The Work

December 12, 2008 9:00 AM

The Am Law Litigation Daily: December 12, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

Patrick Fitzgerald, U.S. Attorney for the Northern District of Illinois

Several years ago Patrick Fitzgerald told The American Lawyer that before he was appointed U.S. attorney for the Northern District of Illinois, he had been to Chicago once, for a friend's wedding. His unfamiliarity was no accident: Senator Peter Fitzgerald recommended Pat Fitzgerald for the Chicago U.S. attorney's job precisely because Fitzgerald--then a Manhattan assistant U.S. attorney best known for terrorism prosecutions--had not even the remotest connection to the state's entrenched political establishment. Pat Fitzgerald didn't know Illinois, and Illinois didn't know Pat Fitzgerald.

That is no longer the case. With the dramatic arrest Tuesday morning of Illinois governor Rod Blagojevich, Fitzgerald has proved, once again, his determination--even eagerness--to confront power. He's done it in Illinois, where his office has convicted not only high-ranking officials in the administration of Mayor Richard Daley, but also the former governor, George Ryan. And he's done it in Washington, where, as a Justice special prosecutor, he stopped at nothing to convict I. Lewis "Scooter" Libby, the former chief of staff to Vice President Dick Cheney, in the Valerie Plame CIA leak case.

The Chicago Tribune has called Fitzgerald "Eliot Ness with a Harvard degree." The son of a Manhattan doorman, he has long shown a near-religious dedication to the job of prosecuting federal defendants, be they terrorists who blew up American embassies in Africa, Blagojevich fundraiser Tony Rezko, or media baron Conrad Black.

The Blagovich case, for all of the profanity-laced details of corrupt schemes outlined in the government's 78-page criminal complaint (available here via The Washington Post), will present challenges for Fitzgerald. The prosecutor said at the press conference announcing Blagojevich's arrest that "Governor Blagojevich has been arrested in the middle of what we can only describe as a political corruption crime spree. We acted to stop that crime spree." But as Scott Turow explained in a compelling op-ed in The New York Times, Fitzgerald acted hastily, arresting the governor before he had obtained an indictment from the grand jury investigating Blagojevich. As a result, Fitzgerald's office faces the prospect of an imminent preliminary hearing that will give Blagovich's defense lawyers an early opportunity to probe for weaknesses in the prosecutor's case. (Will the governor's lawyers take full advantage? Brian Baxter at The Am Law Daily has a great piece on why Winston & Strawn dropped out of Blagovich's defense.)

We had an abundance of candidates for Litigator of the Week this week. For his success at trial, we considered David Spears of Spears & Imes, who won a $141 million jury verdict against Bank of America in an asset-backed securities trial. For sheer notoriety, we could have picked Marc Dreier, whose alleged fraud is turning out to be breathtaking in its audacity and heartbreaking in its effect on the 250-lawyer firm he headed.

But for his long-standing insistence that those who wield power are not above the law, Patrick Fitzgerald is this week's Litigator of the Week.

Show Me the Money: Judge in $97 Million Lumber Price-Fixing Case Orders Plaintiffs Firms to Submit Fee Allocation Plan

If they want their share of $37 million in attorneys' fees in the nationwide lumber price-fixing litigation, Michael Hausfeld and his erstwhile partners at Cohen Milstein Sellers & Toll are going to have to put aside their differences for long enough to help devise a plan to allocate the fees.

In an unusual December 9 order, Philadelphia federal district court judge Paul Diamond ruled that Hausfeld, his old partners, and lead plaintiffs counsel Jeffrey J. Corrigan of Spector Roseman Kodroff & Willis must submit for court approval a proposal for allocating the $37 million. According to Corrigan, more than 30 plaintiffs firms have devoted more than 100,000 hours to the litigation, which consolidated several price-fixing class actions against lumber companies. His firm alone has put in more than 30,000 hours, and he has won high praise from Judge Diamond, who wrote that Corrigan "performed brilliantly in this exceptionally difficult litigation."

The judge's ruling did not offer similar praise for Hausfeld or the Cohen Milstein lawyers, whom Diamond instructed in a November 24 order to serve as co-lead counsel under Corrigan. Instead, wrote Judge Diamond, "prudence suggests that judicial review of the [fee allocation] process is warranted, especially in light of the dispute" between Hausfeld and his former firm.

Corrigan told the Litigation Daily that he's confident he and the now feuding lawyers will be able to come up with a proposal to present to Judge Diamond by the January 9 deadline. "It will work out because it has to work out," he said. "The judge has made that clear." He laughed, however, when we asked if he planned to gather Hausfeld and the Cohen Milstein lawyers in a room or take the less volatile e-mail route. "I'm not sure," Corrigan said. "It will be done collectively."

Feds Subpoena Fannie Mae Records in Texas Class Action

The Manhattan-based criminal investigation of Fannie Mae has made its way to a courthouse in Texarkana, Texas. In 2004, Houston trial lawyer Mark Lanier filed a class action in Texarkana against the mortgage giant, claiming that Fannie illegally took money from mortgage holders' escrow accounts. On Wednesday, Lanier's firm informed the judge overseeing the class action that the FBI had served the firm with a grand jury subpoena.

The subpoena, signed by acting Manhattan U.S. attorney Lev Dassin and assistant U.S. attorney Lisa Baroni, requests "all documents referring to or involving mortgages insured or guaranteed by the U.S. Department of Housing and Urban Development, including, but not limited to, mortgages purchased by, serviced, or underwritten by Fannie Mae and GMAC."

In an interview with Bloomberg on Wednesday, Lanier said the subpoena was necessary since most of the records in the class action are under seal. "I think much of the material in our case is relevant to the criminal case," Lanier said. "This subpoena is the sweet spot in our lawsuit."

Fannie, which says it is cooperating with the criminal investigation, is represented by John Beisner of O'Melveny & Myers (among others) in the class action, and by Leslie Caldwell of Morgan, Lewis & Bockius in the criminal case.

SEC Settles Conflicts Case with Eight Fidelity Employees

There was once a time--hard as it is to remember in these recessionary days--when certain brokers would go to extraordinary lengths to entertain the Fidelity Investments employees who controlled the money market giant's trading business. The Wall Street Journal, in a page-one story in 2005, told tales of junkets to the Bellagio in Las Vegas; expensive concerts and sports events; luxury golf outings; and a bachelor party featuring a dwarf. (That last one leaves the Litigation Daily scratching our head.) The SEC took note, initiating enforcement actions against Fidelity and 13 employees. Yesterday the SEC announced that eight former Fidelity employees had settled charges of improperly accepting gifts and entertainment in exchange for Fidelity's business. None of the defendants admitted to any wrongdoing.

The traders who settled were: Timothy Burnieika, represented by John Sten of Greenberg Traurig; Scott DeSano and Christopher Horan, represented by Andrea Robinson of Wilmer, Cutler, Pickering, Hale and Dorr; David Donovan, Jr., represented by Raipher Pellegrino of Denner Pellegrino; Edward Driscoll, represented by Michael Collora of Dwyer & Collora; Jeffrey Harris, represented by Daniel Cloherty of Dwyer & Collora; Steven Pascucci, represented by Joseph Savage of Goodwin Procter; and Kirk Smith, represented by James Carroll of Skadden, Arps, Slate, Meagher & Flom.

The former employees will pay, in total, more than $1 million in penalties, disgorgements, and interest, according to the SEC. The biggest contribution will come from DeSano, who ran the Fidelity trading desk. He will pay $267,000.

Ground Zero Trials Set to Begin in 2010

Seven years after 9/11, suits against New York City by Ground Zero rescue workers finally have a trial date--but the date is still more than a year away, according to The New York Times. Lawyers for the workers and the city have agreed to begin trials in May 2010.

Nearly 10,000 construction workers, police officers, firefighters, and others have sued New York City and its contractors, claiming they developed illnesses as a result of their exposure to toxic fumes and gasses. In March the U.S. Court of Appeals for the Second Circuit denied a request for immunity by the city and the Port Authority of New York and New Jersey, which owns the site.

Leading the defense for the city is Patton Boggs partner James Tyrrell, Jr., who left Latham & Watkins two years ago to launch Patton Boggs's New Jersey and New York offices. Tyrrell is a mass torts veteran, with a docket that has included litigation over silicone gel breast implants, Agent Orange, PCBs, and asbestos.

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