Law Firms

Judge Says Hausfeld and His Former Firm Both Violated Settlement

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A federal magistrate judge in Philadelphia says lawyer Michael Hausfeld and his former law firm both violated an agreement on the distribution of class-action attorney fees and the return of capital contributions.

U.S. Magistrate Judge Timothy Rice refused to award attorney fees in the litigation over the settlement to either Hausfeld or the firm now known as Cohen Milstein Sellers & Toll because of what he saw as bad faith on both sides, the Legal Intelligencer reports.

“Even after the parties settled disputes arising from the break-up with judicial assistance, their mutual mistrust and bare-knuckle tactics spawned new disputes involving more than $17 million in legal fees and capital accounts,” Rice wrote.

Hausfeld has said he was informed of his expulsion from Cohen Milstein Hausfeld & Toll by a note left on his chair. He formed a new firm and initially took 17 lawyers with him. Rice said Cohen Milstein was able to oust Hausfeld by reducing his ownership interest and obtaining consent of partners owning two-thirds of the firm’s equity interest, according to the story.

Rice said Cohen Milstein lawyers had implied that Hausfeld would receive $5 million from his capital account and another departing lawyer, Richard Lewis, would get $1 million. After Cohen Milstein received a $3 million fee award from Hausfeld, the firm informed the lawyers they would receive $3 million and $686,000, respectively, the story says.

Hausfeld “unilaterally chose to retaliate,” Rice said, by refusing to evenly split a $9.8 million fee award.

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