Legal News

Laster But Not Least: Newest Chancellor Rips Plaintiffs? Counsel

By Ashby Jones

Well, hellooooooo Travis Laster!

Don’t know that name yet, LBers? If today’s news is any indication, it’s a name that you should learn — it just might be on your radar screen for awhile.

The basics: As we wrote last fall, Laster (pictured) is the newest addition to the five-member Delaware Court of Chancery, arguably the nation’s leading court on corporate and business law.

On Tuesday, Laster made the unusual move of replacing the lead counsel for a shareholder class in a class-action lawsuit related to the proposed purchase by MacAndrews & Forbes of a big chunk of Revlon’s stock. He also ordered an investigation of previous counsel. Click here for the Reuters story; here for the opinion.

We’ll try to keep the complicated backstory brief. Shortly after the stock purchase was announced, in April of last year, Revlon shareholders sued, essentially alleging that MacAndrews & Forbes was, in Laster’s words, “trying to capture the benefits of an internal Revlon restructuring” before such benefits were “recognized by the market.”

After the initial lawsuit was filed, days after the stock transaction was announced, a flurry of similar lawsuits followed. Ultimately, according to Laster, the plaintiffs’ lawyers reached an agreement among themselves on how they’d divvy up the work.

According to Laster’s opinion, the initial wave of consolidated lawsuits were settled in principle with Revlon in August of last year. But many shareholders objected to the settlement, and a few months later, in December, a new set of plaintiffs’ lawyers challenged the initial settlement.

Ultimately, the initial lawyers refiled their suit, and tried to have the newcomers’ suit incorporated into their own. In support of this motion, the initial group of lawyers touted their accomplishments and workmanship to Laster.

Laster ultimately didn’t bite, and in his ruling, kicked the initial lawyers off the case. He wrote:

I find that Old Counsel has not provided adequate representation in this case. After the initial skirmish over consolidation and lead counsel status, Old Counsel fell blithely into Cox Communications mode. They literally did nothing.

. . .

In addition, I am replacing Old Counsel because they have impaired their credibility with the Court. When New Counsel emerged and challenged Old Counsel's turf, Old Counsel responded with hyperbolic and self-aggrandizing descriptions of their performance and achievements. I have been told repeatedly, in various permutations, that Old Counsel "vigorously prosecuted the claims asserted in the Action" and engaged in "arduous arm's-length negotiations." These assertions were supported by little more than punctuation. It is true that they were repeated in Mr. Kornreich's original affidavit. But Old Counsel has not provided me with a single letter, email, or other contemporaneous document that might suggest vigor, ardor, or any other form of vibrant activity.

Wow. Harsh words, eh? The attorneys who were replaced were from Rosenthal, Monhait & Goddess and Rigrodsky & Long, both of Wilmington, Delaware and Wolf Popper of New York. We placed calls to the lead attorneys from all three firms, but they were not immediately returned.

What to make of this? “It’s a warning that if you bring cases like this you have the risk of being replaced,” said Robert Thompson, a law professor at Vanderbilt University Law School, to Reuters. “It says he’s a new judge and comes from the front line. He’s more bold than someone who’s been on the bench for 20 years.”

Full post as published by Law Blog - WSJ.com on March 18, 2010 (boomark / email).