Risk Update

Disqualification Daring & Drama (or Just Delay)

REV Group Can’t DQ Fund, Attys For Strategic Litigating” —

  • “A federal judge has denied REV Group Inc.’s attempt to disqualify a pension fund and its counsel for allegedly colluding with counsel in a related state court stock-drop case against the specialty vehicle manufacturer, saying that dropping certain securities claims was a reasonable strategic move.”
  • “U.S. District Judge Lynn Adelman ruled Wednesday that the Houston Municipal Employees Pension System and its lead counsel, Bernstein Liebhard LLP, can’t be disqualified for amending their consolidated investorsuit to drop Securities Act of 1933 violation claims so they could play out in a parallel state court action.”
  • “‘Plaintiff’s amendment of the complaint can quite reasonably be characterized as a strategic choice undertaken in the best interest of the class, with the risk that some class members might pay litigation expenses in two separate actions outweighed, to plaintiff’s mind, by the increased likelihood of recovery,’ Judge Adelman wrote.”
  • “The pension fund’s attorneys told Judge Adelman in April that their litigation strategy is ‘absolutely in the best interest of the Securities Act plaintiffs” and only strengthens the complaint. While the tactic may be a blow to REV’s defense strategy, it is nonetheless the fund’s right to voluntarily dismiss a claim with no explanation so long as it will benefit the Securities Act plaintiffs and doesn’t waste any court resources, the pension fund said.”

And via Bill Freivogel:

  • “City of Fresno v. United States, 2019 WL 2536106 (Fed. Ct. Cl. June 19, 2019). This is a suit by a group of water users (“Group 1”) against the U.S. over Group 1’s entitlement to water. Another group of users (“Group 2″) moved to intervene to take positions adverse to Group 1. Law Firm represents Group 2. Group 1 moved to disqualify Law Firm because Law Firm currently represents a member of Group 1 on matters unrelated to this case, and because Law Firm formerly represented members of Group 1 on water allocation issues.”
  • “In this opinion the court denied the motion because of Group 1’s delay in making the motion. This suit started in October 2016. Law Firm filed Group 2’s motion to intervene in May 2017. Group 1 began demanding that Law Firm withdraw in August 2018 and filed the motion to disqualify that month. Law Firm started appearing for Group 2 adverse to Group 1 on water allocation matters as early as 2014. Given all this, the court ruled that Group 1 simply waited too long to bring their motion. The court did discuss the current client and alleged former client conflicts, presumably to establish that no harm resulted from them. The court also discussed Law Firm’s long-time (and expensive) representation of Group 2, including the expertise on water allocation matters Law Firm developed during that representation.”
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