U.S. District Judge Robert P. Patterson Jr. has sanctioned plaintiffs' class action firm Milberg LLP and its co-counsel pursuant to Rule 11 with a public reprimand after allegations from two "confidential sources" in a lawsuit against Sony Corporation subsequently were not supported by the witnesses' deposition testimony as reported by Nate Raymond for the New York Law Journal. Judge Patterson ruled:
A reprimand is an appropriate sanction where there has been no showing of bad faith, and where the parties are sufficiently concerned with their professional reputation that a public reprimand will have the intended effect of deterring future wrongdoing. * * * Here, no more is necessary than to reprimand Milberg LLP, by Leigh Smith, Sanford Dumain and Jennifer Czeisler, Lax LLP, by Robert Lax, and Lange & Koncius LLP, by Joseph Lange and Jeffrey Koncius for failure to comply with the high professional standards expected by the court, namely for their objectively unreasonably joint actions: (1) attributing a statement to a former Sony employee but eliminating the context necessary to make it accurate at the time the SAC [Second Amended Complaint] was filed, and (2) refusing to strike allegations that were unsupported by the testimony of the people they purported to quote until long after the lapse of the safe habor period.
Last week Milberg LLP was rebuked by U.S. District Judge Richard M. Berman in a ruling on its request for additional attorneys' fees in the securities fraud case In re Nortel Networks Corp. Securities Litigation because of, among other issues, "improper staffing" as reported by Nate Raymond for the New York Law Journal: "'It is clear that a significant portion of the work done by senior attorneys could have been performed by more junior attorneys or paralegals at lower billing rates,' Berman said."
Judges may wish to explore the use of temporary attorneys by some plaintiffs' class action firms in determining the reasonableness of their fee requests. A substantial portion of the attorneys' fees generated in class actions is through the review of voluminous document productions, and much of this work often is performed by temporary attorneys whom the plaintiffs' firms obtain from staffing agencies. The document review process involves both objective and subjective coding components. The objective component simply entails inputting bibliographical data from the document -- such as date, title, author, recipients -- onto a coding sheet or into a database, and the subjective component involves substantive analysis which includes issue spotting, determining relevancy, and providing comments for the document. It is questionable whether temporary attorneys should be used for the objective coding of documents which seemingly is little more than clerical work. Indeed, some law firms outsource the objective coding portion of a document review to data entry service providers, and perhaps appropriately use the temporary lawyers with their much higher billing rates only for the subjective coding component; however, some plaintiffs' class action firms in many cases -- including Milberg in In re Tyco International, Ltd. Securities Litigation -- have used temporary attorneys for both the objective and subjective coding portions of the document review.
Speaking of the Tyco case . . . Grant & Eisenhofer and name-partner Jay Eisenhofer have been sued by a shareholder who alleges that the plaintiffs' lawyers reaped over $200 million in excess attorneys' fees in breach of an agreement with the lead plaintiff which was not disclosed to the court as reported by Daniel Fisher for Forbes. The supposed 2004 agreement between Grant & Eisenhofer and the lead plaintiff -- the Teachers Retirement System of Louisiana -- is not included as an exhibit to Richard Gielata's lawsuit against G&E. A lawyer representing the plaintiff assures "that he has a copy of the agreement" but a former top official from the Teachers Retirement System of Louisiana says "she has no memory of any such fee agreement" as reported by Zach Lowe for The American Lawyer. The lawsuit was filed by Delaware lawyer Joseph Gielata -- a relative of the plaintiff -- who worked at Grant & Eisenhofer several years ago, and the firm contends that he is a "former disgruntled employee" as reported by Phil Milford for Bloomberg: "The firm will defend the case vigorously, and its principals 'vehemently deny these accusations.'"Eisenhofer Complaint - File Stamped