Bernstein Vs Bernstein Litowitz Complaint 031816
Bernstein Vs Bernstein Litowitz Complaint 031816
Bernstein Vs Bernstein Litowitz Complaint 031816
COMPLAINT
JURY TRIAL DEMANDED
Defendants.
Plaintiff Bruce Bernstein (Bernstein or Plaintiff), by his undersigned attorneys, for
his Complaint against Defendants Bernstein Litowitz Berger & Grossmann LLP (BLB&G)
and Max Berger, Steven Singer, Salvatore Graziano, Edward Grossmann and Gerald Silk
(collectively, Individual Defendants and, with BLB&G, Defendants) alleges as follows:
NATURE OF ACTION
1.
This action arises from Defendants retaliation against Bruce Bernstein for his
efforts to address and expose Defendants involvement in an unlawful kickback scheme (the
Kickback Scheme).
2.
Mississippi lawyers and distributed fees from the proceeds of securities class action settlements
as a quid quo pro for being repeatedly selected as counsel for a Mississippi pension fund.
3.
the Kickback Scheme and brought them to the attention of the Defendants.
5.
internally at BLB&G, Bernstein reported his concerns to the U.S. Attorneys Office.
6.
7.
Defendants also caused a lead plaintiff in another securities class action, a client
who followed Bernstein to BLB&G, to end his professional relationship of nine years with
Bernstein.
8.
In this action, Bernstein seeks to recover the compensation he would have earned
if Defendants had not wrongfully terminated him, the fees he would have received had
Defendants not tortiously interfered with his relationship with his client of nine years, and related
relief.
JURISDICTION AND VENUE
9.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1331 because
this action arises under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. 1961 et seq.
10.
because a substantial part of the events giving rise to Bernsteins claims occurred in this district.
THE PARTIES
12.
practiced law since 1997 and is a member in good standing of the bar of the State of New York.
Bernstein was employed by BLB&G1 as an of counsel attorney from December 15, 2008
through October 25, 2012.
13.
New York State. BLB&G maintains its principal place of business in New York City and
operates offices in California, Illinois and Louisiana.
14.
period of Bernsteins employment at BLB&G and the two weeks immediately following his
departure from BLB&G (the Relevant Period), Berger participated in the operation and
management of BLB&G.
15.
Relevant Period, Singer participated in the operation and management of BLB&G. Upon
information and belief, in March 2014, Defendant Singer left BLB&G.
16.
During the Relevant Period, Grossmann participated in the operation and management of
BLB&G.
18.
Bruce Bernstein has no relation to the late Paul M. Bernstein, one of the founders and
name partners of BLB&G.
Bernstein Joins Milberg and Plays a Key Role in the Merck Litigation
19.
Bershad Hynes & Lerach LLP (Milberg), where he became a partner in 2006.
20.
Derivative and ERISA Litigation, a large securities class action that was filed in November 2003
and is currently pending in the U.S. District Court for the District of New Jersey (the Merck
Litigation).
21.
relationship with Richard Reynolds (Reynolds), who was appointed as one of four lead
plaintiffs in the case.
22.
the firm.
B.
In January 2007, in connection with the Merck Litigation, Reynolds averred that
[d]uring my numerous interactions with Bruce Bernstein over the last three years, while he was
at Milberg, and more recently at Dreier, he has earned my full trust and confidence in his ability
to effectively prosecute the Action. (Merck Litigation, Dkt. No. 183-3, at 4.)
C.
customs and practices, that BLB&G would pay Bernstein, in addition to his regular salary and
bonus, at least 10 percent of the fees generated from the clients he brought in.
28.
Reynolds and the other lead plaintiffs in the Merck Litigation with the firms client, the
Mississippi Public Employees Retirement System (MPERS). Specifically, in late 2006, when
Bernstein was representing Reynolds at Dreier, BLB&G filed a motion to intervene in the Merck
Litigation on behalf of MPERS and argued that MPERS should replace Reynolds because he
purportedly provided inadequate representation and lacked honesty and candor in his
communications with the court.
29.
(and itself as an additional co-lead counsel firm), the court rejected BLB&Gs attack on
Reynoldss honesty and candor and Reynolds remained a lead plaintiff in the Merck Litigation.
30.
Notwithstanding the fact that BLB&G had previously impugned his character in a
publicly-filed legal document, when Bernstein joined BLB&G, Reynolds followed him.
31.
D.
Satyam Computer Services Securities Litigation (the Satyam Litigation), which was
commenced in the U.S. District Court for the Southern District of New York in January 2009.
33.
In May 2009, the court overseeing the Satyam Litigation appointed MPERS as
one of four lead plaintiffs and approved its selection of BLB&G and a second law firm, Grant &
Eisenhofer LLP (G&E), as two of the four lead firms. Prior to doing so, the court asked
Defendant Silk about the request to approve two law firms for MPERS: Can you explain to me
. . . why I need two firms? (Satyam Litigation, Dkt. No. 12.) Based in part on Defendant
Silks representation that there would be no duplication of effort, the court approved both
BLB&G and G&E as co-lead counsel. (Id.)
34.
Shortly after Bernstein was assigned to the Satyam Litigation in September 2010,
on or about September 23, 2010, he met with Defendant Singer and an associate attorney who
had worked on the Satyam Litigation but was leaving BLB&G. Singer informed Bernstein that a
solo practitioner from Jackson, Mississippi Vaterria Martin (Martin) would occasionally
check on the status of the case for MPERS, even though BLB&G was already providing this
information directly to the Office of the Mississippi Attorney General (the Mississippi AGs
Office), which acts as MPERS legal advisor and selects and monitors outside counsel on behalf
of MPERS.
35.
In addition to the Merck and Satyam Litigations, between 2005 and Bernsteins
departure from BLB&G in October 2012, BLB&G served as lead or co-lead counsel in at least
14 other shareholder actions in which MPERS was appointed as a lead plaintiff.2
36.
Bernstein an email he had sent to Martin notifying her that he was leaving BLB&G. In his
cover email to Bernstein, the departing associate noted, [t]his is the woman who is local
counsel of some sort to MPERS. She will occasionally check for updates . . . .
37.
in principle to settle with the company defendant for $125 million. On February 16, 2011, the
parties executed a stipulation setting forth the terms of the settlement.
38.
On February 21, 2011, Martin provided Bernstein and Singer with her timesheets.
Although she had not produced any written work as of that date, Martins timesheets indicated
she had spent approximately 50 hours on various tasks.
The shareholder actions in which MPERS was appointed as a lead plaintiff and BLB&G
served as lead or co-lead counsel include: (1) In re Merck & Co., Inc. Securities Litig., 05-cv2367; (2) In re Satyam Computer Systems Ltd. Securities Litig., 09-md-2027; (3) In re
Converium Holding AG Sec. Litig., 04-cv-7897 (S.D.N.Y.); (4) In re Delphi Corp. Securities
Litig., 05-md-1725 (E.D. Mich.); (5) In re Mills Corp., Securities Litig., 06-cv-0077 (E.D. Va.);
(6) UnitedHealth Group, Inc. Shareholder Derivative Litig., 06-cv-1216 (D. Minn.); (7) Merrill
Lynch Mortgage Pass-Through Litig., 08-cv-10841 (S.D.N.Y.); (8) In re Maxim Integrated
Products, Inc. Sec. Litig., 08-cv-0832 (N.D. Cal.); (9) In re Ambac, Financial Group Inc., Sec.
Litig., 08-cv-0411 (S.D.N.Y.); (10) Bear Stearns Mortgage Pass-Through Litig., 08-cv-8093
(S.D.N.Y.); (11) In re Merck & Co., Inc. Vytorin/Zetia Securities Litig., 08-2177 (D.N.J.); (12)
Goldman Sachs Mortgage Pass Through Litig., 09-cv-1110 (S.D.N.Y.); (13) State Street Corp.
Securities Litig., 09-12146 (D. Mass.); (14) Morgan Stanley Mortgage Pass-Through Certificate
Litig., 09-cv-2137 (S.D.N.Y.); (15) Bach v. Amedisys Inc., 10-cv-0395. (M.D. La.); and (16) In
re J.P. Morgan Mortgage Pass-Through Litig., 12-cv-3852 (E.D.N.Y.). Of these 16 actions,
several, including the Merck Litigation, are still active.
7
39.
On March 1, 2011, Bernstein received a call at home from Berger, who asked that
he join him in calling Martin. During the call, Berger assigned two unnecessary legal research
projects to Martin, including the preparation of an unnecessary legal memorandum.
40.
settle with the auditor defendants in the Satyam Litigation for $25.5 million.
41.
On or about March 15, 2011, Bernstein asked if he or Singer was going to instruct
That is the dumbest question I have ever heard. Come on, you were a partner at Milberg. Are
you an idiot? Do you ever want us to work with George [Neville]3 again? Do you ever want us
to work with Mississippi again? I hope that your second question isnt as dumb as the first one.
43.
Bernstein disagreed that Martin should continue to perform unnecessary work and
was distressed by Singers response. Following the exchange with Singer, Bernstein
communicated his distress to colleagues at BLB&G.
44.
On the evening of April 26, 2011 more than six weeks after lead plaintiffs had
settled with the auditor defendants in the Satyam Litigation Martin sent an 18-page legal
research memorandum (the Martin Memo) to Berger, Singer and Bernstein. The email also
attached an updated timesheet in which Martin reported working a total of 207 hours on the
Satyam Litigation. According to the timesheet, Martin had spent the majority of that time
researching and drafting the Martin Memo.
George Neville is a Special Assistant Attorney General and is purportedly tasked with
overseeing outside class action counsel for the Mississippi AGs Office on behalf of MPERS.
8
45.
On April 27, 2011, Berger asked Singer and Bernstein to let me know if [the
Martin] [M]emo is decent, just for the record. . . . just in case George [Neville] asks. The email
directed Bernstein to please hold on to [Martins] time and make sure she gets all pleadings and
drafts on a timely basis.
46.
Bernstein informed Berger that the Martin Memo, which addressed the wrong
pleading and contained no meaningful legal analysis, had no value. Berger agreed.
47.
copies to Berger and Singer, which memorialized Bernstein and Bergers prior discussion that
the Martin Memo had no value.
48.
Later that day, Singer commented good memo about Bernsteins memorandum
to the file and said he thought the Martin Memo was ridiculous.
E.
settlements and the application for attorney fees and expenses in the Satyam Litigation (the
Settlement and Fee Submissions). Singer oversaw the preparation and filing of these
materials.
50.
The Settlement and Fee Submissions provided information about the four co-lead
counsel firms and two additional law firms that served as counsel for the sub-class. These
materials did not identify or refer to Martin or indicate that any fees would be paid to her in the
Satyam Litigation.
51.
Martin did not file a pro hac vice application or a notice of appearance in the
Satyam Litigation, and was not referenced in any document that was filed with the court in that
case. Upon information and belief, Martin was not licensed to practice law in New York.
52.
On September 13, 2011, the court entered judgments approving the $150.5
million combined settlements with the company and auditor defendants. The court also
approved counsels fee request for 17 percent of the $150.5 million settlement amount, which
totaled $25.585 million.
53.
comptroller that the firm had not paid Martin. Bernstein learned from the comptroller that
BLB&G and G&E had each paid Martin $112,500, for a total payment of $225,000, from the
class settlement proceeds.
54.
payments to Martin were the subject of emails between, among others, Singer and Martin. One
such email chain, which Singer forwarded to Grossmann on October 6, 2011, bears handwritten
notes referencing the BLB&G general ledger account from which the BLB&G payment was
made, referring to Martin as Satyam Outside Counsel and stating that Martin was entitled to
75% of $150,000 when settlement is final, and Pay 10/17. $112,500 Today.
55.
Shortly thereafter, Bernstein retained counsel, at his own expense, to advise him
concerning his ethical and legal obligations in connection with the payments to Martin for
unnecessary work in the Satyam Litigation.
56.
Bernstein subsequently learned that Martin a solo practitioner who had been
admitted to the Mississippi bar approximately five years before the filing of the Satyam
Litigation had no securities litigation experience prior to the Satyam Litigation and was
married to a Special Assistant Attorney General in the Mississippi AGs Office. Upon
information and belief, Martins husband had worked directly with the Mississippi Attorney
General.
10
F.
Bernstein Internally Reports His Concerns Over the Newly Discovered Facts
57.
On November 22, 2011, Bernstein told Graziano about his previous discussions
with Defendants Berger and Singer about Martin, his subsequent discovery of the payments to
Martin, and additional facts about her professional experience and ties to the Mississippi AGs
Office. Graziano responded that the facts were concerning. Later that day, Graziano told
Bernstein that he had done the right thing. Graziano said that he would discuss the matter with
Berger and other senior lawyers at BLB&G.
58.
Later that evening, Graziano asked Bernstein if he thought the fees paid to Martin
should have been disclosed to the court. Bernstein responded, Absolutely. Graziano replied,
Yeah, I do too.
59.
Graziano said he had spoken to both Grossmann and Berger about the matter.
According to Graziano, Berger was committed to investigating the matter and might engage an
outside firm to do so. Graziano again told Bernstein he had done the right thing and said
everyone knows youre doing it for the right reason.
60.
On November 29, 2011, Graziano told Bernstein that there were five or six
firms in the Satyam Litigation, including Martins, to which undisclosed fees had been paid.
Graziano explained that there was local pressure on the Mississippi AG to use local firms in
the Satyam Litigation and other matters. Graziano stated that BLB&G had done this in multiple
cases and reiterated that it is important for the Mississippi AG to have local Mississippi firms
in these cases.
11
G.
On December 5, 2011, Berger summoned Bernstein to his office to get this over
62.
When Bernstein arrived, Grossmann and Graziano were also sitting in Bergers
with.
office. Berger said he was upset that Bernstein had spoken to BLB&Gs comptroller about
Martin. Berger explained that a former BLB&G partner had once come to Berger with a concern
regarding an ethical issue at the firm. Berger said, if you do not feel comfortable with or trust
the firm, the relationship with the firm will not work.
63.
performed shoddy work. Berger said that the Mississippi AG was under pressure to use
minority firms.
64.
Noting that he probably would have used different words, Berger said he
agree[d] with the sentiment that Singer had expressed to Bernstein in March 2011 concerning
the importance of allowing Martin to continue performing unnecessary work even after plaintiffs
had already reached settlements with the company and auditor defendants.
65.
responded that because the Martin Memo did not provide a benefit to the class an assessment
Berger and Singer agreed with Bernstein did not think Martin would be paid.
66.
Berger asked Bernstein if he felt comfortable about the matter. Bernstein said
got a little rough during the previous days meeting, which wasnt our intention.
12
68.
December 9, 2011. Bernstein said he would be more comfortable if the firm consulted with an
attorney who specialized in legal ethics. He pointed out that BLB&G had previously consulted
with outside ethics counsel, Professor Bruce Green, on other matters.
69.
hundred percent heartfelt, he believed there was a disconnect because he and the other
Individual Defendants did not believe there was a problem.
71.
Berger told Bernstein to put the matter behind you and that it will not be held
against you.
72.
Upon information and belief, during the Relevant Period, no one at BLB&G ever
consulted with ethics counsel concerning Martins role in the Satyam Litigation, her
corresponding compensation or the need to disclose this information to the court.
73.
At a BLB&G event on or about the evening of December 15, 2011, Berger and
Bernstein spoke for the first time since their December 9 meeting. Berger approached Bernstein
and asked him if he knew an individual whose name Bernstein did not recognize. Berger
responded: Oh, you dont know him? Well, he was a whistleblower who had to rent space from
us because he was blackballed from the finance industry.
74.
Kickback Scheme to the U.S. Attorneys Office for the Southern District of New York.
13
H.
In November 2011, Bernstein shared his concerns about the Kickback Scheme
with a BLB&G associate, who said he had similar concerns relating to the Merck Litigation.
77.
Upon information and belief, George Neville, the Mississippi Special Assistant
Attorney General who oversaw outside counsel for MPERS, had asked Graziano to assign work
on the Merck Litigation to a friend of Nevilles father.
78.
Graziano told the BLB&G associate that they should speak with Neville about the
The BLB&G associate told Bernstein that these facts made him uncomfortable
In February 2012, Bernstein learned from a BLB&G paralegal that BLB&G had
assigned a document review project to a Mississippi lawyer who practiced in the areas of
bankruptcy, personal injury and workers compensation but who had no apparent prior experience
handling securities class actions.
82.
In April 2012, Bernstein learned that BLB&G had assigned work on the same
document review project to a lawyer at another Mississippi law firm who similarly did not
appear to have experience in handling securities class actions.
83.
work to undisclosed Mississippi lawyers in the Merck Litigation. Graziano said, I guess
Mississippi likes to have local counsel.
14
84.
Unlike the teams of other lawyers reviewing documents for plaintiffs who worked
under the close supervision and out of the offices of BLB&G or other co-lead counsel in the
Merck Litigation, the Mississippi lawyers reviewed the documents remotely at their offices in
Mississippi.
85.
86.
The Mississippi lawyers did not file notices of appearance and were not otherwise
disclosed in the Merck Litigation. Upon information and belief, they are not admitted to practice
law in the U.S. District Court for the District of New Jersey.
87.
Upon information and belief, neither the individual lead plaintiffs nor the class
according to Berger, had raised ethical concerns while employed at BLB&G. The former partner
said that he had left BLB&G because the firm had pressured him to make political contributions
to elected officials who controlled the selection of counsel in securities cases on behalf of
pension funds.
I.
referring multiple times to Bruces client in a meeting in Defendant Silks office, which was
next to Bernsteins office.
90.
phone calls and the Defendants added another partner to the Merck Litigation team.
15
91.
Bernstein also learned that the Defendants were monitoring his emails. On two
occasions, Bernstein observed his emails on the computer screens of BLB&Gs IT professionals.
In both instances, the IT professionals quickly minimized the email on their computer screen.
92.
Upon information and belief, Defendants discovered that Bernstein had reported
During one such conversation, Bernstein heard his name mentioned and then
heard Graziano exclaim, fire him, fire him and put it on the client. Silk asked Whats our
strategy? Grossmann responded that [t]he best strategy is to have him resign, and if not, fire
him.
95.
Recognizing that his termination was inevitable, on October 25, 2012, Bernstein
Approximately two hours after Bernstein sent his letter, Berger responded by
email, with a copy to all BLB&G partners, as follows: with sadness and clearly out of
desperation you have found it necessary to dredge up knowingly baseless charges to mask your
poor performance at the firm. Your employment is hereby terminated immediately.
16
J.
On the morning of October 26, 2012, Bernstein proposed on a call with Graziano
between 8:30 and 9:30 that morning, and told Bernstein that Reynolds had decided to remain
with BLB&G.
99.
Later that morning, Graziano left Bernstein a voicemail stating that Bernstein
should call him to discuss an opportunity in the Merck Litigation that would make Bernstein
happy.
100.
Several times that day, Graziano improperly directed Bernstein, both over the
phone and in e-mails, to cease all contact with Reynolds and falsely warned Bernstein that it
would be a violation of the ethical rules for Bernstein to communicate with Reynolds.
101.
On October 29, 2012, Bernstein informed Reynolds that he had left BLB&G.
Reynolds told Bernstein that he had not decided on counsel going forward. Bernstein told
Reynolds that he expected to join a different law firm. Reynolds asked Bernstein to keep him
informed.
K.
brought Reynolds to BLB&G and said that BLB&G would compensate Bernstein if the Merck
Litigation settled.
103.
Shortly thereafter, Graziano told Bernstein that people are very upset about his
resignation and threatened that there could be issues for Bernstein. Graziano suggested they
17
could come to some arrangement to compensate Bernstein for his work on the Merck
Litigation and that he did not want things to get messy.
104.
Graziano warned that if Bernstein spoke to Reynolds or anyone else about the
issues raised in his October 25, 2012 letter to Berger, BLB&G would have to respond.
Specifically, Graziano indicated that the firm would not compensate Bernstein for his efforts in
the Merck Litigation and would make it very difficult for Bernstein to continue practicing law
at another law firm.
105.
Graziano again told Bernstein that Reynolds had decided to remain with BLB&G
person. Ironically, Grossmann handed Bernstein a letter from Professor Green, BLB&Gs
outside ethics counsel. The letter stated, in pertinent part, [n]ow that Mr. Reynolds has made
known to Bernstein a desire not to be solicited by Bernstein, further solicitations are forbidden
by the [ethical] rules. The letter did not, however, mention Defendants prior communications
with Bernstein directing him not to contact Reynolds and warning him about the adverse
consequences of doing so; nor did it mention any of the issues Bernstein had raised with BLB&G
concerning the Kickback Scheme, Defendants failure to address those facts and the
circumstances of Bernsteins departure from BLB&G.
108.
Grossmann told Bernstein that BLB&G would serve as a reference for future
employment and acknowledged Bernsteins contribution to the Merck Litigation by, among other
18
things, bringing Reynolds to BLB&G. Grossmann stated that, consistent with BLB&Gs own
practices, BLB&G planned to compensate Bernstein if the matter were resolved successfully.
109.
Second, Grossmann stated that Bernstein could not discuss their disagreement
112.
purportedly on behalf of the Mississippi Attorney General and MPERS, which stated that
BLB&Gs engagement of Martin in the Satyam Litigation was confidential and directed
Bernstein not to disclose information relating to BLB&Gs engagement of Martin.
113.
comply with Nevilles instruction, we will have no . . . choice but to hold you . . . accountable.
L.
Since his departure from BLB&G on October 25, 2012, Bernstein has searched
Bernstein met with two law firms concerning potential employment. However,
when Bernstein informed the law firms that he had been directed to cease communications with
Reynolds, the firms lost interest.
116.
19
M.
On April 5, 2013, a hearing was held concerning attorneys fees in another case in
which BLB&G was involved as co-lead counsel, Bank of Americas Securities Litigation, No. 09MD-2058 (S.D.N.Y) (PKC). BLB&G represented two Ohio-based public pension funds, which
the court appointed as two of the lead plaintiffs. As in the Satyam Litigation, Defendants Berger
and Singer were the two lead partners on the case for BLB&G.
118.
During the hearing, the court asked Defendant Berger about a fee application for a
non-lead counsel law firm based in Ohio. The court raised concerns similar to those Bernstein
had expressed to Defendants.
119.
Specifically, the court inquired: Is this kind of like the way it works out here,
that if you want to retain securities counsel to prosecute this case, you make sure you have the
AG's designated local lawyer in for a piece of the action?
120.
Berger assured the court that the failure of the Ohio law firm to file a notice of
appearance was inadvertent. Berger explained, I hope your Honor understands there was never
an attempt by any of the co-lead counsel in this case to in any way pull the wool over your
Honors eyes. I did not know that the firm, or at least I wasnt aware, because of course the case
has been pending for three [ ] and a half years that there was no notice of appearance filed.
121.
122.
In support of a motion to reconsider the fee issue, a lawyer from the Ohio law
firm stated, in contrast to Bergers representation to the court, that co-lead counsel had
specifically advised him that filing a notice of appearance and seeking admission pro hac vice
was not necessary.
20
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
124.
During the Relevant Period, BLB&G was a legal entity, a limited liability
company, which was directly engaged in interstate commerce by providing legal services in
various states throughout the United States.
125.
During the Relevant Period, the Individual Defendants managed the affairs of and
controlled BLB&G.
126.
During the Relevant Period and beyond, the Individual Defendants conducted or
participated in the conduct of the affairs of BLB&G through a pattern of racketeering activity,
including without limitation:
a.
b.
c.
21
e.
f.
g.
h.
22
i.
j.
k.
In October 2012, after learning that Bernstein reported the Kickback Scheme
to the U.S. Attorneys Office, the Individual Defendants retaliated against him
and interfered with his employment by devising a plan to interfere with
Bernsteins relationship with Reynolds, his client of nine years, in violation of
18 USC 1513(e);
l.
In October 2012, after learning that Bernstein reported the Kickback Scheme
to the U.S. Attorneys Office, the Individual Defendants retaliated against him
by devising a strategy to terminate Bernsteins employment and by
constructively and actually terminating him on October 25, 2012, in violation
of 18 USC 1513(e);
m.
On or about October 26, 2012, after learning that Bernstein reported the
Kickback Scheme to the U.S. Attorneys Office, the Individual Defendants
retaliated against him by wrongfully directing him not to contact Reynolds
23
and falsely informing him that he was forbidden from doing so by the rules of
ethics, causing him to lose Reynolds as a client, in violation of 18 USC
1513(e);
n.
o.
127.
Upon information and belief, the Kickback Scheme has extended over a
criminal activity by virtue of their multiple representations of MPERS and other pension funds in
class action lawsuits over a period of many years. The Kickback Scheme poses a specific threat
of repetition and involves the use of racketeering activity as a regular way of conducting an
ongoing legitimate business.
24
130.
him for his disclosure of the Kickback Scheme in that the Individual Defendants caused
Bernstein to lose his job and his client of nine years.
131.
Bernstein for treble damages, together with all costs for this action, plus reasonable attorneys
fees as provided by 18 U.S.C. 1964.
SECOND CLAIM FOR RELIEF
CONSPIRACY TO VIOLATE RACKETEER INFLUENCED
CORRUPT ORGANIZATION ACT (18 USC 1962(c), 1964(d))
(Against All Defendants)
132.
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
133.
Throughout the Relevant Period, each of the Defendants knowingly and willfully
tasks to Mississippi lawyers without any securities litigation experience, including Martin, as
part of the Kickback Scheme, conducted a sham investigation over Bernsteins internally
reported concerns, threatened Bernstein with a story about a blackballed whistleblower and
terminated Bernstein for reporting the Kickback Scheme to the U.S. Attorneys Office.
136.
Bernstein to allow Martin to continue to bill hours for unnecessary work after the primary
defendants in the Satyam Litigation had settled, oversaw the drafting and filing of the Settlement
25
and Fee Submissions, which omitted any reference to Martin, and caused Martin to be paid
$225,000 as part of the Kickback Scheme.
137.
caused Martin to be paid $225,000 as part of the Kickback Scheme, conducted a sham
investigation over Bernsteins internally reported concerns, participated in a meeting at which
the Defendants resolved to terminate Bernstein for reporting the Kickback Scheme to the U.S.
Attorneys Office and offered to honor BLB&Gs commitment to compensate Bernstein for his
role in the Merck Litigation if Bernstein remained silent concerning the Kickback Scheme.
139.
represented to the court that having multiple firms representing the class in the Satyam Litigation
would not result in duplicative work and participated in a meeting at which the Defendants
resolved to terminate Bernstein for reporting the Kickback Scheme to the U.S. Attorneys Office.
140.
Bernstein was directly injured by the Defendants retaliation against him for his
disclosure of the Kickback Scheme in that the Defendants caused Bernstein to lose his job and
his client of nine years.
26
141.
Accordingly, the Defendants are jointly and severally liable to Bernstein for treble
damages, together with all costs for this action, plus reasonable attorneys fees as provided by 18
U.S.C. 1964.
THIRD CLAIM FOR RELIEF
BREACH OF CONTRACT
(Against BLB&G)
142.
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
143.
Both Bernstein and BLB&G shared an implied obligation under their employment
Rule 8.3(a) of the New York Rules of Professional Conduct requires a lawyer to
report another lawyers violation of the ethical rules that raises a substantial question as to that
lawyers honesty, trustworthiness or fitness.
149.
BLB&G falsely represented that attorneys fees would be paid only to the firms identified in the
papers, which omitted any reference to Martin.
27
150.
BLB&G failed to correct the Settlement and Fee Submissions following its
Bernstein reported this unethical conduct and his concerns about the Kickback
Bernstein reported this unethical conduct and his concerns about the Kickback
BLB&G retaliated against Bernstein for acting in compliance with New Yorks
rules of ethics by devising a scheme to terminate Bernstein and interfere with his relationship
with Reynolds.
154.
BLB&G retaliated against Bernstein for acting in compliance with New Yorks
BLB&G retaliated against Bernstein for acting in compliance with New Yorks
ethical rules by wrongfully causing Reynolds to end his nine-year professional relationship with
Bernstein.
156.
157.
Bernstein, Bernstein has suffered the loss of his salary and other compensation associated with
his employment.
158.
be determined at trial.
28
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
160.
Bernstein had a strong and enduring business relationship with Reynolds, which
began shortly after plaintiffs commenced the Merck Litigation in November 2003.
161.
Reynolds followed Bernstein from Milberg, Bernsteins prior law firm, to Dreier.
162.
163.
Bernstein was the primary, and for substantial periods, the only lawyer from
informed Bernstein that Reynolds had already decided to remain with BLB&G rather than
continue his relationship with Bernstein and wrongly directed Bernstein not to contact Reynolds.
Bernstein reasonably relied on Defendants false representations and refrained from contacting
Reynolds for several days.
166.
represented that the ethical rules precluded Bernstein from communicating with Reynolds.
Bernstein reasonably relied on Defendants false representation and refrained from contacting
Reynolds for several days.
167.
Upon information and belief, in order to prevent Reynolds from leaving BLB&G
and following Bernstein, Defendants made false and defamatory statements to Reynolds about
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Upon information and belief, Defendants concealed from Reynolds the Kickback
the court from learning that BLB&G was selecting attorneys to perform tasks for Reynolds and
other members of the class based on their connection to the Mississippi AGs Office rather than
on the basis of their qualifications. Defendants thereby placed their own interests above those of
Reynolds and other members of the class in violation of their fiduciary duties to Reynolds and
the class.
171.
was material to Reynoldss fiduciary duties to the class as a lead plaintiff in the Merck Litigation
and to Reynoldss choice of counsel.
172.
Defendants interfered with Bernsteins relationship with Reynolds for the purpose
Had it not been for Defendants wrongful interference, Reynolds would have
followed Bernstein to a new law firm and continued their attorney-client relationship.
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174.
Had Reynolds remained a client of Bernstein, Bernstein would have been entitled
and abetting tortious interference, Bernstein has suffered damages in an amount to be determined
at trial.
FIFTH CLAIM FOR RELIEF
QUANTUM MERUIT
(Against BLB&G)
177.
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
178.
counsel.
179.
180.
181.
BLB&G.
182.
It is customary in the plaintiffs class action bar for originating lawyers to receive
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184.
BLB&G indicated that it would not pay this compensation to Bernstein unless he
accepted certain conditions, including a commitment to conceal the Kickback Scheme, which
Bernstein rejected.
185.
Bernstein is entitled to recover from BLB&G based on quantum meruit the full
value of the services he performed for Defendants, including a reasonable percentage of the fees
generated by BLB&Gs representation of Reynolds.
SIXTH CLAIM FOR RELIEF
UNJUST ENRICHMENT
(Against BLB&G)
186.
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
187.
counsel.
188.
189.
BLB&G.
190.
Reynolds.
192.
BLB&G indicated that it would not pay this compensation to Bernstein unless he
accepted certain conditions, including a commitment to conceal the Kickback Scheme, which
Bernstein rejected.
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193.
It is against equity and good conscience to permit BLB&G to retain the benefit of
195.
Bernstein repeats and realleges each of the foregoing paragraphs as if fully set
forth herein.
196.
BLB&G has communicated to Bernstein its position that the facts underlying the
Kickback Scheme, including BLB&Gs retention and payment of Martin and other local
Mississippi law firms and their concealment of this information from the relevant courts,
represent confidential information pursuant to Rule 1.6(a) of the New York Rules of Professional
Conduct.
197.
BLB&G has communicated to Bernstein its position that Rule 1.9(c) of the New
York Rules of Professional Conduct precludes Bernstein from disclosing facts relating to the
Kickback Scheme in this action.
198.
BLB&G has taken the position that Bernstein will violate his ethical and/or
fiduciary duties by disclosing facts relating to the Kickback Scheme in this action.
199.
information pursuant to Rules 1.6(a) and 1.9(c) of the New York Rules of Professional Conduct
and may be disclosed in connection with this action without Bernsteins violation of his fiduciary
and ethical duties.
33