Class-action cowboys

Class-action cowboys

Daily Business Review

December 1, 2000

Darren Blum sits at the head of a polished oak table in the borrowed conference room of a lawyer friend in North Miami Beach. The 31-year-old solo practitioner asked to be interviewed here rather than at his own modest office in Hollywood because it's "nicer." He's eager for the day when he wins his first class-action case and can afford his own posh office.

A former Wall Street pit broker, Blum deliberately chose South Florida when he decided to become a lawyer, attending Nova Southeastern University law school. Though he graduated far from the top of his class, he saw the area as a good place to make a fortune as a plaintiff attorney.

Now he sees his chance. In August, Blum, who has practiced law for only five years, filed one of the first class-action lawsuits in the country against Bridgestone/Firestone and Ford Motor Co. He chose to file in Miami-Dade Circuit Court - the same venue where Stanley and Susan Rosenblatt earlier this year won a class-action jury verdict of $145 billion in punitive damages against the tobacco companies on behalf of ailing smokers.

"Miamians subscribe to the theory of punishment of corporations," Blum says, explaining the choice of venue. "If a jury is going to give $145 billion to someone who smoked, I think we can get twice that when they hear what Firestone and Ford did. South Florida is like the Wild Wild West. It's crazy here."

Many observers agree. If South Florida is the untamed frontier of class-action law, local plaintiff lawyers like Blum are the gamblers and gunslingers. They've helped turn South Florida into a rollicking center of class-action suits. Ford and Bridgestone/Firestone are only their latest targets.

The boom in class action has many attorneys rushing into the field, which worries veteran practitioners. They think too many inexperienced lawyers - with visions of the Rosenblatts' tobacco billions dancing in their heads - are leaping unprepared and underfunded into the Firestone fray and other complex legal battles. And that's unfair to clients, they contend.

"If it were my family that were injured," says Mark Raymond, a partner at the 30-attorney firm Tew Cardenas Rebak Kellogg Lehman DeMaria & Tague in Miami, "I would ask the lawyer, 'How many class actions have you done? And how will you finance this? ' As a result of the tobacco case, people are saying, 'Me, too. ' Well, me-toos can be dangerous. "

Despite these concerns, South Florida is too enticing a class-action market to pass up. "Just look at the demographics here," says Marvin Dunn, chairman of the psychology department at Florida International University, explaining why lawyers are eager to file in South Florida. "Sixty percent of Miami-Dade County is Hispanic or black. You tend to get more sympathy from plaintiffs in minority communities. Plus, there are no corporations here. "

"People here don't trust corporations," agrees Roy Oppenheim, senior partner at the three-attorney Weston firm Oppenheim & Pilelsky, who recently filed a class action against Ford and Firestone in Miami-Dade Circuit Court.

Plus, there are plenty of potential clients. "South Florida has a high proportion of elderly residents who fall victim to financial and other types of scams," says Abraham Rappaport, a partner at the Boca Raton office of New York-based Milberg Weiss Bershad Hynes & Lerachi office, the granddaddy of class-action firms. His 145-attorney firm opened its Boca office two years ago because of the explosion of class-action cases in South Florida.

But Sam Smith, managing partner of the five-attorney class-action boutique Burr & Smith in Tampa, bristles at the notion that all Florida class-action activity is in the southeastern tip of the state. In 1997, Smith settled a sex-discrimination case against Publix Supermarkets on behalf of thousands of female employees and ex-employees for $85. 5 million.

"It's a misperception that all class action cases play out in South Florida," says Smith, who notes that his employment discrimination-oriented firm has at least five class-action cases pending at any given time. "We have plenty of important cases to keep us busy up here. "

While that may be true, there's no doubt that South Florida has become a magnet for class-action cases filed both by local and out-of-state attorneys. Consider these facts:

Nearly 45 of the nation's top plaintiff law firms have filed suit in Miami against national HMO companies. Prominent barristers involved include David Boies, founding partner of Armonk, N. Y. -based Boies Schiller & Flexner, who helped defeat Microsoft in the recent antitrust case; Richard Scruggs, of Pascagoula, Miss. -based Scruggs Millette Bozeman & Dent, who won $366 million in attorney fees from the tobacco companies; Aaron Podhurst, a partner at the 12-attorney Miami firm Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin, who's best known for winning large verdicts for families of plane crash victims; and Stephen N. Zack of the 35-attorney Miami firm Zack Kosnitzky a former president of the Florida Bar.

Eight of 47 federal class-action suits filed so far against Ford and Firestone were filed in South Florida - more than in any other jurisdiction in the country. Viewing South Florida as consumer-friendly, some plaintiff lawyers requested that approximately 300 federal suits involving Ford and Firestone, including about 60 class actions, be consolidated in Federal District Court for the Southern District of Florida. But the Judicial Panel on Multi-District Litigation in Washington, D. C. decided in October to bundle them and assign them to a federal judge in Indianapolis.

Boies, the high-powered litigator who's turned his attention to class-action, recently opened outposts of his 52-lawyer firm in Fort Lauderdale, Hollywood, West Palm Beach and Orlando.

Class-action lawsuits typically are brought by individuals who file on behalf of a large group of people sharing similar damage or injury claims. They are distinct from mass tort cases, which are filed on behalf of a specific number of injured parties, as in plane crashes. Once a class is certified by the court, other plaintiffs can join in.

Such actions have been around for decades, but the Internet has given them a big boost. Web sites such as www. firestoneattorneys. com are constantly pulling in new clients around the country, allowing them to sign up by computer. Some site offer a comprehensive catalog of class action, like www. notice. com and www. classaction. com.

The Internet has also made it easier and cheaper for lawyers without deep pockets to file big class-action suits. They can access mountains of discovery from cyberspace - without having to depose a single $200-an-hour expert witness. Indeed, many lawyers around the country who are suing tobacco companies in smokers' cases obtained discovery documents by downloading them from Web sites devoted to tobacco litigation.

Other types of class-action litigation also are eased by the Net. In a few hours of browsing, securities-fraud lawyers now can learn everything they need to know about a target company from its Web site and Internet investor chat rooms, says Thomas Tew, a partner at Tew Cardenas, which concentrates on class-action securities cases. "You used to have to fly all over the country to get information about a company," he says.

In the past, South Florida attorneys filed many suits on behalf of elderly investors defrauded by various securities schemes, which helped establish a strong plaintiff bar in the area.

But a 1995 federal law made it harder to sue for securities fraud. So class-action litigators turned their attention to product liability and prospered. The big product cases - carcinogenic asbestos, toxic breast implants, the diet drug fen-phen, the contraceptive Norplant, the pesticide Benlate and tobacco - yielded millions in attorney fees. HMOs and Ford and Firestone are the latest product liability targets.

"You've got a bunch of hungry, shark attorneys here," says partner Bill McCarty, of Oppenheim & Pilelsky in Weston, explaining the shift. "They smell blood and go into action. "

One Miami attorney who has done well in product liability is Louis Robles, founding partner of the eight-attorney Robles Law Center, who has concentrated on class-action cases since 1974. He's raked in millions in fees by finding virgin matters for class-action treatment, rather than following the legal herd.

Robles was among the lead lawyers in the 100,000-case asbestos class action, the largest in history. He handled 1,000 asbestos claims before moving on to liability actions involving fen-phen and Norplant. Now he's turning his attention to Rezulin, a diabetes drug pulled off the market by the FDA because it has been shown to cause liver damage, and Propulsid, an indigestion remedy which can damage the heart.

Robles won't reveal how he finds promising new areas of product liability, calling that proprietary information. Once he finds a hot area, he spends hundreds of thousands of dollars advertising for clients on daytime TV and in the National Enquirer. He also sets up a Web site (like www. rezulinclaims. com) and signs up masses of clients.

While Oppenheim says such advertising smacks of "ambulance chasing," Robles is unapologetic. "If people are injured and don't know they are injured, I'm doing a public service in letting them know," he says.

Class-action suits have turned some attorneys into millionaires. But individual plaintiffs' winnings are often paltry, critics say. For example, in five class-action suits filed against Wells Fargo Bank in the late 80s for unfair business practices stemming from allegedly excessive bank fees, plaintiff attorneys received $14 million in fees, while the average payout to class members was $9. 07, according to the National Center for Policy Analysis, a conservative research group in Dallas.

"Most class actions are for lawyers," says Chuck Kline, executive partner of White & Case's Miami office, who has defended corporations against class-action suits. "They are the only ones who will make money. "

Plaintiff attorneys strongly dispute that. In Smith's $85. 5 million settlement with Publix, the 12 leading plaintiffs received $93,000 apiece, 124 other women received between $10,000 and $27,000 each, and thousands of others collected up to $840. Attorney fees totaled $18 million.

"The court scrutinizes our actions very closely," says Smith, pointing out that the judge considers whether a proposed settlement and attorney fee arrangement are fair to the class of plaintiffs. "A settlement may look large, but if you consider that it may have taken five years to come to a conclusion, that's a lot of litigation, especially if you have to bring in outside firms to aid you in the case. "

Business-oriented critics also assail class-action suits on policy grounds. Plaintiff lawyers are using such suits to enact de facto legislation which lawmakers have refused to pass, contends Walter Olson, a senior fellow at the Manhattan Institute, a conservative research group in New York City.

Tobacco litigation "is one of the scandals of our era," he says. "Those [plaintiff] lawyers manipulated various branches of government and orchestrated a brilliant media campaign. What we got was a tax increase - not by legislation but by legal settlement. And it was done behind closed doors."

Brandishing such arguments, congressional Republican leaders and business groups have pressed for major changes in class-action rules. A bill introduced last year by Sen. Charles E. Grassley, R-Ohio, called for all class-action suits to be heard in federal court. Last summer, the Senate passed a modified bipartisan version, which would allow for the removal of a state class-action suit to federal court if any class member lives in a state different from that of any defendant. It also sets a minimum class size of 100 people, and a minimum damage request of $1 million per class member, to qualify a case for removal to federal court. But the bill has not yet been considered in the House.

The Association of Trial Lawyers of America firmly opposed these measures, arguing that they would shield corporate wrongdoers from accountability. The bills would make it easier for defendants to avoid having to defend against numerous suits in state courts around the country. Corporate defendants also prefer dealing with federal judges rather than state judges, trial lawyers say, because many state judges are elected and are more responsive to populist pressures.

Plaintiff lawyers defend class actions on the grounds that they protect the public by deterring corporate misbehavior, keep the courts from becoming clogged with masses of individual suits, and give ordinary Americans with relatively small claims the ability to get justice from powerful corporations.

"You can't file a lawsuit for $85 in damages. No lawyer would take it," says Podhurst, who is involved in several suits against Ford and Firestone, including one on behalf of Venezuelan families, and has ongoing suits against the tobacco companies and several airline companies.

"There are some class actions that are bad, and that are an embarrassment," he acknowledges. "But class-action lawsuits have a very good, positive effect - besides making money for lawyers. "

Podhurst also is involved in the HMO class-action lawsuits being heard by U. S. District Judge Federico Moreno in Miami. These allege that Humana and other managed care insurers secretly offered doctors financial incentives to withhold needed treatment. If successful, the suits could force fundamental changes in how HMOs deliver health care.

In April, the multi-district litigation panel in Washington consolidated numerous Humana lawsuits under Moreno. In October, it granted a request by plaintiff attorneys to bundle in similar cases against eight other managed care insurers. The litigation now covers about 80 million managed care subscribers nationwide.

Plaintiff lawyers say they wanted the cases in Miami because they like Moreno, who is known for keeping cases moving quickly. "We're known for having the best federal court system in the country," says Podhurst.

HMO defense lawyers had opposed the inclusion of the new managed care defendants. They say the plaintiff lawyers wanted the cases assigned to Moreno because a previous class-action securities case he heard yielded a whopping $141 million verdict.

The Ford-Firestone matter also has given South Florida national prominence as a class-action hotbed.

Roy Oppenheim got involved when his hair stylist complained that she couldn't get replacement tires for her Ford Explorer following news of the blowout-related rollover deaths in sports-utility vehicles. "I got infuriated and agreed to help her," he says. "It wouldn't make sense to file one suit. With a class action, we thought we could do well and do good at the same time. "

Oppenheim and his partner McCarty previously hadn't handled any major class-action lawsuits. So they decided to team up with an experienced firm that had deeper financing. They chose Miami-based, 29-attorney Kluger Peretz Kaplan & Berlin, which has handled numerous class actions. "You go in with your best cards," says Oppenheim. After all, he explains, "you're going up against Ford and Firestone. "

After the firms agreed to team up in August, the attorneys worked intensely over the following weekend and filed the suit on Monday morning, Aug. 14. Their goal was to be one of the first law firms in the country to file suit against Ford and Firestone. They hired a public relations firm and held a news conference to announce the suit.

But, to their surprise, Darren Blum gt there first. He filed his tire suit on Aug. 9, the day after the companies announced a recall of the tires involved in the accidents. He delivered a copy of the suit to news reporters before filing it at the Miami-Dade Circuit Court.

Blum was frank about the reason for his haste: If the multi-district litigation panel decided to consolidate the tire cases, the lawyers who filed first and rounded up the largest number of plaintiffs would have the best shot of being named lead counsel. Lead counsels get the biggest attorney fee if the class-action succeeds.

Being first has another benefit as well. It brings in more clients. Blum says he received hundreds of calls from potential Ford-Firestone clients after stories about his lawsuit appeared on TV and in the newspapers.

Unlike Oppenheim, however, Blum decided to go solo. The Hollywood attorney says he's confident he can handle the case, even though he has experience with only one other class-action suit. He filed that suit in 1997 against Sprint, on behalf of South Florida cell phone users who allegedly received poor service. The $25 million claim is still awaiting class certification in Broward County Circuit Court.

But Aaron Podhurst worries about whether inexperienced attorneys like Blum can adequately represent classes of plaintiffs in the difficult area of class-action practice. "What Stanley Rosenblatt did was a remarkable undertaking," Podhurst says. "But it would be a mistake for a young lawyer to try and emulate him. He was well-established and had resources. You can get into seven figures in costs. "

Blum admits that he's unsure how much it will cost him to litigate the Firestone case. He says he has two clerical staffers working on the matter full-time and that he's hiring a third person. Nevertheless, he has assured his clients that he has sufficient financial resources to see the matter through.

"Some of my clients have said, 'You're not a big law firm. Are you sure you can handle this? ' " he says. "I say, 'Absolutely. ' Guys like me live to stick it to companies like Firestone. It's like David and Goliath. "

 
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