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14 August 2012 at 11:12 BST

Judge hits firm in pocket over conflict of interest

A leading international law firm committed an 'egregious' ethical violation while acting for claimants in a $49 million action against a bar finals cramming organisation, according to a US court.

Cramming: trigger to US class action

Cramming: trigger to US class action

The US federal appeals court has prevented Virginia-based McGuireWoods – which has offices across the States and in Brussels and London – from collecting its fees in a claim against the publishers of the BarBri course.

Ethical breach

According to a report in the National Law Journal, in upholding an earlier US District Court ruling the appeal court found that the firm had committed a significant ethical breach by failing to disclose to claimants that incentive awards based on the settlement’s value would go to various named plaintiffs. The newspaper quoted the decision from Judge Sandra Segal: ‘The representation of clients with conflicting interests and without informed consent is a particularly egregious ethical violation that may be a proper basis for complete denial of fees.’
The litigation itself involved claims that West Publishing and New York-based private education company Kaplan had breached federal competition law by conspiring to monopolise the review course market. The Journal reports that the some 300,000 students were involved in the class action and that they had paid an average of $1,000 in overcharges for the crammer between 1997 and 2006.

Notable success

The claimants had originally instructed the law firm Van Etten Suzumoto & Becket, which was taken over by McGuireWoods six years ago. Settlement was originally reached in 2007, with the District Court judge making a costs award to McGuireWoods of some $8.5 million. But he refused to approve the incentive awards, citing, according to the newspaper, a potential conflict of interest.
A statement from the firm this week highlighted its work in achieving a ‘notable success’ for the claimants. It also said the appeal court’s ruling ‘acknowledges that the incentive agreements which were the basis for the denial of attorneys' fees caused no harm to the class. Nevertheless the court applied a legal standard that was not generally recognised at the time the incentive agreements were entered into or when the attorney who had entered into them joined our firm. We disagree with the conclusion reached by the court but we respect the court's decision’.

Lallapalootza

That judgment falls against the backdrop of the AmLaw Daily web site’s latest round-up of what it describes as ‘law firm lawsuit-palooza’. For the uninitiated in early 20th century American homespun slang, a ‘palooza’ is derived from a ‘lallapalootza’, and in this case means an exaggerated event.
Whether the law firms in the heat of litigation feel events are exaggerated is another matter, but the list is impressive. The web site highlights New York’s Chadbourne & Parke, which, along with fellow Manhattanites Proskauer Rose, is headed to the Supreme Court to fight a suit against it involving recently gaoled fraudster Allen Stanford.  
Elsewhere, the survey points to top Miami player Greenberg Traurig and Milwaukee’s Quarles & Brady as having ‘collectively coughed up $87.5 million to resolve claims that they contributed to a $900m Ponzi scheme perpetrated by two mortgage-industry clients’.

 
   
 
 
 

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