On the transactional side, things seem to be going gangbusters for Skadden Arps. As we noted yesterday, the firm took the top spot in three separate rankings of 2012 M&A work. In 2011, a different firm sat atop each set of rankings, but in 2012, Skadden ruled them all.
On the litigation side, though, the new year has brought new headaches for Skadden. Earlier this month, a high-profile partner at the firm, along with another partner and an associate, got hit with a big benchslap. A federal judge issued an order to show cause, asking the Skadden lawyers to explain why they should not be sanctioned, and set “a status hearing in open court…. [at which the attorneys] are all directed to appear in person.” Ouch.
Skadden recently filed its response to the OSC. Let’s review the benchslap, then see what the Skadden lawyers had to say for themselves….
The case is Thul v. OneWest Bank, FSB, pending in federal district court in Chicago (N.D. Ill.). Charles and Cynthia Thul sued their mortgage lender, OneWest Bank, arguing that OneWest breached a promise to modify their mortgage, among other things. OneWest, through its counsel at Skadden, moved to dismiss.
In the opening brief in support of their motion to dismiss, the Skadden lawyers failed to discuss a recent, relevant Seventh Circuit opinion that was adverse to their position. This did not sit well with Judge Matthew Kennelly, who on January 2 doled out this benchslap (via the Indiana Law Blog):
The attorneys who submitted OneWest’s opening brief, John Beisner and Jessica Miller of the Washington, D.C. office of Skadden, Arps, Slate, Meagher & Flom, LLP, and Andrew Fuchs of the Chicago office of that firm, ought to have brought Wigod [the Seventh Circuit precedent] to the Court’s attention in their opening brief. Their failure to do so almost certainly ran afoul of their obligation of candor under ABA Model Rule of Professional Conduct 3.3(a)(2) and the corresponding District of Columbia (D.C. RPC 3.3(a)(3)) and Illinois rules (Ill. RPC 3.3(a)(2)), and it likely amounted to conduct sanctionable under Federal Rule of Civil Procedure 11(b)(2) and 28 U.S.C. § 1927. The Court will address this point further at the end of this decision….
For the reasons stated above, the Court denies defendant’s motion to dismiss [docket no. 29]. The Court also directs each of the attorneys who submitted the motion to dismiss and supporting briefs, John Beisner, Jessica Miller, and Andrew Fuchs of the law firm of Skadden, Arps, Slate, Meagher & Flom, LLP, to show cause in writing, by no later than January 10, 2013, why they should not be sanctioned in one or more of the following ways: (a) payment of plaintiffs’ reasonable attorney’s fees and expenses caused by advancing arguments contrary to the Seventh Circuit’s Wigod decision without bringing that case to the Court’s attention; (b) revocation of the pro hac vice status of Mr. Beisner and Ms. Miller; (c) a written and/or oral reprimand; (d) any other sanction that may be appropriate. The ruling date of January 3, 2013 is vacated. The case is set for a status hearing in open court on January 17, 2013 at 9:30 a.m. Mr. Beisner, Ms. Miller, and Mr. Fuchs are all directed to appear in person.
If John Beisner’s name rings a bell, it should. He currently serves as co-head of Skadden’s renowned mass torts and insurance litigation group (along with the formidable Sheila Birnbaum, aka the “Queen of Toxic Torts”). As a partner at another firm told us, when he forwarded us the order to show cause, “Beisner is a class action/mass torts mahoff, so this is big-time embarrassing.”
As it turns out, John Beisner is also no stranger to the pages of Above the Law. We first wrote about him back in 2008, when he was a candidate for the chairmanship of O’Melveny & Myers. We wrote about him again in 2009, when we broke the news of his leaving O’Melveny for Skadden, along with Jessica Miller and Stephen Harburg; at the time, according to a tipster, “Beisner’s cases [represented] an unbelievable percentage of the entire litigation portfolio” at OMM. And then we wrote about him last week, describing a panel discussion he participated in along with Professor Arthur Miller and Justice Antonin Scalia, among other luminaries. Mahoff indeed.
Consistent with the order to show cause, Skadden filed its response on January 10. It struck me as a well-executed, major mea culpa. It begins:
The undersigned counsel, John H. Beisner, Jessica Davidson Miller and Andrew J. Fuchs (collectively, “Counsel”) respectfully submit this response to the Court’s Order to Show Cause.
Counsel apologize to the Court for not discussing Wigod in OneWest’s opening brief. Since receiving the Court’s order, Counsel have spent substantial time rereading Wigod and both parties’ briefs, reviewing ethical and legal rulings, and consulting with colleagues who had not worked on this case. Having reflected on these matters at length, Counsel wish to tell the Court first and foremost that they are very sorry Wigod was not cited and distinguished in the opening brief.
That’s a classy response to an unfortunate situation. And so is this:
Mr. Beisner and Ms. Miller further wish to clarify that they had ultimate responsibility for the legal briefing in this matter. Mr. Fuchs was neither the principal drafter of the briefs nor tasked with conducting research related to the briefs. While Mr. Fuchs reviewed the opening brief prior to its filing, he relied upon Mr. Beisner and Ms. Miller with respect to the legal content of the briefing and was not personally aware of the Wigod decision.
Yes, that’s right: John Beisner and Jessica Miller, partners, just extracted Andrew Fuchs, associate, from under the federal judicial bus. That’s pretty impressive; many other partners might have blamed the associate — and the associate, desirous of keeping his job, would have had to take it.
And then there’s this happy ending:
Counsel also wish to inform the Court that OneWest and the Thuls have reached an agreement to settle this litigation. Counsel (through their firm) will be contributing to the settlement amount in order to personally redress plaintiffs’ counsel for responding to the motion to dismiss.
Charles and Cynthia Thul must be so glad right now that the Skadden lawyers failed to cite Wigod. I’d love to know the terms of the settlement in this case. As for Skadden contributing to the settlement, the firm can afford it, with $2.5 million in profits per partner (according to the most recent Am Law 100 rankings).
Of course, that’s not all the Skadden lawyers have to say about the matter. They spend the next few pages of their response explaining why they viewed Wigod as distinguishable from their case and not required to be cited in their opening brief. But they explicitly and repeatedly point out that they’re not trying to pick a fight with Judge Kennelly:
Counsel wish to emphasize that their purpose in doing so is not to defend the omission or to reargue positions already rejected by the Court, but only to explain how it happened and to assure the Court that an incident like this one will not arise again….
Counsel understand that the Court has ruled on the merits of these positions and that its decision is the law of the case. Counsel do not mean to debate the Court’s ruling; their only intent is to explain their conduct. Counsel further reiterate that they regret not citing and distinguishing Wigod in their opening brief.
Oh, and did they mention that they’re really sorry about not citing Wigod? They’d like to mention that again, thanks.
In the final pages of their response, the Skadden lawyers argue against the imposition of sanctions against them. Their main point is that, because they had a good faith belief that Wigod was distinguishable, their failure to cite it — while admittedly wrong — was not so egregious as to warrant sanctions. And they promise to clean up their act in the future:
Counsel assure the Court that they will present arguably dispositive precedent in opening briefs going forward, even if they believe that such cases are distinguishable.
Maybe John Beisner and Jessica Miller should have to write this on a blackboard five hundred times: “I will always present arguably dispositive precedent in opening briefs going forward.”
The Skadden response to the order to show cause strikes me as heartfelt and sufficient. If I were the judge, I wouldn’t impose sanctions.
Biglaw partners have a great deal of pride. Being forced to swallow it is punishment enough.
UPDATE (1/18/2013, 2:20 PM): Read about what punishment Judge Kennelly imposed over here.
(You can check out the order to show cause and Skadden’s response in full by flipping to the next page.)