Inside ‘unseemly’ lead counsel fight in Nexium antitrust class action

January 29, 2013

The Federal Judicial Center says that the preferred way to determine lead counsel in a complex multidistrict litigation is for plaintiffs’ lawyers to meet and reach a consensus on which firms should direct the case. But that’s not always the way things work out. Just ask Linda Nussbaum at Grant & Eisenhofer, who lost a bid last week to lead an antitrust class action by drug wholesalers accusing AstraZeneca and three generic drugmakers of conspiring to keep AZ’s blockbuster heartburn drug Nexium off of the market. Nussbaum accused three other big pharmaceutical antitrust players — Hagens Berman Sobol Shapiro, Garwin Gerstein & Fisher and Berger & Montague — of plotting to exclude her and then misrepresenting her stellar record. In the end, Nussbaum’s rivals won the battle for lead counsel, but not without also incurring the disgust of the judge overseeing the case.

In a Jan. 24 order appointing the Hagens group to lead the case, U.S. District Judge William Young of Boston meted out blame for the “unseemly squabble” among plaintiffs’ firms. “This squabble reflects most poorly on all counsel involved since it appears driven more by a desire to participate to a greater degree in a potential award of attorneys’ fees than by any nuanced professional judgment concerning how to assemble the strongest possible team of counsel,” he wrote. Young also said he planned to make sure that the cost of “this sad and unprofessional quarrel” is not passed along to the firms’ clients.

But even the strong words in Young’s order don’t convey how truly nasty the showdown between Nussbaum and Bruce Gerstein of Garwin Gerstein became, with these two leaders of the plaintiffs’ antitrust bar flinging accusations of borderline ethics back and forth for a month. Lead counsel jostling in mega-antitrust and product liability litigation is the rule, not the exception, as indicated by the briefs debating leadership of the Nexium indirect purchasers’ case, also before Judge Young. Plaintiffs’ lawyers, however, usually realize after a round or two of briefing that they’re better off reaching an agreement than parading dirty laundry before the court and the defendants; that’s what happened in the indirect purchasers’ wing of the Nexium case. This story is for anyone who doubts the wisdom of finding consensus.

The fight began on Dec. 17, when Thomas Sobol of Hagens Berman, representing the drug wholesaler American Sales Company, moved to be appointed lead counsel. Two weeks later, on New Year’s Eve, Nussbaum filed a cross-motion on behalf of Meijer Inc suggesting that four firms jointly lead the case as co-counsel: her firm, Sobol’s firm, Garwin Gerstein and Berger & Montague. Unbeknownst to Nussbaum, the other three firms had already met and decided to team up, as Hagens Berman revealed in an amended motion on Dec. 31. “Hagens Berman admittedly has changed its position,” the motion said. “A three-firm leadership structure has been successful in other similar cases on behalf of a similar proposed class of direct purchasers.” Nussbaum responded with a motion a couple of days later suggesting again that her firm join the lead group, since her credentials were every bit as good as those of the other candidates. If the judge was worried about too large a group, she said, he should just appoint her and Hagens Berman.

Though Nussbaum noted “a not insubstantial degree of regret … (that) the three other plaintiffs groups have chosen to exclude” her, the dispute to that point was polite, at least publicly. But in a brief on Jan. 8, Gerstein escalated matters. “There have been a number of troubling instances in the past which raise serious questions regarding Ms. Nussbaum’s fidelity to the class’s interests,” his brief said. In a number of similar antitrust cases against makers of popular drugs, Gerstein claimed, Nussbaum and her client Meijer had pulled out after being named to lead the case, stranding co-lead counsel and plaintiffs. “Thus, unlike the other plaintiffs here, based on the aforementioned track record, Meijer is far from the most reliable plaintiff to serve the interests of the class,” his brief said. Then, in an indication of how well the firms in the dispute know one another’s business, Gerstein reached all the way back to a 2001 case that involved claims by both drug wholesalers and contract purchasers to accuse Nussbaum of having “an obvious conflict” and acting against the interests of the wholesalers.

Nussbaum then accused Gerstein of attacking her for his own diabolical purposes. “Shock and dismay are terms perhaps too frequently used,” she wrote in a brief on Jan. 10. “But those words are particularly apt here. Bruce Gerstein, counsel for Value Drug and Burlington Drug, has stepped over the line. Meijer and Ms. Nussbaum take umbrage at Mr. Gerstein’s misleading accusations. His attempts to impugn the character of Ms. Nussbaum and Meijer, a class representative that he, as part of a leadership group, has represented and personally praised time and time again, are not well-taken,” the Nussbaum brief said. Gerstein was all too happy to praise Meijer when he needed its support, Nussbaum asserted, but was now deploying “baseless rhetoric” to paint standard class action procedures by Nussbaum and her client as “sinister.”

Earlier this month, an exasperated Judge Young ordered the four firms to get together and work things out. That only led to two more rounds of bitter briefs in which Gerstein, Sobol and David Sorensen of Berger & Montague scrutinized Nussbaum and her client and Nussbaum defended her record and descried their supposed exaggerations and misrepresentations. She also claimed that Sobol had revealed confidences by her client. In the meantime, both sides solicited support from drug wholesalers who haven’t filed suits in the consolidated litigation but would be members of a class of direct purchasers. Several of these absent class members were pulled into the dispute (most in support of the three-firm dispute). And when Sobol of Hagens Berman proposed ending the feud and adding Nussbaum, another plaintiff’s lawyer said that if Nussbaum joined the lead counsel group, he also would demand to join.

Young’s order last week shut off the stream of invective, but you can see how the whole thing left him in disgust.

I emailed all of the lawyers in the lead counsel war but none responded.

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