Big Business Turns to Plaintiffs Lawyers for Help: Trial skills, lower costs are winning corporations over

Tresa Baldas
The National Law Journal
07-13-2005

Though once considered a thorn in the side of corporate America, plaintiffs attorneys say big businesses are hiring them with increasing frequency to help fight their legal battles.

• For example, in Florida, personal injury lawyer Jack Scarola was the lead counsel in billionaire Ronald O. Perelman's recent $1.4 billion win in a securities fraud suit against investment bank Morgan Stanley.

• In New York, personal injury attorney Bob Clifford of Chicago's Clifford Law Offices is representing General Electric Co.'s insurance arm in the World Trade Center litigation where insurers are suing American Airlines and airport security to recoup costs paid out for damages from Sept. 11.

• And in Illinois, asbestos litigator Jeff Cooper's Chicago firm CooperSimmons, which has seen an "explosion of interest from corporations," recently formed a business-to-business, contingency fee-based litigation practice in partnership with New York's Hanly Conroy Bierstein & Sheridan.

"Corporate America is more willing now to dance with the devil -- that being your plaintiffs lawyers -- in bet-the-company cases to represent them because there is no longer the stigma that there used to be," said Scott Marrs, an intellectual property lawyer with Houston's Beirne Maynard & Parsons who helped a company win a $130 million verdict in a patent case involving a vegetable slicer two years ago.

"You would never, ever find a corporation hiring a plaintiffs lawyer 20 years ago to represent it in litigation," Marrs said. "It's a new phenomenon."

In the past, attorneys note, most business-to-business lawsuits were handled by traditional, full-service law firms that charge by the hour, as well as large defense-oriented firms with strong ties to the business community. Hiring a plaintiffs lawyer, such as a wrongful death or personal injury attorney, was considered taboo.

But that stigma has subsided, they assert, mainly because of two factors: rising legal fees, which have prompted companies to look for less expensive legal options; and tort reform, which has forced plaintiffs attorneys to get more creative with their services.

"I think that in part, this is a response to what we all see as a mounting assault on the tort system and a means by which to begin to build into our practices a safeguard against some draconian tort reform measures," said Scarola, the lead attorney in the Perelman case. "It's not business seeking out the skills of personal injury lawyers, but us going after them as a safeguard."

Scarola, a litigator with West Palm Beach, Fla.'s Searcy Denney Scarola Barnhart & Shipley, said Jenner & Block recruited him in 2001 to assist in Arthur Andersen litigation, and then in the Perelman case, both in Palm Beach, Fla. He said his name came up as someone to consider as local counsel.

Jerold Solovy, chairman of Chicago-based Jenner & Block, recalls bringing Scarola on board. He said that calling on a personal injury litigator to handle a complex business matter didn't concern him.

Instead, he saw Scarola's trial experience as an asset. "What you want is somebody who can try cases. Mr. Scarola knows how to try cases. That's why we picked him," Solovy said.

READY FOR THE JURY

Scarola said that in recent years he has seen a growing reliance upon lawyers with personal injury skills to present business matters before juries. Of course, he speaks from personal experience.

In the Perelman case, Scarola said he had to simplify complex business concepts before the jury and show how Morgan Stanley covered up the failing finances of Sunbeam Corp. so Perelman would sell his Coleman camping-equipment company to Sunbeam in exchange for cash and Sunbeam shares. Accustomed to explaining complicated medical procedures in his personal injury cases, Scarola said he was prepared for the challenge.

Scarola's tactics worked. The jury in May hit Morgan Stanley with $850 million in punitive damages and $604.3 million in compensatory damages. Coleman Parent Holdings v. Morgan Stanley, No. 2003 CA 005045 AI (Palm Beach Co., Fla., Cir. Ct.).

Attorneys for Morgan Stanley include Mark Hansen of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington and Joseph Ianno of Carlton Fields' West Palm Beach office. Neither was available for comment.

While many attorneys agree that corporations are turning to the plaintiffs bar, they don't agree on why.

Michael Slack, managing partner at Slack & Davis, a personal injury and wrongful death firm in Austin, Texas, said it is not that tort reform is driving plaintiffs lawyers to big companies, as some suggest, but that big businesses are chasing plaintiffs lawyers.

"I think somebody held a business conference somewhere and said, 'You know what, we're not being very smart about shopping for legal services if we're not hiring contingent fee-based plaintiffs lawyers," Slack said. "We were chuckling about it in-house the other day ... where it seems the inner circles at businesses are now saying, 'The same people that we've been bashing in the tort arena are our new best friends.'"

Slack said that in recent months, his personal injury firm, which deals mainly with aviation accidents and pharmaceutical cases, has been inundated with phone calls from businesses seeking contingent fee-based legal services.

"We've had more inquiries in the last six months than we have had since this firm was established," said Slack, who is planning to hire a top commercial litigator to handle this new demand for litigation services. "All of a sudden, the negative connotations that have been directed to contingent-fee lawyers over the last decade seem to have been overcome."

Then again, some plaintiffs firms find they are not up to the challenge.

Patent attorney Fred Tecce, who specializes in contingency fee-based commercial litigation, said he has seen plaintiffs attorneys cutting in on his turf in recent years.

"From what I've seen and know from talking to some of my clients, they're seeing an uptake in med-mal guys who are worried about tort reform," Tecce said. "A lot of these med-mal guys are trying to fashion themselves and repackage themselves as business-to-business litigants. But I don't mind the competition at all."

Tecce of McShea & Tecce in Philadelphia noted that in the last few years, he's picked up four referrals from plaintiffs law firms that took a shot at commercial contingency fee cases, but found out they couldn't handle them.

"If these guys take these cases, they take one of them. They get burned. And I end up getting referral work," Tecce said.

CONTINGENCY FEE APPEAL

Marc Moller of the aviation litigation and personal injury firm Kreindler & Kreindler in New York believes mounting legal fees are leading companies to plaintiffs firms that operate on a contingency fee basis.

Moller's firm is currently handling five business-to-business cases, and has settled another five in recent years.

"[Contingency fees] are very attractive for companies that are trying to control their litigation costs," Moller said. "A contingent fee lawyer only gets money if he wins."

He added that this fee makes lawyers more picky in the cases they decide to take. "There's a higher premium on winning if you're only going to get paid if you win," he noted.

Jim Beasley, managing partner of Philadelphia's Beasley Firm, which handles many products liability claims, noted that his firm represents many small businesses that have problems with Fortune 500 companies. He said the contingency fee model helps small companies that want to sue other companies, but can't afford to.

"It gives them the same key to the courthouse that a poor person would have," said Beasley, adding that contingent fee billing is also more efficient. "If you run on a contingent fee model, you know that attorneys representing you are going to be efficient. They're not just here to bill, they're here to work."

IT'S THE BIG VERDICTS

But defense attorney Levi McCathern of McCathern Mooty in Dallas believes corporations are selling themselves out to the plaintiffs bar. He argues that plaintiffs attorneys are winning businesses over because of the lucrative verdicts they get.

Companies are impressed with these big verdicts, he said, so they're willing to hire plaintiffs attorneys to take on their big cases.

"I just think they'd be better served by using the defense bar," McCathern said. "Commercial litigation has long been the work of the defense bar. But not anymore. ... I've seen it go south."

McCathern also questions plaintiffs attorneys' motives in helping corporate America.

"Sometimes most of the good plaintiffs attorneys are what I call true believers -- they really believe that corporations are the evil empire that control the country," McCathern said. "It's interesting to see them get on their side and work these kinds of cases. I certainly think that tort reform has placed them in that position."

There's no denying that, contend several plaintiffs attorneys.

"There's no questions that this business model can help firms become tort-reform proof," said Cooper, whose Chicago firm started the business-to-business litigation practice two months ago.

Since then, he said the firm has received more than 200 phone calls from companies of all sizes looking for legal representation. He said the stigma of hiring plaintiffs lawyers appears to be over.

"One CEO we spoke to in his office said, 'Having you guys in my office is like Nixon going to China,'" Cooper said. "We're seeing a loss of that stigma. When we first entered, we thought we'd have to sell a lot harder, and that hasn't been the case."

He said further, "There's a niche in this market that we're able to fill, and I expect other plaintiffs firms to do this."

Despite plaintiffs lawyers' claims that corporations are warming up to them, officials at many companies declined to comment for this story.

Officials at Industrial Risk Insurers, General Electric's insurance arm in the World Trade Center litigation against American Airlines, declined comment on why they picked Clifford as counsel.

Labels: China, Morgan Stanley, New York AG