NEW YORK (Legal Newsline) - A federal judge decertified a class action against Allergan after discovering plaintiff lawyers had agreed to split fees even after she had explicitly told them only one law firm should represent the class.
In a 26-page decision, U.S. District Judge Colleeen McMahon expressed frustration not only with Pomerantz LLP and the Thornton Law Firm but their client, the Boston Retirement System, for violating the single condition she established before selecting the pension fund as lead plaintiff: That Pomerantz alone would handle the litigation.
The involvement of Thornton only deepened the judge’s concern, since the politically connected Boston firm is deeply enmeshed in a scandal over the State Street securities class action, where a special master found Thornton double-billed class members by using lawyers borrowed from other firms and paid more than $200,000 to the brother of managing partner Garrett Bradley, who normally worked as a $53-an-hour public defender. Bradley, a former Massachusetts legislator, has helped his firm earn millions of dollars in contingency fees by representing state and local pension funds in securities class actions.
Judge McMahon cited the State Street case in a footnote admonishing the Boston pension fund for allowing Thornton to work on the Allergan case. The firm had a secret fee-splitting agreement with Pomerantz that would have given it nearly half the court-awarded fees in the case had it proceeded to settlement.
“A class representative who starts by ignoring the terms of the court’s order appointing it as lead plaintiff cannot be trusted to monitor a law firm that was found guilty of double billing in another case,” she wrote.
The judge deliberately selected a single law firm to avoid a frequent pattern in class-action litigation, where plaintiff lawyers share work both to diversify their own financial risk and to dampen the incentive to compete with each other on fees. She described the undisclosed fee-splitting agreement between Pomerantz and Thornton as “the quintessential example of a `lawyer driven’ arrangement,” she wrote
“It is this court’s experience (and I have quite a bit of it) that the involvement of multiple firms tends to inflate legal fees to the detriment of the other class members,” the judge wrote. “This is a result I am particularly anxious to avoid.”
The law firms defended their agreement, saying Thornton was merely “additional counsel” assisting with the litigation. In the State Street case, Bradley said his firm had a similar fee-splitting agreement with lead attorneys at Labaton Sucharow. Under grilling from the judge, Bradley acknowledged he had little experience litigating cases in federal court and only a vague familiarity with the Federal Rules of Civil Procedure. Plaintiff lawyers in that case also paid $4.1 million to Damon Chargois, a Texas lawyer whose only involvement was to arrange a meeting between Labaton Sucharow and officials at the Arkansas teachers’ pension fund that served as lead plaintiff.
Judges can decertify a class for a number of reasons including inadequacy of counsel or the lead plaintiff to represent other class members. In her order, Judge McMahon said it was important the public understand every aspect of fee arrangements among the lawyers who claim to represent class members, many of whom are unaware a lawsuit is even being prosecuted on their behalf. She said she would unseal documents showing prior relationships between Thornton, Pomerantz and the Boston pension fund.
“In a securities fraud class action, or any class action, the public and class members have the right to know about fee arrangements,” she wrote. “Fee awards are matters of public record and information relating to the fees of class counsel is supposed to be transparent.”