Richard Lerner’s Choice: My Client or My Firm

With a court date set for next Tuesday before Eastern District Judge I. Leo Glasser, this is crunch time for Wilson Elser Moskowitz Edelman & Dicker and its long-time partner, Richard E. Lerner.

Judge Glasser has before him Wilson Elser’s motion to withdraw as counsel in the wake of another Eastern District’ judge’s directive to commence a criminal contempt investigation of both Mr. Lerner and his client, Fred M. Oberlander.

Meanwhile, there is significant evidence that discussions have taken place at the firm over the terms of Mr. Lerner’s departure from the firm. On Sept. 21, Mr. Oberlander stated in a court filing that Mr. Lerner’s departure from the firm was “likely imminent[].” Additionally, Mr. Oberlander disclosed in filing last week that firm had removed the files relating to his case from Mr. Lerner’s office

It also appears that the firm has been playing hardball in the negotiations. Jonathan Sack, an employment law attorney who is handling Mr. Lerner’s negotiations with the firm, said in an interview that he had been “informed” the firm had scheduled a partnership meeting to vote on Mr. Lerner’s expulsion on Tuesday, the same day the parties have a court date before Judge Glasser.

Should Mr. Lerner be expelled, Mr. Sack said, “I assume” that, absent litigation, Mr. Lerner’s separation package would be limited to whatever the firm unilaterally decides upon.

Mr. Sack added that negotiations are ongoing and said he is “hopeful” that an amicable resolution of all issues related to Mr. Lerner’s departure “can be amicably resolved without litigation and expulsion.”

Thomas J. Hyland, Wilson Elser’s general counsel and the senior partner overseeing the Oberlander litigation, did not return a telephone call seeking comment.

For 16 of his 23 years at Wilson Elser, Mr. Lerner has been a partner. According the American Lawyer magazine, the average profit per partner at the firm in 2011 was $620,000.

An Insurance Case

Mr. Oberlander’s insurance company brought Wilson Elser into the case shortly after his filing of a civil racketeering suit over two years ago, which contained excerpts from the sealed criminal file of a government cooperator. The public filing of sealed materials caused a furor and quickly resulted in a flurry of sealing and gag orders. The orders were issued by both Judge Glasser, who had taken the cooperator’s plea in 1998, and the Southern District judge to whom the civil racketeering case had been assigned.

In the civil racketeering case, Mr. Oberlander contended that cooperator’s ability to conceal his 1998 plea to participation in a $40 million pump-and-dump stock swindle had enabled him to pull off a $500 million real-estate fraud.

There is no doubt that when Mr. Hyland, the firm’s point person with Mr. Oberlander’s insurance company, Zurich American, assigned the case to Mr. Lerner that his client was in hot water.

Before the firm had been formally retained, both Judge Glasser and Southern District Judge Naomi Reice had issued sealing orders and enjoined Mr. Oberlander from disclosing the contents of the information he had from the cooperator’s sealed file. Over the next 18 months, despite contending that the critical information in the sealed file had long been available to the public, Mr. Lerner hit a brick wall with the courts.

Judge Glasser, after conducting a four-day hearing in 2010, concluded that Mr. Oberlander had intentionally flouted a court order” by “unilaterally deciding” to disclose information from the cooperator’s sealed file. He fared no better at the Second Circuit which issued orders that forbade him from making certain information available to Congress and pointedly warned Mr. Oberlander that it might require him to obtain a court order before submitting any further filings, a measure ordinarily taken to deal with obstreperous pro se clients. More ominously, the circuit panel also ordered the appointment of a second Eastern District judge to make sure that Judge Glasser and its own orders were complied with.

That order led to the appointment of Eastern District Judge Brian M. Cogan, who in February ordered the Eastern District U.S. Attorney’s Office to open an investigation of both Mr. Lerner and Mr. Oberlander for criminal contempt.

According to a transcript of a court session before Judge Cogan on Feb. 27, lawyers for the informer had brought a complaint for civil contempt against the two lawyers for disclosing that the “Richard Roe,” referred to in the papers the courts had ordered sealed, was in fact Mr. Oberlander. Apparently, the cooperator’s lawyers at Beys Stein & Mobargha have brought a number of other civil contempt complaints against the two lawyers but they have not appeared on a public docket.

About six weeks after Judge Cogan disclosed the investigation the firm moved to withdraw as counsel. Judge Cogan granted the motion on Aug. 16 which was only a week before the case took a dramatically different turn resulting in the release of materials Mr. Lerner and Mr. Oberlander had long contended should be public.

Judge Cogan has a motion pending from Mr. Oberlander, backed by Mr. Lerner, asking him to reconsider his order allowing Wilson Elser to withdraw. In addition, Judge Glasser has a parallel motion pending before him for the firm to withdraw from other aspects of the multipronged litigation pending before him.

A Dreadful Choice

The firm’s withdrawal motion placed Mr. Lerner in a terrible bind. Either he abandon a client he had skillfully represented for nearly two years or acquiesce to the firm’s desire to withdraw from the case. He chose to stick by his client and actively opposed the firm’s efforts to withdraw.

That has led to his current predicament where he apparently is under pressure to accept terms the firm wants under the gun that, if he does not, he will be expelled.

The irony is that just as his battle with the firm is coming to a climax, his argument that the critical information has long been public is finally gaining traction.

The name of the cooperator, Felix Sater, had been published in Business Week at the time of the 1998 indictment, and two years later the U.S. Attorney’s Office in Brooklyn had disclosed Mr. Sater’s name in a press release involving the 1998 crime. The New York Times had also disclosed his name and plea in a 2007 article.

Then by a fluke, in mid-August, the Eastern District’s Clerk’s Office erred in making the entire docket sheet to Mr. Sater’s criminal file, U.S. v. Doe, 98-cr-110, available to the public on the Internet. On Aug. 27, Judge Glasser made it formal and ordered the entire docket sheet, then containing 170 entries, available to the public. Judge Glasser also ordered a hearing to determine which of the documents referenced in the docket sheet should be made public. That hearing has also been scheduled for Tuesday.

In another irony, the prosecution is agreeing to release much of the sealed material after maintaining for two years that its disclosure could endanger Mr. Sater’s safety and also jeopardize national security.

In a letter written last week, Assistant U.S. Attorney Todd Kaminsky advised Judge Glasser that the government will not seek to keep much of the information in the file under seal. The government has reviewed thirty-eight documents that were submitted under seal during the 11 years that elapsed between Mr. Sater’s plea agreement and his sentence in 2009 to probation and a $25,000 fine. Mr. Kaminsky reported that the government will seek to keep nine of those documents under seal and to redact a portion of another.

With respect to the 155 documents filed under seal since Mr. Oberlander brought the $500 million racketeering case, Mr. Kaminsky advised that the government will seek to “keep relatively few of those documents under seal in their entirety.”

The favorable turn may well be too late to help Mr. Lerner with Wilson Elser. But his lawyer, Mr. Sack said, Mr. Lerner did what he had to because “if he turned his back on his client, he could never sleep at night. His father [former First Department Justice Alfred D. Lerner] would have been very proud of him.”

DanielJWise©

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