Dispute Likely to Force Lerner’s Departure from Wilson Elser

After simmering for months, a dispute between Richard E. Lerner and the firm where he is a partner, Wilson Elser Moskowitz Edelman & Dicker, boiled over into public view last week.

The two are at odds over Mr. Lerner’s handling of the defense of Frederick M. Oberlander, who faced a series of gag and sealing orders after disclosing the contents of a sealed court file in a lawsuit begun in May 2010. Click here to view story.

Last Thursday, Mr. Oberlander wrote to Eastern District Judge I. Leo Glasser, who presided over the case which was sealed in 1998, to advise him that Mr. Lerner’s withdrawal from Wilson Elser was “likely imminent[].”

That disclosure was the product of six months of legal wrangling in which Mr. Lerner had resisted his firm’s efforts to withdraw from the case, contending that only he, and not the firm, had the authority to withdraw as counsel of record.

Even though the rift is likely forcing Mr. Lerner’s departure, he is not abandoning Mr. Oberlander, who advised the court that he will be retaining Mr. Lerner as his lawyer after he leaves the firm.

Jonathan Sack, the lawyer Mr. Lerner has retained to represent him in negotiations with Wilson Elser, declined to comment.  Thomas W. Hyland, the senior partner at Wilson Elser familiar with the situation, could not be reached for immediate comment.

Representation Arranged by Insurance Company

Mr. Lerner, who is the son of former First Department Justice Alfred D. Lerner, first came to Mr. Oberlander’s defense in May, 2010, shortly after the Long Island-based lawyer filed a civil racketeering case in the Southern District of New York, claiming that the 1998 sealing of a government cooperator’s plea to a $40 million stock fraud gave him cover to go on to commit a $500 million real-estate fraud.

The Southern District lawsuit was quickly sealed and Judge Glasser equally promptly issued an order enjoining Mr. Oberlander from disseminating any information in the sealed file that had been disclosed in the racketeering lawsuit.

Mr. Lerner entered the case when Mr. Oberlander’s insurance company, Zurich American, asked Wilson Elser to undertake his defense. The firm assigned the case to Mr. Lerner and he filed a notice of appearance.

In defense of Mr. Oberlander, Mr. Lerner mounted two arguments that had particular heft. One was that the information the district judges in both the Southern and Eastern District court judges were seeking to keep under seal was already in the public domain. The name of the cooperator, Felix Satter, has been published in Business Week at the time of his indictment, and two years later the U.S. Attorney’s Office had disclosed Mr. Satter’s name in a press release involving the 1998 crime. The New York Times disclosed his name and plea in a 2007 article. Last month, Judge Glasser ordered the unsealing of the docket sheet containing Mr. Satter’s name.

Mr. Lerner also argued that the sealing of Mr. Satter’s file was illegal because it blocked Judge Glasser from notifying the victims of Mr. Satter’s pump-and-dump scheme of their right to restitution. A former federal judge, Paul Cassell, joined Mr. Lerner in mounting that argument.

The Second Circuit, unswayed by those arguments, affirmed Judge Glasser’s sealing and injunctive orders and added a number of its own, including the appointment of a judge to enforce its own and Judge Glasser’s orders. In March, the enforcement judge, Brian M. Cogan, requested an investigation of whether both Mr. Oberlander and Mr. Lerner should be held in criminal contempt of court. By that time, the two lawyers were also subject to a civil contempt proceeding brought by Mr. Satter.

Following on the heels of the request for an investigation, Wilson Elser moved to withdraw as counsel in papers that remain under seal.

Two months later, in May, Mr. Lerner filed a petition for a writ of certiorari with the U.S. Supreme Court under seal as he had been ordered to do by the Supreme Court. The high court gave a ray of hope to Mr. Lerner, when it granted his request to file a redacted petition with the court, which would be available to the public.

Initially the Solicitor General’s office, which represents the government before the Supreme Court, had waived its right to respond to the petition. Last Thursday the court gave the Solicitor General’s Office until Oct. 22 to file responsive papers, a development that experts on Supreme Court procedure say indicates that there is some interest within the court in granting review.

In August, Judge Cogan granted Wilson Elser’s motion to withdraw. A week later Judge Glasser unsealed the 1998 docket sheet, and both sides made public filings in related proceedings detailing their positions.

Core Issues: Who is Counsel of Record? What Does that Mean?

With Wilson Elser’s withdraw motion pending before him on a different aspect of the case, Judge Glasser asked all sides to brief the “counsel of record” issue.

In response to that request, Mr. Lerner today submitted a declaration that a Wilson Elser lawyer had signed the firm’s motion to withdraw as counsel.  As such, he wrote, it was without effect because he as the counsel of record is the only person authorized to file such a motion.

With the Supreme Court and the Eastern District having the same rules, Mr. Lerner reported in his declaration that Mr. Hyland, the firm’s general counsel, had signed a motion the firm had filed with the Supreme Court to withdraw as counsel on the certiorari petition. The Court had refused to accept Wilson Elser’s withdrawal motion, Mr. Lerner wrote, “because [Mr. Hyland] was not attorney of record.”

In its response to the briefing request, Wilson Elser contended that the firm alone is the attorney of record, and therefore Mr. Lerner need not submit the withdrawal motion. In a memorandum, the firm contended that Mr. Oberlander’s insurance company, Zurich, had dealt with Mr. Hyland in making arrangements for his representation stemming from the 2010 civil racketeering filing. According to the memorandum, Mr. Hyland was the attorney responsible for the management of the case and, in that capacity, he “delegated work on [the] case to Mr. Lerner.”

In a “subordinate” capacity, the memorandum stated, “pursuant to Mr. Hyland’s directive,” Mr. Lerner had filed a notice of appearance “on behalf of Wilson Elser.”


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