March 2, 2011 8:00 PM
Who Will Milk Fees from Howrey's Mammoth Antitrust Case?
Posted by Brian Baxter
Why did Winston & Strawn reportedly extend offers to most of Howrey's remaining partners instead of simply completing a formal merger? One thing complicating consideration of any such union is a multidistrict litigation related to the dairy industry in which the firms are involved on opposite sides.
The case, which sees Howrey serving as lead counsel to 4,000 dairy farm plaintiffs and Winston on the defense side for an industry trade group called the Southern Marketing Agency, is part of a series of similar civil suits filed around the country over alleged price-fixing and illegal monopolization and monopsonization--controlling the market at the buyer, rather than seller level--in the milk industry.
Plaintiffs allege that national milk marketing cooperative Dairy Farmers of America (DFA), milk processing giant Dean Foods, and several other defendants are responsible for a lack of competition in the milk industry that has kept prices artificially low for struggling farmers while milk processors have enjoyed record profits. (Click here and here for copies of the complaint.) Defense lawyers claim their clients are innocent of any anticompetitive actions and that the recession is responsible for lower milk prices. Milk industry advocates also claim that dairy farmers have benefited from current regulations.
Robert Abrams, Howrey's cochair of global litigation as of Wednesday afternoon, is leading a team from the firm that is serving as lead plaintiffs' counsel in the Tennessee case. Cohen Milstein Sellers & Toll is assisting Howrey in the litigation, while also serving as lead plaintiffs' counsel in another MDL in Vermont, where Howrey has a more limited role.
The Am Law Daily spoke with four lawyers representing various parties in the case, who insisted on anonymity when discussing client matters. The attorneys say that plaintiffs, who are primarily current and former southeastern dairy farmers, are seeking damages in the hundreds of millions of dollars. Many documents in the case have been filed under seal.
In September, U.S. district court judge J. Ronnie Greer granted class certification to Howrey's clients. The litigation, which has been hard-fought on both sides, is currently set for trial in June in Greeneville, Tenn. As with most cases of this kind, plaintiffs counsel are operating on a contingency fee basis, which lawyers involved in the case expect to be a third of any final recovery. Greer will have final say over any fee award.
"These are huge cases, and the amount of damages that are at stake is very high, especially in the southeast, where Howrey has been doing the overwhelming majority of the work," says one lawyer, who declined to speculate on any potential fee. "The fee could be substantial, but I'm not going to get into the business of trying to estimate it."
Trailing the Tennessee litigation in both timing and size is the MDL in Vermont, which in December saw Dean Foods pay $30 million to settle its role in an antitrust suit filed in U.S. district court in Burlington. Other defendants are objecting to the settlement in that case. (Dean Foods is represented by Dechert, while Williams & Connolly is counsel to the DFA and Andrews Kurth is advising National Dairy Holdings.)
According to the lawyers who spoke with The Am Law Daily on the condition they not be identified when discussing colleagues and adversaries, the lead Howrey partners representing milk litigation plaintiffs in Tennessee have not been tendered offers by Winston because of the obvious conflict of interest caused by both firms' roles in the case.
Lawyers say that Winston and Howrey have made motions to the court notifying Greer of the unique situation between the two firms. Winston has stated that anyone from Howrey who joins the firm would no longer have a financial interest in the case and that Winston would never reap any contingency fee awarded to Howrey lawyers in the case. Greer had no concerns or objections, say lawyers involved with the litigation.
Despite Howrey's current embattled state, the lawyers add that the firm's attorneys have been handling the case with the utmost professionalism.
"These are really good lawyers," says one admiring adversary. "It's been business as usual and if it's affecting them, they certainly haven't bothered to tell us." Adds another attorney: "Obviously they're having a tough time there, so we're just trying to give them the space they need."
Howrey's Abrams did not respond to a request for comment, nor did four other Howrey partners appearing on a docket in the case, including commercial trial practice cochair Gregory Commins, Jr., and litigation partners Robert Brookhiser, Robert Green, and Terry Sullivan. Howrey vice-chairman Sean Boland, cochair of the firm's antitrust practice, also did not return a phone call about the milk matter.
Winston's managing partner, Thomas Fitzgerald, did not immediately respond to a request for comment about how the milk litigation in Tennessee affected some of the offers made to current Howrey partners. A firm spokesman also did not return a phone call.
Just where Abrams and his Howrey team will end up is still in question. Abrams and his Howrey team aren't talking, but other lawyers involved in the milk antitrust cases are. A lawyer representing a defendant in the case tells The Am Law Daily that Abrams would likely join his plaintiffs' cocounsel, Cohen Milstein, to continue working on the case. The Cohen Milstein rumors have caught fire in the legal blogosphere in recent weeks, albeit focusing on securities lawyers at Howrey. When Heller Ehrman collapsed two years ago, Cohen Milstein landed antitrust partner Kit Pierson to bolster its antitrust group following the plaintiffs firms' late 2008 split with former name partner Michael Hausfeld.
However, a Cohen Milstein spokeswoman denies that offers have been made to Abrams or any other Howrey partners working on the Tennessee case. Calls to several Cohen Milstein partners went unreturned, but another lawyer involved in the litigation, who requested anonymity in order to speak freely about a rival, expressed doubt that Abrams would join Cohen Milstein.
This lawyer says that Abrams's practice over the years has been split between plaintiffs and defense work, with a tilt towards the defense side, which is usually adverse to Cohen Milstein. Abrams's bio on Howrey's Web site shows he has represented corporate clients like Caterpillar and Exxon. Pierson's practice was more suited to plaintiffs work when he joined Cohen Milstein from Heller in February 2009, says the lawyer.
Any firm that recruits the Howrey partners handling the milk antitrust litigation will have to take into consideration the possibility that if the firm folds and files for Chapter 11, a bankruptcy trustee could eventually pursue the firm for a sizable portion of any recovery under Howrey's contingency fee arrangement.
"All profits relating to cases as of the date of dissolution are required to be tendered back to the dissolving firm," says McCarter & English bankruptcy partner David Adler, who is representing the liquidation plan administrator in the Coudert Brothers bankruptcy. "So the day [a] firm shuts down, all cases that are in whatever state of progress, the partners have a duty to complete those cases and turn over all profits to their former firm."
Even if the firm avoids bankruptcy, Adler says the obligations of Howrey's partners are to their former colleagues under the "unfinished business doctrine" that has played out in civil suits filed after the dissolutions of firms like Coudert, Heller, and Brobeck, Phleger & Harrison.
Adler himself has experience handling such matters. In the Coudert bankruptcy he struck an agreement with Baker & McKenzie last year in which the firm gave up nearly $7 million in contingency fees to compensate Coudert's bankruptcy estate.
"Contingency cases are sometimes a little bit more complex, because sometimes firms enter into an arrangement on how you allocate fees going forward," Adler says. "And that's what happened with Baker & McKenzie and Coudert."
When Coudert shut down, the firm entered into a complicated asset purchase agreement with Baker & McKenzie about how the proceeds from the contingency case would be shared between both firms. (Click here and here for copies of that agreement.) Any firm looking at Abrams and his Howrey team will likely have to consider a similar arrangement.
Adler says that the likelihood that Abrams and his colleagues will pocket any potential contingency fee from the milk antitrust litigation would drop should Howrey end up in Chapter 11. "The difference in bankruptcy is that there'll be someone chasing after them," Adler adds.
Contact Brian Baxter at firstname.lastname@example.org
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