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Appeals Court Upholds Multiplier in Insurance Coverage Fee Award

August 24, 2018

A recent Law 360 story by Nathan Hale, “Fla. Insurer Loses Appeal of Multiplier of Atty Fees Award,” reports that a Florida appeals court rejected Citizens Property Insurance’s appeal of an order applying a multiplier to an attorneys' fees award for a homeowner who obtained a favorable settlement in a coverage dispute, finding the insurer's argument relied on a decision recently rejected by the Florida Supreme Court.  The Third District Court of Appeal concluded that the trial judge had not abused his discretion in applying a 2.0 contingency fee multiplier, which resulted in a fee award of $120,250 for homeowner Agosta Laguerre.

Citizens Property Insurance Co., which is Florida's insurer of last resort, did not dispute that state law entitled Laguerre to collect attorneys' fees after they settled the underlying suit, in which she contested an $8,400.77 coverage payment she argued significantly undervalued her December 2005 claim for wind damage caused by Hurricane Wilma.  Citizens argued against the multiplier based on the Third District's 2015 decision in State Farm Ins. Co. v. Alvarez, which held that courts can apply contingency fee multipliers “only in 'rare' and 'exceptional' circumstances,” according to the opinion.

The appeals panel pointed out, however, that it had held the Laguerre case in abeyance after hearing oral arguments to await the Florida Supreme Court's ruling in Joyce v. Federated National Insurance Co., an appeal of a decision by the Fifth District that had relied on the Alvarez decision.  In its ruling last year, the Florida Supreme Court rejected the idea that contingency fee multipliers are appropriate only in rare and exceptional circumstances, disapproving of that element of the Alvarez decision, the opinion said.

The Third District quoted the high court's statement that “the contingency fee multiplier provides trial courts with the flexibility to ensure that lawyers, who take a difficult case on a contingency fee basis, are adequately compensated.  Citizens had argued that Laguerre's request did not meet the “rare” and “exceptional” requirement because there was no evidence presented at the fee hearing that Laguerre had difficulty finding an attorney who would take her case, that the results she obtained were not enough to warrant a multiplier, and that a multiplier cannot be based on the complexity of the case, the Third District recounted.

The appeals panel found that while the testimony provided by Laguerre's expert fee witness was thin, Citizens' decision not to cross-examine him about the application of a multiplier and its failure to present evidence that there were competent attorneys who would have taken the case without a multiplier meant the trial judge had not abused his discretion in reaching the conclusion that the relevant market required a fee multiplier.  “Although we find that the testimony supporting the trial court’s conclusion was minimal, a trial court generally may rely on 'expert testimony that a party would have difficulty securing counsel without the opportunity for a multiplier' in support of the imposition of the multiplier,” the panel said.

The panel also rejected Citizens' argument that the “relatively small recovery” did not justify a multiplier, pointing to the difference between a $2,000 offer the insurer made and the appraisal umpire's ultimate award of $27,367.63 minus the money already paid to Laguerre.  Finally, the Third District said the Florida Supreme Court made clear in the Joyce decision that it was not wrong for the trial court to consider the complexity and difficulty of a case in weighing application of a multiplier.

“Turning to whether the complexity of the instant case warrants a contingency fee multiplier, we again note that a contingency fee multiplier analysis 'is properly analyzed through the same lens as the attorney when making the decision to take the case,'” the panel said.  “For this reason, the fact, in hindsight, that this case ultimately consisted of two summary judgment proceedings and minimal discovery and did not proceed to trial is not determinative on this issue.”

The case is Citizens Property Insurance Co. v. Laguerre, case number 3D15-2411, in the Third District Court of Appeal of Florida.

Judge Slashes Attorney Fees in Anthem Data Breach Class Action

August 17, 2018

A recent story in The Recorder by Amanda Bronstad, “Federal Judge Approves Anthem Data Breach Case, Slashes Attorney Fees,” reports that after chastising plaintiffs lawyers in the Anthem data breach settlement for their excessive billing, a federal judge has awarded them $31.05 million and approved the $115 million deal.  In a order, U.S. District Judge Lucy Koh of the Northern District of California approved the fees after concluding that the results were “exceptional.”

Koh had hired a special master to review the billing records submitted by plaintiffs lawyers, who asked for $38 million for their work on the case.  The special master had recommended cutting more than $9 million based largely on the billable hours, but Koh based her decision on a percentage of the fund—about 27 percent.  Although still a reduction from the original request, the award is higher than the special master’s recommendation and the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark.

“Here, based on the court’s familiarity with the case, the choice of a percentage does not strike the court as arbitrary or unconnected from the performed work in a way that would create a windfall for class counsel,” Koh wrote.  Also, Koh approved the settlement, the largest ever in a data breach case.

As to the fee order, he noted that Koh didn’t adopt all of the special master’s findings.  “We’re pleased that the judge saw to go with a benchmark,” he said.  “Obviously, we’d like more.  We always want more.  We’ve asked for more.  But I didn’t read the tea leaves one way or the other.  We didn’t know what to expect.  I think she spent her time, gave a well-reasoned opinion for the final order and judgment and, on the fees, as well.”

Koh brought in a special master in February after telling the four lead plaintiffs lawyers she was “deeply disappointed” in their decision to bring in 49 additional law firms on the case.  The special master, retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS, proposed a 10 percent cut to the billable hours and suggested that the contract attorney rates, which averaged $360 per hour, be set at $156 instead.  Plaintiffs lawyers continued to press for their initial request, while Frank’s objector thought the award should have been closer to 15 percent of the fund.

In this week’s order, Koh continued to have reservations about the rates billed for contract attorneys—remarking “how striking the markup is”—and set an hourly rate at $240.  She also agreed that the hours were “almost necessarily excessive,” particularly given that there were 53 law firms on the case.  She found that was especially true with hours billed for depositions and settlement.  She cut that amount by 13 percent.

She approved a fee award that is more than the Ninth Circuit’s benchmark, however, citing the “novel legal issues and technical subject matter” and the risks inherent in a data breach case.  She noted that while the fee percentages were higher in data breach settlements with Home Depot and Target, those cases also included claims by financial institutions that skewed the compensation to consumers.  She also approved more than $2.1 million in costs and expenses and nearly $600,000 in service awards to 105 named plaintiffs.

In her approval of the settlement, Koh found that amendments in April resolved her concerns about potential money left over from a $15 million fund in the settlement earmarked for out-of-pocket costs.  The original settlement called for $3.3 million going to cy pres organizations, but the amendments said two organizations, the Center for Education and Research in Information Assurance and Security at Purdue University and the Electronic Frontier Foundation, would receive no more than about $417,000.

Watts Guerra Seeks $150M in Fees in $1.5B Corn Settlement

August 7, 2018

A recent Texas Lawyer story by Amanda Bronstad, “Mikal Watts Wants One-Third of Expected $500M Fee Corn Settlement,” reports that Texas plaintiffs attorney Mikal Watts is asking for at least $150 million in legal fees from the $1.5 billion settlement with Syngenta AG, citing his firm’s “unique position in this litigation.”  The Watts Guerra attorney’s fee request, filed last month but updated on Aug. 3, sets up a potential clash over what could be an estimated $500 million in fees in the class action settlement, which resolves claims by more than 600,000 farmers who alleged Syngenta sold genetically modified corn seed that China refused to import, causing farmers to lose billions of dollars.  In a separate request for fees, lead counsel in the federal multidistrict litigation in Kansas are seeking that amount—about 33 percent of the total settlement fund.

“This fee request is based on Watts Guerra’s enormous investment in this litigation,” Watts wrote in his motion.  “It is on the high end of the range, perhaps, but not unprecedented.”  Watts claims to represent 57,000 farmers who could be entitled to between $345 million and $750 million under the settlement.  The requests come as at least four other lawyers have challenged the fees in the deal, particularly those going to Watts.  Oppositions to the fee requests are due Aug. 17.

The Syngenta litigation was coordinated in both federal multidistrict litigation in Kansas and in two proceedings in Minnesota and Illinois state courts.  In their fee request, the lead lawyers in Syngenta want 50 percent of the $500 million, plus about $6.7 million in costs and expenses, which would go to a total 44 law firms.  They want another 12.5 percent to go to the lead lawyers in the Minnesota state court, and 17.5 percent to attorneys in Illinois state court.  The remaining $100 million would be reserved for other lawyers.

The dispute mirrors fee fights that have erupted in mass torts between plaintiffs attorneys appointed to represent members of a class action and those who have brought individual suits on behalf of their clients.  The vast majority of the farmers Watts represents have retainer agreements with him and filed individual suits in Minnesota state court.  Last year, as part of the federal multidistrict litigation, a jury awarded $217.7 million to a class of Kansas farmers in the first bellwether trial.  It was one of eight subclasses of farmers planned for trials.  A second, on behalf of Minnesota farmers, was ongoing when both sides struck a deal.

Watts Guerra partner Francisco Guerra was co-lead plaintiffs counsel in Minnesota state court, but no one from the firm had a lead role in the federal multidistrict litigation.  The firm did work on the Minnesota trial, however, and Watts was one of four lawyers appointed to the plaintiffs’ negotiating committee.  “That trial forced Syngenta finally to accept that it faced not just hundreds of millions of dollars in compensatory damages but a likely multibillion-dollar judgment based on intentional misconduct—for the farmers in a single state,” Watts wrote.  “Then, in an instant, it was over.”

The initial settlement called for two agreements—one on behalf of the class, and one on behalf of the individual plaintiffs, according to court filings.  But the negotiated deal encompassed four subclasses—two on behalf of farmers, one for grain handling facilities and another for ethanol producers.  Final approval of the settlement is set for Nov. 15.

Earlier this year, two attorneys in Beaumont, Texas, claiming to represent 9,000 farmers filed a motion to delay approval of the settlement, insisting the lead lawyers who negotiated the deal kept their clients in the dark on “how the settlement would be divided and distributed between the class actions and the individual producer plaintiffs.”  In particular, they claimed Watts and another lawyer on the plaintiffs settlement negotiation committee, Clayton Clark of Clark, Love & Hutson in Houston, dropped a more favorable settlement for farmers with individual lawsuits in exchange for higher fees.

Another lawyer, D. Allen Hossley of Hossley & Embry in Tyler, Texas, who claimed to represent 650 farmers, joined the motion, filed by Mitchell Toups, of Weller, Green, Toups & Terrell and Richard Coffman of The Coffman Law Firm (Toups and Coffman are now seeking $34 million in fees, while Hossley wants nearly $2.7 million).

On April 24, Minneapolis attorney Doug Nill sued Watts.  He claimed Watts, firm partner Guerra and Jon Givens, of counsel, who lives in Alaska, and 13 other small law firms or solo practitioners conspired to convince 60,000 farmers not to participate in the class action, and now could end up with $200 million in fees.  The suit asked to void the retainer agreements, which included a contingency fee rate of 40 percent.  In his fee request, Watts said he would drop his contingency fee to 33.3 percent.  When accounting for what he had agreed to pay lead lawyers in the federal multidistrict litigation—referred to as a common benefit assessment—his contingency fee would drop to less than 24.2 percent, he wrote.

But, anticipating that “some of the other common benefit counsel” may demand one-third of the settlement for themselves, he insisted that his fees come out of the $500 million and that he get reimbursed for the $12.8 million in common benefit expenses he paid in the Minnesota state court litigation.  He cited a 2015 joint prosecution agreement that was designed to resolve future fee disputes among lawyers in both the Minnesota state court cases and federal multidistrict litigation.

Watts backed up his fee request, which also includes 332 law firms that worked on his cases, with expert reports from six prominent legal scholars, including Brian Fitzpatrick of Vanderbilt Law School and Geoffrey Miller of New York University School of Law.

Expert Report on Attorney Fees Called “Wholly Unmoored”

July 2, 2018

A recent American Law story by Scott Flaherty, “Report Railing Against Lawyers’ Conduct in State Street Case ‘Unmoored,’ Says Labaton,” reports that a newly unsealed special master’s report accuses the law firm Labaton Sucharow and its co-counsel of deliberately misleading the court about how it distributed the legal fees from a $300 million settlement with State Street Corp., prompting Labaton Sucharow to call the master’s analysis “wholly unmoored” from legal precedent and professional conduct rules.

The report recommends Labaton Sucharow return as much as $8.1 million of its share of a $75 million fee award to the class, and says Garrett Bradley, lead partner at the Thornton Law Firm in Boston, should pay up to $1 million in fines.  Labaton Sucharow is one of three plaintiffs firms, along with Thornton and Lieff Cabraser Heimann & Bernstein, that served as lead counsel in a securities case against State Street that settled in 2016 for $300 million.  U.S. District Judge Mark Wolf in Boston initially approved a plaintiffs legal fee award of $75 million in that case, but later appointed a special master—retired federal Judge Gerald Rosen—to review the fees after an article in The Boston Globe raised questions about potential double counting of hours.

The Globe had previously published an exposé detailing the political donation habits of lawyers at Thornton, and followed that with an examination of the fee request in the State Street case.  In light of the Globe’s reporting, the plaintiffs firms admitted in 2017 to double-counting some hours put in by “staff attorneys” who were paid on an hourly basis and worked temporarily for the three firms, primarily doing document review.  Although they described those mistakes as inadvertent and argued that they shouldn’t affect the $75 million fee award, the plaintiffs firms initially agreed to pay $2 million to fund the special master’s investigation.

However, the probe ended up stretching out for about a year and costing nearly $4 million, according to court records.  At the end of it, the special master issued a 377-page report that was kept confidential while the parties to the case proposed that sections be redacted.  The long-awaited public version of the report, penned by Rosen and released on Thursday, walks through a litany of conduct that the special master viewed as “questionable.”

Rosen detailed the double-counting issues that the firms had already acknowledged.  But he also trained his eye on money that Labaton Sucharow paid to a Texas-based lawyer named Damon Chargois, who helped the firm secure an Arkansas state teachers’ pension fund as an institutional investor client.  The Arkansas pension fund ultimately served as lead plaintiff in the State Street securities case.

According to Rosen’s report, Labaton Sucharow paid Chargois—who had connections to the Arkansas pension fund, but didn’t actually work on the State Street case—roughly $4.1 million under a referral agreement, but failed to disclose the payment to the court, other members of the settlement class and even its co-counsel in the case.  “By not disclosing the intended payment of $4.1 million to Chargois, Sucharow and Labaton kept the court in the dark and denied it the very information it needed in order to determine how much of the settlement funds should go to counsel, and which counsel, and how much,” Rosen wrote.

Rosen also criticized Labaton for its responses to the special master investigation, itself.  Instead of expressing remorse for any potential misconduct, Rosen wrote, the firm responded with a “phalanx of experts, who together with Labaton, have erected a wall of legalistic and formalistic excuses and blame-shifting.  “Although Labaton certainly has a right to present its best case,” the special master continued, “some acknowledgment of the potential harm this conduct has caused to class members, co-counsel and the court would have been not only appropriate, but expected.”

Ultimately, after describing the mistakes made by the firms in how they counted hours ahead of their fee request and citing the undisclosed Chargois referral fee, Rosen recommended that the three firms pay back a little more than $4 million to the class to correct for the double-counting issues.  He also suggested imposing a sanction of $400,000 to $1 million against the Thornton firm, a reduction of the billing rates for contract lawyers that worked on the case—an amount totaling about $2.42 million that would also be returned to the class—and he recommended that Labaton Sucharow be required to pay $4.1 million in connection with the Chargois referral deal.  Some $3.4 million of that would go to lawyers involved in a parallel Employee Retirement Income Security Act case, who were dragged into the special master investigation but weren’t faulted for any conduct, while the remaining $700,000 would go back to the State Street investor class members.  But Rosen also concluded that, despite his concerns, no Labaton Sucharow lawyers should be recommended for professional discipline.

Labaton Sucharow quickly issued a stern response to the special master’s findings.  The firm, represented by Joan Lukey of Choate Hall & Stewart, filed a formal set of objections in court and released a lengthy statement Friday describing the master’s report as “wholly unmoored from the relevant law and the actual facts.  “The master could have concluded his endless and costly investigation long ago once he verified that the double-counting was, indeed, inadvertent,” the firm said.  “Instead, he opted to go down the rabbit hole chasing the scent of an ‘improper’ referral payment because he believed it should have been disclosed to the court.  In doing so, he elected not to act as a neutral fact-finder (as was his stated charge) but rather as an adversary seeking to impugn Labaton and customer class counsel for making a referral payment that was entirely legal, ethical and appropriate under Massachusetts law.  Judge Rosen may be offended by a ‘bare referral’ fee—one where the referring attorney does not have to do any work in order to receive the referral fee, but it is the law in Massachusetts.”

Overbilling Case Raises Questions about Public Corruption

June 19, 2018

A recent NLJ story by Amanda Bronstad, “How a Fee Inquiry Led to Hints of Public Corruption That Have Labaton Fight,” reports that, what began as a judge’s inquiry into a $75 million attorney fee has morphed into hints of public corruption, with one of the top securities plaintiffs firms in the nation on the defensive.  A year ago, U.S. District Judge Mark Wolf in Boston began looking into potential overbilling in a securities class action settlement with State Street Corp.  To spearhead the probe, Wolf brought in a special master who filed his 377-page report on May 14 under seal.

But the report’s findings prompted Wolf last month to order that George Hopkins, the executive director of the lead plaintiff, the Arkansas Teachers Retirement Fund, show up in person for a May 30 hearing.  Wolf said he could end up returning a “significant amount of money” to class members, according to a transcript of that hearing.  But it’s not overbilling that’s caught his attention.  The judge appears focused on the report’s finding of an undisclosed payment that went to a lawyer for a referral.

According to the hearing transcript, Wolf wanted to know more about New York-based Labaton Sucharow’s relationship with the Arkansas pension fund.  Then, mentioning “referral fees,” he asked about a number of individuals, including a former state legislator in Arkansas and two Texas plaintiffs lawyers.  In the sealed report, one of those lawyers, referred to in the transcript as “Mr. Chargois,” said Labaton asked him to introduce the firm to institutional investors in Arkansas, the judge said. He now gets 20 percent of Labaton’s fees in the class action even though he “didn’t do any work for it, and there was an assiduous effort to keep that from counsel in the case and others,” the judge said in the transcript.  “I think it is foreseeable that when the report becomes public, there are going to be questions about the origin of this relationship and whether all those millions of dollars stopped with Mr. Chargois,” the judge said in a transcript.

Labaton has fought back against the allegations, insisting the payments were legal.  On June 15, Wolf unsealed several documents including a June 8 motion in which the firm asked the judge to recuse himself, citing a “serious conflict” and a “legitimate concern as to whether Labaton will receive a truly impartial review.”  A footnote in the motion indicated that the special master has proposed a $4.1 million cut to its fees, the “same amount as the fee paid to the referring firm.”

Also unsealed was a sidebar discussion during the May 30 hearing at which Labaton’s counsel raised concerns about the judge’s remarks.  “You’re suggesting public corruption,” the firm’s attorney, Joan Lukey, of Boston’s Choate Hall & Stewart, told the judge.  “Honestly, your honor, I am appalled that that was even said.”

Special Master’s Focus

Wolf’s initial concerns focused on potential overbilling on the part of the three lead plaintiffs firms, which also include San Francisco’s Lieff Cabraser Heimann & Bernstein.  Those firms agreed to pay the costs of the special master, Gerald Rosen, a retired federal chief judge from the Eastern District of Michigan.  In ordering Hopkins to testify, Wolf raised concerns about whether, given the findings of the report, he should replace class counsel, and the lead plaintiff, in light of a potential conflict of interest.  Hopkins, in a June 6 affidavit, said he had retained outside counsel to handle questions relating to the special master’s report but insisted that the Arkansas pension fund could continue to adequately represent the class.

Hopkins, in sworn testimony, told the judge: “I have never asked a law firm to hire some attorney.  I have never asked a law firm to make a political contribution.”  The questioning appeared to catch Labaton off guard.  “Have you formed an opinion that there is something in this record that suggests that some form of public corruption occurred?”  Lukey asked the judge during the sidebar discussion.

“No,” the judge said.  “But I’ve formed the opinion that those are questions that are raised.”  He added: “I can foresee the reasonable likelihood that the conduct of Arkansas Teacher is going to become part of the controversy, and it causes me to have questions about whether it’s an appropriate lead plaintiff.  Who is representing—remember what this is about.  Who is representing the class?”  Labaton has its own questions.  The recusal motion indicated that class counsel would be seeking an accounting of the $3.8 million they had agreed to pay to fund the special master’s report.

“That millions of dollars paid by customer class counsel have been expended on the master’s investigation without a suggestion of, or a shred of evidence to support, public corruption is telling,” the motion continues.  Labaton and its lawyers have frequently made campaign contributions to both federal and state politicians, but their donations to Arkansas state election campaigns have been minimal, according to a search of records since 2002 at FollowTheMoney.org, the website of the National Institute on Money in Politics.

The questions raised by the judge in this case, though, may shed light on the politics behind how plaintiffs firms often get public pension funds for clients in large securities class actions.  “This is the murky underworld of how securities fraud class action firms acquire their clients,” said Adam Pritchard of the University of Michigan Law School, who has written about how plaintiffs attorneys have made political contributions in hopes of getting institutional investor clients.  “This may be an alternative way of getting yourself a lead plaintiff. People have connections—good ol’ boy networks—that help grease the wheels. And, if they do that, then they expect to get paid.”

Making the Introduction

Hopkins became the executive director of the Arkansas pension fund in 2009.  At the May 30 hearing, Hopkins told Wolf that even though Labaton had started working with them a year earlier, he hadn’t considered moving forward on potential lawsuits.  “Then our political leaders in Arkansas convinced me that I should,” he said.  “I’m sorry, what did you say?” Wolf responded. “The political leaders convinced you that you should be interested in these class actions?”  The judge pressed Hopkins to give names. Hopkins mentioned “several legislators,” “people at the governor’s staff” and “the Department of Finance Administration of Arkansas.”

But Wolf’s focus was on a retired state legislator named Steve Faris.  In particular, he wanted to know how much Hopkins had talked to Faris about the law firms handling the pension fund’s class actions.  Faris, Hopkins explained, was a member of the Arkansas General Assembly, which has indirect supervision of the pension fund because it adopts the laws that govern the organization.  He said Faris was co-chair of the public retirement committee in the state’s House of Representatives at the same time Hopkins co-chaired the public retirement committee in the state Senate.  They grew up in the same county and went to the same college.  Hopkins acknowledged he’d talked to Faris and others about the case.

“You know, sometimes we’d get an interesting case, and I would tell him, here’s this case and Labaton represents us,” Hopkins told the judge, noting that the fund works with other firms such as Bernstein Litowitz Berger & Grossmann and Kaplan Fox & Kilsheimer.  But he denied that Faris ever encouraged him to use Labaton.  “Did he ever tell you that he had a role in introducing Labaton to Arkansas Teacher?” Wolf asked.  “No, he never told me that.”

After the report came out, Faris acknowledged to Hopkins that “he had met a couple of Labaton attorneys” and introduced them to Paul Doane, who was the pension fund’s executive director at the time.  Hopkins told the judge “he introduced some attorneys that he knew, and sort of rolled out of the room.”

In an interview, Faris, now a board member of the Arkansas Public Employees Retirement System, acknowledged that he called Doane to introduce him to Labaton—but that was the extent of it.  “All I did was call Paul Doane and say, ‘Here are these people,’” he said.  “Every member of the retirement committee gets requests like that.”  Doane resigned in 2008 following a state audit that found he spent $34,515 on out-of-state travel expenses during the year he was executive director of the Arkansas pension fund.

In court, Hopkins denied any wrongdoing occurred.  He told the judge “you seem to assume that, you know, how Labaton became associated with ATRS was in some way improper, illegal, or untoward, and I don’t think the record shows that.”  Labaton’s attorney, Lukey, said she was shocked at the judge’s remarks at the hearing, according to the transcript of the sidebar discussion.  She asked the judge to clarify if he was “suggesting there was an impropriety involving Senator Faris with the monies being paid?  Because there is nothing.  I mean nothing.”  Wolf replied that “yes, those questions occur to me when I read it.”

Neither Labaton nor any of its current or former lawyers gave political donations to Faris, who ran in elections from 2000 to 2006, according to FollowTheMoney.org.

Finding Mr. Chargois

But Wolf didn’t ask about political donations.  He asked Hopkins if he knew of an Arkansas lawyer named “Herron.”  Hopkins said he knew the name but had not met him.  During the sidebar discussion, the judge elaborated, describing “Mr. Chargois”—the lawyer who was getting a 20 percent fee from Labaton—as having a partner named Herron who knew Faris.

The only attorneys in Arkansas by those names are Timothy Powell Herron and Damon Chargois, both with the same address in The Woodlands, Texas, according to Arkansas bar records.  But Herron, who said he’s retired from practicing law, said in an interview that he and Chargois were law partners with an office in Arkansas.  His uncle also was an aide to Faris.  “We had a referral practice,” he said. “We worked with other firms on some cases, like asbestos cases, toxic torts, things like that.”

He also insisted that that his firm worked on all the cases it referred, often handling depositions.  Any referral fees would have been justified and disclosed, he said.  “We did refer a number of firms but the expectation was we wouldn’t want the case if we weren’t involved,” he said.  “I never remember any kind of arrangement with anybody where we got a percentage and didn’t do a damn thing.”

He said his memory is “fuzzy” when it comes to Labaton.  He remembered the firm asked for an introduction to Faris for a case that the governor’s office was handling, but he did not recall the State Street lawsuit.  “I knew some people, did some campaign contributions, so it opened a few doors,” Herron said.  “George Hopkins was a longer-term friend of Steve Faris, and I imagine what happened is we may have cracked the door a bit, but Mr. Hopkins stepped in. We never had anything to do with that case. He steered that case to Labaton.”

Labaton, in a statement, called the judge’s suggestion that a payment may have led to the firm’s hiring is “baseless.”  Further, the firm wrote, “there is no mention of any such influence payment in the special master’s exhaustive report, which remains under seal” and “not a single finding suggesting that attorneys’ fees awarded by the court were used to pay elected or other officials.”

“The evidence and testimony of all relevant parties in this matter is clear: the referral payment went only to the lawyer who made the original introduction of our firm to ATRS,” Labaton said in its statement.  “State Senator Steve Faris has received no political contributions or any other payments from any member of either the Labaton firm or the referring lawyer, and Labaton made no payment of any kind to obtain work by ATRS.”

At the May 30 hearing, Labaton’s attorney, Lukey, insisted that the referral payment at issue was legal under Massachusetts law, but a lawyer for the special master, William Sinnott, of Barrett & Singal in Boston, disputed that characterization, calling it an undisclosed “finder’s fee.”  Failing to disclose the payment might be enough for the judge to be concerned, Pritchard said.

“It may be that this referral fee is nothing sordid, but that doesn’t mean that it doesn’t have to be disclosed to the client,” he said.  “If part of the money paid by Labaton is being spent on referral fees, the court likely thinks it’s entitled to know that because it has to approve the fees.”  But it’s imperative that the judge ask, Labaton said in its statement.

“The special master’s conclusions—which have no basis in fact or law—put the burden of disclosure of a referral payment on counsel, while the law itself places the burden on the court to ask,” the firm said.  “Here the court did not ask.  Thus, the court is placed in a tenuous position having to decide whether it bears responsibility for not asking—or shifting the blame to class counsel.”