July 2008

Big Apple meet Big Easy.

Melvyn Weiss, named partner in the New York City class-action firm of Milberg Weiss LLP, was sentenced on June 2, 2008, to spend thirty months in a federal prison for his role in a well-publicized kickback scheme. Weiss had conspired with other Milberg Weiss partners to share part of the firm’s fees with certain plaintiffs in several of the thousands of class action lawsuits filed by the firm over its forty year history. These secret payments were illegally made to individuals who were not injured, but who had agreed to serve as plaintiffs in the firm’s trademark "strike suits." A month after sentencing, press reports surfaced that the firm, now known simply as Milberg LLP, had agreed to pay Weiss 15 percent of fees on matters being handled by the firm. Apparently, the deal was struck shortly after Weiss was indicted. A Wall Street Journal editorial later harshly criticized the arrangement, stating that the payments could more than make up for the $9.75 million that Weiss had agreed to forfeit in a plea deal with the government. Milberg also reached an agreement with the federal government wherein criminal charges would be dropped against the law firm in exchange for a payment of $75 million. The Wall Street Journal concluded that Milberg’s “settlement remorse was as phony as its previous strike-suit plaintiffs” and the paper criticized the Justice Department for agreeing to a settlement, noting:

But now it seems Justice may itself have been conned by the notorious firm and its felonious former lead partner…Apparently crime does pay.

http://online.wsj.com/article/SB121599290265249457.html?mod=sphere_wd .

The law office of New Orleans attorney Randy Ungar is about thirteen hundred miles from Milberg Weiss’ fashionable One Penn Plaza address in Mid-Town Manhattan. The very different worlds inhabited by Melvin Weiss and sole practitioner Randy Ungar were about to collide because two Louisiana residents, Kim Cutrera and John Meehan, believed that they had been cheated by an insurance company. Both individuals purchased so-called “vanishing premium” life insurance policies from the Equitable Life Insurance Company. 

Ungar had a professional relationship with a Houston, Texas law firm, O’Quinn and Laminack. The O’Quinn firm professed expertise in class action litigation and had placed advertisements in New Orleans newspapers seeking prospective class representatives who had purchased life insurance policies from Equitable. Ungar had taken out similar ads. Prospective clients in the New Orleans area who contacted the O’Quinn firm were routed to Ungar and mailed a copy of Ungar’s contingent fee agreement for their signature. The O’Quinn firm in turn associated themselves with Milberg Weiss. The New York firm had taken the lead in prosecuting Equitable litigation by signing up clients nationwide and was negotiating with Equitable’s lawyers, who were also based in New York.

At some point, Kim Cutrera and John Meehan signed a contract with Ungar to have him represent them in claims against Equitable at a 40% contingent fee. Unbeknownst to the two clients, Ungar and the O’Quinn firm agreed that any attorneys’ fees generated from any Equitable litigation would be divided with 65% going to the Texas firm and 35% to Ungar. It is unknown what sharing agreement Milberg Weiss had with either of their Southern brethren at the time the clients retained Ungar. All of these lawyers, however, eventually became involved in litigation involving Equitable in the Orleans Civil District Court. Cutrera and Meehan’s claims were included in this litigation. After consideration, the trial court declined to certify a class and the case was left to proceed as a mass-joinder action with the claimants asserting their individual claims against the insurance company based on a common course of action.

Failing to achieve class action status, the lawyers decided to seek a global settlement with Equitable. They determined that they, the lawyers as opposed to the clients, would decide when to settle each claim, how much to allocate and award to each client, and how much to take in attorney’s fees. The lawyers settled the Louisiana case for $15 million, $4 million of which was to be paid out to all of the claimants, including Cutrera and Meehan. In an overabundance of greed, the lawyers unilaterally decided that their fee was to be 70% of the entire settlement. Milberg Weiss instructed the O’Quinn firm to conceal information from the clients about the allocation of settlement monies and to keep quiet about the distribution of the funds paid by Equitable. Neither Cutrera nor Meehan were consulted during the negotiation process and they had absolutely no idea about what the actual total settlement amounted to. At some point, Cutrera and Meehan were told that their claims had settled for $100,000 each. One of the O’Quinn lawyers told Cutrera’s husband that Ungar’s fee was not being deducted from his wife’s recovery and falsely advised that the lawyers were “taking a loss.” Ungar later wrote to Cutrera and claimed that Equitable was paying the attorneys fees. The letter failed to advise that Ungar intended to collect a substantial fee from a multi-million dollar award.

After reaching a global settlement, Milberg Weiss filed a motion to dismiss the New Orleans civil action. The trial court dismissed the case, but the judge was unaware that Cutrera and Meehan had never authorized the settlement, signed any releases, been given any settlement details, or had been told that their case was going to be dismissed. The following month, on instructions from Milberg Weiss, the O’Quinn firm sent final documents to Cutrera and Meehan, documents that failed to include any settlement details and required that the clients certify, falsely, that they had been provided with such information. Cutrera refused to sign such a document, so Ungar called her husband and said that she would have to sign the release or she would receive no money. Cutrera still refused and eventually hired a lawyer to investigate the situation. When confronted with the same threat, Meehan balked and signed the release. Eventually, Melvin Weiss flew to New Orleans Lakefront Airport to meet with Ungar and Cutrera’s new lawyer, and the men unsuccessfully attempted to pressure Cutrera’s lawyer to have the recalcitrant Cutrera sign the release. According to Cutrera’s lawyer:

They were trying to convince me that she should take the deal…At one point, they told me that she had sustained no damages – And then, they said her damages were under $10,000. In other words, why wouldn’t she take the $100,000 they were offering her if her damages were $10,000 or less? Mr. Weiss told me that he decided to give the clients more than their damages, and he was doing it out of his fee…

Suspecting a confidence game, Cutrera’s new lawyer began to investigate the matter more closely and eventually learned the real facts behind the settlement. Cutrera and Meehan then filed a malpractice action against Ungar, O’Quinn and Melvin Weiss. More worrisome to Ungar, the Office of Disciplinary Counsel began an investigation, and eventually charged him with numerous ethics violations. He defended himself by blaming the situation on Milberg Weiss and the O’Quinn firms, arguing that he could not be held liable for the alleged misconduct of the out of state lawyers associated with the case. He suggested that he might be guilty of neglecting the clients’ interests, but that he should not be sanctioned because he was “nothing more than conduits for communications” with the other lawyers. Amazingly, he averred that he never personally reviewed his own file when issues with respect to the proposed settlement arose. A Hearing Committee of the Louisiana Attorney Disciplinary Board flatly rejected all of his arguments, holding that his defenses of ignorance and incompetence were unsupported and “simply untruthful.” His role was anything but passive, and he knowingly withheld information from the clients in an effort to hide the settlement amount and thereby charge an excessive fee. Further, he could not shift the responsibilities that he owed to his clients to the out of state lawyers.

For his intentional misdeeds, it was recommended that he be suspended for two years and, in the event that he is ever reinstated, that his law practice be monitored for no less than one year. The case is In re Randy J. Ungar, No. 06-DB-073 (La. Atty. Disc. Bd. July 18, 2008). It is not a final decision, as both the Disciplinary Board and the Louisiana Supreme Court must review it before sanction, if any, is actually imposed.