Court Rejects Bid to obtain law firms Work Product in class action settlement

shareholder had sought internal documents to support claim that settlement did not adequately account for company fraud

Anthony Lin  New York Law Journal  December 28, 2007
A Manhattan appeals court has rejected a billionaire investor’s bid to obtain the work product of three plaintiffs firms, led by Milberg Weiss, which he claims settled a class action against software maker CA Inc., for too little.
Sam Wyly, a major CA shareholder, had sought internal documents from Milberg Weiss; Stull, Stull & Brody; and Schiffrin Barroway Topaz & Kessler to support his claims that the 2003 settlement they negotiated, valued at $134 million, failed to adequately account for fraud at CA, which ultimately landed top executives — including CEO Sanjay Kumar and general counsel Steven Woghin — in jail.
But in a decision issued Thursday, the Appellate Division, 1st Department, ruled that Wyly, as an absent class member in the CA suit, did not have the same right to lawyers’ files as a client in a traditional “bipolar” attorney-client relationship.
In a unanimous decision written by Justice Eugene Nardelli on behalf of a panel that also included Justices Richard T. Andrias, John W. Sweeny and Bernard J. Malone, the court said the Court of Appeals’ 1997 decision in Sage Realty Corp. v. Proskauer Rose, 91 NY2d 30, which held that clients are entitled to all of their attorney’s work product, did not apply to absent class members.
Sage Realty … involved an attorney-client relationship in the traditional sense, in that the single voice of a client governs, among other things, the lawyer’s conduct; the direction of a case, including any decision on when, if, and under what terms it should be settled; and the attorney’s continued employment,” Justice Nardelli wrote in Wyly v. Milberg Weiss, 104553/05.
“In contrast,” he continued, “it has been observed, by courts and commentators alike, that the relationship between appointed counsel and an absent member in a class action differs fundamentally from that found in the traditional relationship.”
The panel said absent class members were entitled to some of the benefits of an attorney-client relationship, such as privileged communications with class counsel, but had no right to direct the course of litigation. The court noted that Wyly had been free to hire his own lawyer in the CA class action, though his role still would have been limited, or opt out of the class action altogether.
The court also said Wyly had not sufficiently shown why he needed access to the lawyers’ files.
Nardelli wrote that Wyly appeared to be using the state court proceeding as a “fishing expedition” for evidence that might support his ongoing battle in federal court to have the CA settlement vacated.
Last month, Wyly also filed a legal malpractice suit in Manhattan Supreme Court against Milberg Weiss and the other two class action firms in the CA case. In that suit, Wyly alleges the firms fraudulently induced class members to participate in an inadequate settlement that still paid $40 million in legal fees.
Wyly’s lawyer, William Brewer of Bickel & Brewer, Thursday said his client was on firm legal ground bringing a legal malpractice case as class member and would be able to obtain the documents he sought in the course of that case. But Brewer said they would nevertheless appeal the Appellate Division’s decision because it was “bad law” that allowed class action lawyers to act against the interests of class member.
Milberg Weiss, which did not respond Thursday to an e-mail request for comment, and the other firms appeared pro se.
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