We’ve been hearing talk of interesting developments at Boies, Schiller & Flexner, the litigation powerhouse founded by the legendary David Boies, which seems to be doing well despite the downturn (see their bonuses). If you have info to share, please feel free to email us.

Here is some news that we can confirm. The BSF office in New Jersey — located in the upscale community of Short Hills, home to the fabulous, high-end shopping mall — is breaking off from the mother ship. Partners David Stone (at right) and Robert Magnanini are hanging up their own shingle, at Stone & Magnanini. (The official press release is available here.)

As one might expect of Boies Schiller partners, Stone and Magnanini are highly experienced and impressively credentialed. David Stone (above right) — a graduate of Harvard Law School, where he worked with such heavyweights as Alan Dershowitz and Laurence Tribe — has developed a robust practice in complex civil and criminal litigation. He has been particularly successful in handling False Claims Act cases, where he has scored some major victories (including a $163 million settlement in the Medco case).

Bob Magnanini (at right), a graduate of Columbia Law School, has similarly extensive experience in complex civil and criminal cases, especially False Claims Act matters. He’s also a Lieutenant Colonel in the New York Army National Guard, serving as the senior division staff officer from the 42nd Infantry Division at the World Trade Center for the two weeks following the 9/11 attacks.

They’ll be joined by Eric Jaso, as counsel. Jaso, a graduate of the University of Chicago Law School, is a former Justice Department official and federal prosecutor, who also worked at Latham & Watkins and Cravath. (Disclosure: Jaso is a friend and former colleague of your above-signed scribe, from the U.S. Attorney’s Office in New Jersey.)

We chatted on the phone with David Stone — no relation to Eli — about the new firm. Read more, after the jump.

UPDATE (4/7/09): As of now, the firm is hiring. Details here.

ATL: You’ve had a long and successful career. Can you tell us, in brief, how you got here?

DSS: I went to Harvard Law School, where I worked with Alan Dershowitz, on matters including the Von Bulow case, and with Larry Tribe, on his Con Law treatise. I also worked on Woburn v. W.R. Grace, the case featured in A Civil Action.

Skipping ahead, I was one of the founding partners of Stern & Greenberg (now Stern & Kilcullen), along with Herbert Stern, the former federal judge and U.S. Attorney for New Jersey. We were very close colleagues for a number of years.

I then went off and started my own firm. This is how I came to work with David [Boies]. When I was general counsel to YankeeNets, David and I worked as co-trial counsel in a successful suit to recover the New York Yankees’ television rights from Madison Square Garden Network.

Eventually David asked me to join his firm, and we had various discussions. When he decided he wanted to have a New Jersey office, I agreed to join him. Boies Schiller gave me a really high-level platform for my practice, as well as the autonomy to recruit my own people. The idea was to work on Boies Schiller matters in New Jersey and also to grow the False Claims Act practice, which Boies was very supportive of.

ATL: Can you tell us a bit more about that practice?

DSS: Over the years, I’ve been handling False Claims Act cases, in which I’ve developed a specialization. I’ve always represented the relators [i.e., the whistleblower plaintiffs] in these cases, not the defendants.

I worked on a very large False Claims Act case in Minnesota, involving 65 anesthesiologists, five hospitals, and several anesthesiology groups. That case went on for eight years and made it all the way up to the Supreme Court. I myself took over 80 depositions in that case and spent a good part of my life in Minnesota. Eventually I successfully resolved that case, which led to more such cases.

Our firm is now in the top three or so firms known for doing this type of work. In the cases we’ve been involved in, over a billion dollars has been recovered.

My practice has drifted towards the pharmaceutical realm. I had always had a focus on health care, but I’ve gravitated as most False Claims Act practitioners have towards focusing on large pharmaceutical companies. These cases often have the largest recoveries and the greatest government interest. But I work on many different types of False Claims Act cases, including defense contractor cases and fraud in Iraq, as well as IRS whistleblower cases.

ATL: What types of matters have you worked on outside the False Claims Act realm?

DSS: I’ve worked on a number of groundbreaking cases at BSF, including the Hank Greenberg litigation, as well as representing a former UN official investigated in Oil for Food scandal. I’ve had a pretty varied complex litigation practice, working in areas like IP, unfair competition, and FTC proceedings.

ATL: It sounds like everything is going great. What’s behind your decision to leave Boies Schiller and start Stone & Magnanini?

DSS: Our False Claims Act practices has become so big, and so public, that it has started to give rise to potential conflicts with Boies Schiller, because of BSF’s institutional clients. Boies Schiller has grown to some 250 lawyers and has picked up some major corporate clients. I was conflicted out of some [False Claims Act] cases, and I felt that this might happen more down the road.

So I spoke to the managing partners, and we decided it would be a win-win situation to spin off the New Jersey office. I could grow the False Claims Act practice without concern about possible conflicts. But we can continue to work with BS as co-counsel or local counsel in certain cases that don’t present conflicts.

It’s also a great opportunity for us to be more entrepreneurial. We can have a practice on a much greater scale, in terms of the cases we’re handling and the money at stake. You can recover hundreds of millions of dollars, and attorneys in these cases can make very good fees, not limited by the hourly fee.

ATL: What are your thoughts about launching in the current economic climate?

DSS: This is actually a perfect approach for the current environment. You can be innovative with [fee] arrangements, not just going by the billable hour. I never liked the hourly standard. It rewards people for building up hours without accomplishing anything.

We would get punished for how well we do. We’d win a summary judgment motion and end up spending 200 hours on a case rather than 2000 hours. The more efficient we were, the less money we made. So right now there’s a great opportunity for us to go out to clients and say that we can handle this litigation for X amount, or for a fixed amount with a success fee, or with a contingent fee.

What’s great [about representing relators in False Claims Act cases] is that you’re basically betting on yourself — and nine times out of 10, we think we’re going to win. And clients are happy because they’re paying you out of money that is actually coming in to them.

That’s why I see this as a great opportunity. Some say this isn’t a great marketplace for legal services, with lawyers being laid off. But I think that, first, there are a lot of good lawyers available, and second, clients are looking for the most efficient way to achieve their goals. Good lawyers who are practical will do well.

ATL: So here’s a question that many laid-off lawyers in the tri-state area will want to know: Are you hiring?

DSS: We might be hiring later, depending on how things go. We’re starting off being prudent. Right now the new firm will consist of me and Bob, as partners; Eric Jaso, as counsel; and three associates. We’ll start with six lawyers and build from there.

I did the Minnesota case with basically just four attorneys; the other side had about 26 attorneys. If you have experience and do this litigation in an efficient way, you don’t need a lot of lawyers. But that doesn’t mean that at some point we might not add on lawyers later.

UPDATE (4/7/09): As of now, the firm is hiring to fill one position. Details here.

ATL: You sound very busy. Does all this leave you with any time outside the office?

DSS: I actually have many outside interests. I produced on off-Broadway musical based on Frankenstein by Mary Shelley. I have a deep interest in the arts; I play the jazz piano, and I’m on the NJPAC [New Jersey Performing Arts Center] board.

I’m also playing soccer in July for the U.S. in the Maccabiah Games, in the men’s 45-and-over category. The Maccabiah Games are like the Jewish Olympics, held in Israel every four years. They’re the third-largest sporting event in the world after the Olympics.

I also co-founded an organization called the Federal Enforcement Homeland Security Foundation. It’s a private charitable foundation that acts as a safety net for federal and state law enforcement officials and their families, to assist them when agents are injured or killed in the line of duty. You can check out our website at www.fehsf.org.

ATL: It sounds like a great organization. Best of luck with your new firm!

Stone & Magnanini LLP: New Firm Will Expand Successful and Profitable Qui Tam Practice [press release]