firm protests Judge Wolf made his findings, including that Lieff Cabraser should have investigated the payment to Chargois, “without having heard from Lieff on the issue.”
The firm added that Chargois, whose only involvement in the case appears to have been introducing Labaton attorneys to prominent state officials in Arkansas, “was consistent with fees paid to local counsel in similar class actions” and thus didn’t merit further investigation. The lead lawyer for Thornton, Garrett Bradley, is a former Massachusetts state representative who paid his brother, normally a $53-an-hour court-appointed criminal defense attorney, more than $200,000 at $500 an hour in the State Street case.
The Thornton firm billed $19 million in the State Street case even though it has few partners and Bradley acknowledged on the stand he couldn’t recall handling any cases in Massachusetts federal court. Most of the hours reported by the firm were actually worked by lawyers the larger securities law firms lent to Thornton, in a common arrangement designed to compensate local counsel with connections with institutional plaintiffs or the court where the case is being heard.
Judge Wolf described the fight of Lieff Cabraser’s fee as “essentially an ex parte matter” in which the usual adversarial process is missing because there is no one involved to argue on behalf of the investors who ultimately are paying the fees. The Hamilton Lincoln Law Institute’s Center for Class Action Fairness has asked to be appointed as a representative for shareholders but so far the court hasn’t acted on that request or ordered any fees for the outside group, which frequently challenges what it believes are excessive fee awards in class actions.
The judge said he wouldn’t require Lieff Cabraser to pay the cost of the court’s attorney, after charging the law firm and its co-counsel some $5 million for the special master. Lieff Cabraser said it spent another $1.6 million on expenses and $2.7 million in professional time on that investigation, which it opposed throughout the process.