In a class-action lawsuit charging price-fixing among the top modeling agencies in New York, a federal judge has approved a nearly $22 million settlement, a figure presumably far beyond the hopes of the five former models who filed it about three years ago.
Even so, the plaintiffs’ attorneys-including lead counsel Andrew Hayes, a partner in trust-buster David Boies’ law firm-have had their hopes dashed. In the same order and opinion in which he approved the settlement, dated May 4, 2005, Southern District Judge Harold Baer Jr. slashed the amount the lawyers could take home.
He awarded them a mere $5,349,747.81, as opposed to the $8,875,164.65 that they had sought. The reason?
“Certain conduct in which class counsel engaged during the discovery phase of this litigation,” Judge Baer wrote.
He cited three sanctions that the magistrate judge (who oversaw the lengthy discovery process) issued against the models’ counsel: charges of $5,000, $250 and $25,000 (the latter stayed by Judge Baer) for what the magistrate judge called their “failure to respond appropriately to interrogatory answers.”
“[P]laintiffs have unnecessarily made the straightforward task of responding to interrogatories a difficult and grueling process,” wrote the magistrate judge in a passage cited by Judge Baer. “I am left with the firm conclusion that plaintiffs’ counsel determined they were going to provide discovery in the manner that they saw fit, notwithstanding the Federal Rules of Civil Procedure and notwithstanding my prior Orders.” (Mr. Hayes and Co. were none too pleased with the magistrate judge, protesting late last year in a memorandum to Judge Baer: “Although the Court … ordered defendants to serve only consolidated interrogatories and requests for documents, the Magistrate allowed each defendant to serve their own interrogatories which resulted in plaintiffs having to answer no less than 270 interrogatories in six weeks.” (Harrrumph!)
“Accordingly, I have reduced the sought-for fee award to include and emphasize my concern on this score,” Judge Baer wrote.
Mr. Hayes said: “We’re pleased that the court approved the settlement.”
Aaron Richard Golub, the lively lawyer for Click Model Management Inc., one of about a dozen defendants, weighed in.
“I can’t wait to take them on again. The next time around, they’ll get zero,” he bragged.
As reported in Forbes, this isn’t the only time that Boies, Schiller and Flexner (which was not singled out in Judge Baer’s order and opinion) has been punished with sanctions. In 1998, a judge fined Mr. Boies and his client $46,000 for filing a “barely sensible” motion in New York State Court. In 2003, the Second Circuit Court of Appeals called a lawsuit Mr. Boies had filed on behalf of Hard Rock Cafe founder Peter Morton “frivolous” and ordered a mild slap on the wrist; Boies Schiller and another firm had to pay the defendant’s legal costs-times two.
Indeed, it hasn’t been a particularly kind spring for Mr. Boies and Co. He and his firm have said they are planning to appeal a Florida state judge’s ruling that his firm cannot represent their chief financial officer in a case related to a gardening company she owns, because of a conflict of interest. News reports indicate that Attorney General Eliot Spitzer is circling in on his client, former A.I.G. chairman and chief executive Maurice Greenberg. And it seems that at least some of the judges in New York State’s Court of Appeals, whom Mr. Boies is trying to persuade to open up courtrooms to his client, Court TV, were skeptical. (A ruling is expected in June or early July.)
According to an article in The American Lawyer, which first reported that a settlement of $22 million was close to being approved, the case was instigated in 2001, when a model sought out a lawyer in Los Angeles for help getting out of a contract with a New York modeling agency. The lawyer, Brian Rishwain, discovered a New York State law capping agency commissions at 10 percent; meanwhile, agencies across the board took a uniform 20 percent from their clients. Mr. Rishwain persuaded another model to become the lead plaintiff in a class-action suit.
Mr. Rishwain’s partner then approached Boies Schiller-the firm had won high-profile price-fixing lawsuits against Sotheby’s and Christie’s in 2000 with a $512 million settlement-about captaining the case.
The federal class action, now called Fears v. Wilhelmina Model Agency, Inc., alleges that the agencies-including Ford Models Inc., Next Management Corp. and IMG Models Inc.-colluded to set their rates at the same level so that models couldn’t jump to another agency to get a better deal. The suit was filed in June 2002. (A separate class action, filed in State Supreme Court in Manhattan in 2003, deals with the violation of New York’s business law capping employment-agent commissions at 10 percent.)
“This was not a case that was prompted or instigated by a prior or parallel governmental investigation, inquiry or prosecution. It was developed entirely by the skill and tenacity of plaintiffs’ counsel. It was only as a result of these efforts that evidence of defendants’ collusive practices emerged,” reads a prideful memorandum by the models’ lawyers, which was submitted to Judge Baer this winter.
In July 2003, Judge Baer approved the suit as a class action, and defined the “class” of potential claimants as any model employed by a New York agency between 1998 and 2002. Mr. Golub’s client, Click, briefly held out against settling and went to trial for a few days last June.
But in October, the parties submitted a settlement proposal of $21,855,000-“cash.”
In a Dec. 10, 2004, document, the lawyers for the models asked for 33 percent of the settlement plus expenses, revealing that were they to charge based on hourly rates- having spent “in excess of 28,000 professional hours in prosecuting this matter”-it would actually entitle them to even more (a total of $10,702,324.65, according to Judge Baer’s order and opinion).
In February, Judge Baer ordered “injunctive relief,” basically meaning that the agencies had to promise not to discuss fees with each other, and to clearly disclose to the models the terms of their contracts and their rights to negotiate.
But as Judge Baer noted in his order and opinion of this month, only about $9,338,958.29 of the settlement has been claimed. He asked the parties to submit charities where the remainder of the funds could be donated, and it is among those charities (some of which don’t appear to have been suggested by any of the parties)-Beth Israel Medical Center’s Continuum Women’s Cardiac Care Network, Columbia Presbyterian Medical Center’s Eating Disorders Program and the Heart Truth national education campaign, among others-that the remaining funds will be distributed.
It’s a juicy donation (about $5.75 million) that wouldn’t have been quite as generous if the lawyers had gotten what they’d asked for.
As opposed to the 33 percent of the fund that the lawyers were seeking, Judge Baer granted them 17 percent of it (some reduction is typical in these types of cases). Or, in other words, “a fair and appropriate fee is 40% of the claimed Funds.”
“If they can’t allocate the money, it basically says that the whole thing was a heavy- handed lawsuit,” commented Boss Models owner David Bosman. That said, if the remaining funds can’t be returned to his business and those of the other defendants, Mr. Bosman added, “Certainly I would prefer it would be with a charity” than with the lawyers.
He continued: “These are the same attorneys that battled Microsoft-major superpower attorneys coming after small agencies …. I’m very bitter.”
Mr. Hayes declined to comment on his firm’s plans, citing ongoing proceedings before the judge. But the firm’s lawyers have two options if they’re unhappy: appeal the ruling altogether or file a motion for reconsideration, which they would have to do by Thursday, May 19.
There are various points of entry. Judge Baer called the case a “valuable public service for which they are to be commended,” so they could press him on that point. There is also an inconsistency, noted by the judge as a “split in the circuits,” over whether attorneys’ fees should be pegged to how much is claimed, or the amount of the actual settlement.
Judge Baer ruled that it should be related to how much is claimed-though he noted, earlier in the decision, that models “are a notoriously peripatetic group.”
Meanwhile, Elite Model Management Inc.-which fell into bankruptcy during the proceeding-has negotiated its own settlement. The parties also await a ruling by Judge Charles Ramos on a motion to dismiss on the state case, Shelton v. Elite. Reportedly, a Justice Department probe of the industry is also underway.
The Real L.A. Law
Too big? Too small? Or just right?
Those are the questions being asked about the Los Angeles office of Fried, Frank, Harris, Shriver and Jacobson, the storied New York eminence, which announced plans to shutter its West Coast branch last month.
Valerie Ford Jacob, the firm’s chairwoman, said the culprit was a legal market that “has changed significantly over the years.”
“Our client base there, their work is much more global, and we are servicing that out of New York,” she said. “We have decided to expand and focus our resources in the markets where we have been growing.”
The news was first reported by Legal Week, a British magazine, and then by the Los Angeles Daily Journal, which noted that the firm was not the only New York–based one to close its Los Angeles outpost: Debevoise and Plimpton closed its office in 1996, and Shearman and Sterling did so in 1998. (The firm opened up in L.A. in 1985.)
Meanwhile, coming out of Los Angeles, firms like Latham and Watkins have been aggressively expanding in places like New York. But unlike New York-commonly viewed as the world’s fattest legal market-observers note that the deals coming out of Los Angeles are smaller, which means an adjustment for transplant firms.
“Take a zero off out here,” joked one L.A. lawyer.
Meanwhile, for the big deals, the Los Angeles office was undersized-at its peak numbering around 30 lawyers; as of this month, down to 10, with only two partners. The New York firm commonly viewed as a winner in the Los Angeles market, Skadden Arps, is around 110 strong.
One former lawyer cited size as a factor for moving on, likening the shrunken office to “a mail drop.”
“There’s a limit to what you could do at that point,” the lawyer said.
Another factor, which seems to have affected the litigators rather than the transactional lawyers, was that the firm’s big-dog New York rates were set about 25 percent higher than L.A. ones. That made it hard to attract new clients, but also indirectly to bring in established lawyers with books of business, either because the firm didn’t want to mess with its lock-step rate structure, or because the potential lawyer didn’t want to raise his or her fees and risk alienating clients.
“My sense of it is that Fried Frank had the same issues that a number of New York firms have had: They didn’t adapt to the L.A. market,” said Anne Nicolas, a founding partner of Advocate Legal Search in Los Angeles.
“It always seemed to have a problem growing, and it was difficult to figure out,” said Harvey Saferstein, who worked in the L.A. office and now is of counsel at Mintz Levin. “I don’t think it was the rates.”
He added: “It was a good firm, great fun. It’s sad that it’s closing.”