Defending Adversary Claims: Strength in Numbers
When Ponzi scheme investors are sued by bankruptcy trustees seeking recovery of any return of principal, they are entering a new phase of their investment nightmare. It is one thing to face litigation for return of their “profits,” but quite another to stare at a lawsuit seeking any and all return, whether principal or interest, on their investments.
Investors, faced with the surprise and shock of adversary lawsuits, first and foremost feel alone. They usually face a well-financed bankruptcy trustee, well-organized and experienced trustee’s lawyers, a judicial system that they don’t understand, and legal theories that both disturb and baffle them. These adversary lawsuits are sought in part to break the investor’s resistance without fighting.
Litigation can be like warfare. There is strength in being united. Litigation has its own rules. There are hearings, discovery, legal briefings and argument of motions, meetings with adverse counsel, communications among parties and Court communications. These rules must be followed whether an investor is a sole defendant or one of hundreds of adversary defendants.
Michael Hackard is experienced in representing both multiple defendants and multiple plaintiffs. He is a veteran of the pharmaceutical wars, representing hundreds of clients in the 1990s and early 2000s in recovering for their injuries brought by unsafe drugs. Whether representing dozens or hundreds of clients, the economies of scale predominate. There are common issues of law and fact that pervade the litigation landscape.
Multiple representations of adversary defendants (with attorneys’ fees allocated between those commonly represented) benefit the Court as well as all the participants in the litigation process. Case management is made easier. Joint hearings on common legal and factual issues afford common defendants both a more economical and better-financed defense. The control and representation of a large number of plaintiffs or defendants is the same principle as the control of a small number; it is merely dividing tasks, identifying both common and individual issues, and planning and executing litigation strategy and supporting tactics.
Fee allocations for cases that involve common issues of law and fact can be done by a number of different methods. There are a number of ways that common benefit billing can be addressed. The particular types of allocation should be addressed early on in such cases. The most common methods of allocation are:
- Per Capita – Fee allocations using a per capita fee structure spread fees equally across the number of participants. As an example, if there are 100 clients each client would pay 1% of the fees related to addressing common issues of law and fact.
- Pro Rata – Fee allocations using a pro rata fee structure allocate fees on the basis of the size of the adversary claims. Clients with lower adversary claims against them pay less for legal services related to common issues of law and fact while participants with higher adversary claims against them pay more for those same legal services. As an example, assume that there are three (3) clients with adversary claims against them: Client A in the amount of $60,000, Client B in the amount of $30,000, and Client C in the amount of $10,000 ($100,000 in total claims). The fees allocated for legal services related to common issues of law and fact would be divided between Client A (60%), Client B (30%) and Client C (10%).
- Per Individual Issues – Whether using a per capita or pro rata fee structure for common issues, fees for legal services relating to client specific issues may be directly charged to the client to whom the specific services are rendered. As an example, client depositions and individual fact discovery are specific to the client to whom the discovery is directed. As such, the particular client is charged for those legal services.
Finally, Sun-Tzu, author of a timeless classic on strategy, The Art of War, once said that “He will win who knows when to fight and when not to fight.” This is a truth well-applied to litigation. A U.S. Justice Department study of state courts found that 97% of civil cases are settled or dismissed without a trial. While the settlement-dismissal rate might be lower in bankruptcy adversary proceedings, the same public interest in expeditious and efficient litigation applies. To that end, well-coordinated litigation actions often include opportunities for settlement and/or mediation – this can save both time and money. Michael Hackard is very experienced in the mediation and settlement process and views it as an essential tool in reaching consensual resolutions. Such mediations and settlement discussions are confidential and inadmissible in court proceedings. If the settlement discussions fail to resolve the case, the regular litigation process goes forward.
To see visual representations of client timelines in adversary claims, consult our document Clawbacks: A Visual Timeline.
Our mass tort experience serves as a source of success in working cooperatively with law firms across the country. While the prospect of representing multiple defendants can be both daunting and exciting, it is something that provided the mass tort bar with a breadth of experience and knowledge that would otherwise have been unavailable. Joint representation works. If done effectively it provides clients with the benefits of experienced local counsel coupled with the collaboration of others with particularized knowledge.
We can help you evaluate your case and determine if mutual representation of clients might be beneficial. Our experience in complex litigation can help in the efficient litigation of a multitude of cases. If we decide to collaborate on a case, we can work with local counsel to have us admitted by way of a pro hac vice motion.
If joint venturing a complex litigation case might make sense, give us a call. We can help to identify the possible benefits that a team approach might bring.