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Their Worst Nightmare
He's a general counsel's worst nightmare. Dimitrios Biller was hired to come in-house and help manage Toyota's litigation, and he wound up turning those skills on his own company. Toyota paid him $3.7 million to go away, and he came back with a vengeance.
That ironclad confidentiality clause he signed? He shoved it in the Cuisinart and filed a lawsuit in which he called Toyota a criminal enterprise. And if that weren't enough, he named as coconspirators the general counsel of Toyota Motor Sales, U.S.A., Inc., the previous GC, and three other in-house lawyers. When Toyota finally managed to steer the case into arbitration, that still didn't shut him up. He shared rulings and talked about the case right up to the final arbitration hearing (which at press time was scheduled to start on November 15).
Toyota's conflicts with the U.S. Department of Transportation and its millions of vehicles recalled for problems with sudden acceleration may have dominated the airwaves lately [see "On the Docket"], but its dispute with Biller could prove more important in the long run. It's one thing to make mistakes while racing to be the number one car manufacturer. It would be a reputational hit of a different order if Toyota were found guilty of systematic discovery fraud.
Biller was Toyota's managing counsel in charge of its national rollover litigation from 2003 to 2007. If he is correct, Toyota has been intentionally withholding information that plaintiffs lawyers have been asking for, and had a right to receive, for years. That's what makes the arbitration now pending in Orange, California, a big deal—it's not a trivial employment dispute. If Biller wins, not only will his claims have been validated by a respected former federal judge; the documents on which he's built his case may be available to plaintiffs around the country.
And that may not be the worst of it. Tab Turner, a North Little Rock, Arkansas, attorney who has been representing plaintiffs in rollover cases for more than 20 years, and has gone up against Biller and Toyota, says: "If Dimitrios is telling the truth about Toyota's conduct, then they have a civil problem and a criminal problem."
There's another reason why the case is worth watching. Toyota has waged a bitter fight to keep Biller from using documents he took when he left, arguing that they're protected by the attorney-client privilege. But in September, Biller won a rare ruling. The arbitrator, Gary Taylor, found that he'd made a prima facie showing that the crime-fraud exception applies. This doesn't mean that Taylor will necessarily find evidence of a crime or fraud, but it does mean he will allow Biller to use documents in the arbitration that would otherwise be unavailable because of the privilege.
For its part, Toyota has long maintained that Biller is a disgruntled, unreliable, and litigious former employee who repeatedly violated his ethical obligations as an attorney. He may claim he's suing for principles, but it's all about money, they say [see "Toyota Responds"]. They point out that he sued the lawyer who represented him in negotiating his severance package with Toyota, and also sued the Los Angeles County district attorney's office after he was fired following a brief stint as a prosecutor during the summer of 2008 (a suit he settled this past September for $100,000).
There are broader employment law ramifications, too. Lawyers worry that a ruling in Biller's favor could eviscerate a company's ability to protect itself when an employee leaves. Logan Robinson, who teaches at the University of Detroit Mercy School of Law, is one of them. "It would be a major erosion of attorney-client privilege," says Robinson, who has been a GC at ITT Automotive, the auto supplier Delphi, and the international subsidiary of Chrysler Corporation.
The Association of Corporate Counsel has had a long-standing interest in this issue, and has developed a policy to address it. "The rules are pretty darn clear," says general counsel Susan Hackett, who emphasizes that she's speaking generally. "The lawyer doesn't own the right to determine when the rules of confidentiality apply." A lawyer may be compelled by professional obligations to report wrongdoing, and may even be justified in using privileged documents. But that lawyer "can't introduce attorney-client information gleaned during the course of employment to make a case for remuneration," says Hackett.
Dimitrios Biller is sitting in his office In Los Angeles. On this rainy fall day, he's wearing a black Spyder ski jacket. His jet-black hair is a little shaggy and still dripping. He apologizes for the mess, gesturing at the file boxes scattered around the room.
His war room is actually a converted garage behind the Pacific Palisades home he bought for his mother—ironically, with part of the settlement he received from Toyota. (He lives a couple of blocks away with his wife and their two young children.) The office is crammed with boxes, but each is full of carefully labeled files. Has he always been this well organized? Guilty as charged. It started with baseball cards—which he still has. "I have them in plastic sleeves in notebooks," he says with a laugh. He organized them by divisions, teams, positions: "Yes, I was obsessed."
He still is. Only now the plastic binder sleeves are filled with evidence from his case. He knows that other people—not limited to Toyota executives—have used words besides "obsessed" to describe him. "Weirdo" and "nut" are probably among the more civilized. "People can say whatever they want," he says. "It doesn't have any bearing on the documents."
He's always said they're what his case is about. "If I didn't have the documents," he says, "nobody would believe me." He's talking about the ones he took from Toyota when he left in 2007. To date, only a handful of people outside of Toyota have seen any of them. And even lawyers who stand to benefit if Biller is right, and the documents are made available, aren't sure what to think.
One of them, plaintiffs lawyer Todd Tracy, has seen a sampling. But he was extremely disappointed by what he found. "I felt duped," he said at the time. "The documents don't support the sinister allegations that were being made." (Recently, in light of additional information, Tracy tempered his initial reaction.)
Biller's journey to this backyard office has been a rocky one. The son of Greek immigrants, the 48-year-old lawyer has lived his whole life in L.A., but he didn't grow up on the cushy side of town. He's always had to work hard; his father abandoned the family when Biller was 8. He went to law school not because he had a burning desire to be a lawyer. Credit goes to his mother, who was determined that one of her two sons would take up law or medicine. His older brother became a professional soccer player, so that left Dimitri.
At first he felt like he was drowning: "I was sure I was going to drop out." But then he discovered he could swim. After his second year he worked as a law clerk at Lillick, McHose & Charles, which kept him busy rotating through its corporate, real estate, and litigation departments. He was hired to work through his final year of law school, and stayed to cut his teeth as a trial lawyer with an emphasis on maritime law ("a natural for a Greek," he says).
Lillick eventually merged with what is now Pillsbury Winthrop, and Biller made partner in 1999. He worked on a wide variety of cases during his 14 years there—including some plaintiffs work. But one notable area of expertise was his work for car manufacturers, especially The Ford Motor Company. In fact, Tab Turner, the plaintiffs lawyer who has tried many cases against Ford, remembers first meeting Biller when he was still at Pillsbury. Years later, Turner negotiated directly with Biller in settling two lawsuits against Toyota, and came away impressed. "I had a lot of respect for his knowledge," he says. "He obviously knew the field."
The move to Toyota felt like a logical next step. But the move also meant adjusting to a very different culture, and somewhat lower compensation (he started at $300,000, and earned $400,000 his last year, he says). His wife, Janice, who worked for a time as a paralegal before she quit to stay home with their kids, worried that her hard-charging husband was "too aggressive" to fit. By all accounts, she was right.
Toyota wanted someone who could reduce its legal costs by crafting an overarching strategy, Biller says, rather than focusing on individual cases. His plan was to demonstrate to the plaintiffs bar that the carmaker would no longer be a soft touch. In his territory, at least (Northern California and Texas), they'd take cases to trial against top lawyers in jurisdictions generally unfavorable to the defense. And if they did well, settlement costs would plummet.
That's precisely what happened. Biller saved Toyota tens of millions of dollars, he says. He oversaw a dozen trials during his four years, and Toyota won them all. He was able to leverage this success in court to reduce settlement costs by half his second year, and half again his third, he says. At the end of his last year, he'd returned Toyota's litigation costs to 1996 levels.
But there was one huge area of conflict. In Biller's view, Toyota was not up to speed on discovery. It didn't have an effective protocol for litigation holds, he says, and it was not producing nearly as much information as required—especially electronically stored information (ESI), which was specifically included in the Federal Rules of Civil Procedure in 2006. Biller thought the problem was a culture clash. In interviews and in court documents he describes a lack of coordination between TMS (the U.S. company, based in Torrance, California, for which he worked) and its affiliates: Toyota Motor North America (essentially a holding company); Toyota Engineering & Manufacturing North America, Inc. (the technical center where the design work was done); and Toyota Motor Corporation (the parent company in Toyota City, Japan). When Toyota received a discovery demand in one of Biller's cases, TMS was often the only entity that responded. The others simply ignored it, he says, even if they possessed relevant information. In time he concluded that the practice was not inadvertent.
From mid-2005 to late 2006 Biller probed each entity for information. To his surprise, he found that he was the first lawyer to do so. The executives in Japan didn't understand why it was even necessary. Which wasn't as surprising as it might sound, Biller says, because TMC's "legal department" in Japan doesn't employ any lawyers. The individuals there who decide what documents need to be produced to plaintiffs, Biller learned, are engineers. Thus, one of the biggest challenges he faced, he says, was convincing executives in Japan, who didn't seem concerned about U.S. discovery rules, that they needed to both care and comply.
Biller tried to explain that examining evidence in the company's files was the only way he could be sure that they were responding appropriately to court orders. Failing to do so could result in lawyers being sanctioned and the company suffering serious damage to its credibility and, ultimately, its reputation. Besides, he added, some of the information was favorable to the company, and either way the lawyers needed to deal with it in court.
Biller thought he was making progress. But that was before he realized there was another line of resistance—within his own law department. As he reviewed materials at the technical center, he discovered what were called "Books of Knowledge" that detailed design principles for all the company's cars. But he was warned to back off, he says, by his immediate supervisor, Eric Taira. (Taira and the other lawyers Biller named in his lawsuit did not respond to requests for comment passed through Toyota. But the company defended them in an e-mail statement: "We firmly stand behind the individuals in our legal group and their professional integrity. Toyota believes that the company, and each of the individuals against whom Mr. Biller has made his unfounded allegations, have acted appropriately.")
The tension between Biller and Taira reached a head in November 2006. Taira had previously instructed Biller not to preserve material that Biller believed he was required to. Without telling Taira, he did not destroy the material. "I was unmanageable," Biller acknowledges. The reason, he says, is that Taira and executives in Japan "wanted to manage me in such a way that I would commit crimes and fraud for Toyota. I wasn't willing to do it." When Taira again told him to withhold evidence, the instruction was accompanied by a question, Biller asserts.
"Haven't you heard of the Golden Rule?" Taira asked. He made it clear that he was speaking of a business, not a spiritual, stricture when he added: "Don't screw the client."
"How am I screwing the client?" Biller demanded.
"You're not," Taira answered. "But you have to protect the client at all costs."
Biller complained about the company's refusal to comply with discovery rules, and about the increasing pressure he was under, to then–general counsel Dian Ogilvie. He complained twice more during the following six months, but he says nothing changed. In April 2007, after Taira gave him a poor performance review, Biller wrote a 23-page response, defending himself against an evaluation that he called "retaliation," and spelling out his grievances. Two months later, buckling under the strain, Biller suffered an emotional breakdown, he says. His last day of work at the company was June 18, 2007.
Toyota execs were undoubtedly relieved when Biller signed a severance agreement three months later. Biller certified that he'd returned all confidential information "without limitation." And the confidentiality clause he agreed to was not only broad, it contained draconian penalties. If he violated it, he would be obliged to pay Toyota $250,000 for each offense.
The armistice didn't last long. In January 2008 Toyota moved Ogilvie to a job at the North American holding company and brought in a new GC, Christopher Reynolds. That same month Biller notified Reynolds that he had a problem.
The draft complaint he sent a few weeks later was a preview of what was to come. Biller had started a private practice, and he'd learned that some of his old colleagues were "badmouthing" him to potential clients. He threatened to sue TMS, Eric Taira, and another in-house lawyer, Alicia McAndrews, for slander, defamation, and the intentional infliction of emotional distress. The 76-page draft revisited Biller's tumultuous tenure at the company. It also noted that while he was not seeking damages for conduct that took place before he signed his settlement "because plaintiff has agreed not to seek such actions," the conduct could still be used as proof that individuals had sought to harm him, he argued, and that TMS had failed to intervene.
Biller's most significant threat was this: The defendants would not be able to keep communications private by asserting attorney-client and work product privileges because the crime-fraud exception applied. But Biller never filed that suit. Instead he negotiated another agreement with Toyota and the two in-house lawyers. There were releases all around, and Biller agreed not to disclose confidential documents or materials—without a court order. In exchange he received $41,500 in attorneys' fees, and a letter of recommendation, signed by Reynolds, that lauded his "excellent litigation management and trial skills" along with the quality of his advice on compliance.
The letter may have struck Toyota as innocuous, but it meant a lot to Biller. After months of looking for that elusive next job, he'd finally come up with Plan B. In September 2008 he launched a Web site for his new business: Litigation Discovery and Trial Consulting. When a viewer clicked on the endorsement link, Reynolds's letter popped up.
Biller thought he was on his way to the next phase of his career. He was wrong. When Toyota executives saw his site, they were livid. That's when they sued (contrary to popular belief, Toyota sued first, not Biller).
In the complaint Toyota filed in November 2008 in state court in Los Angeles, it demanded that Biller remove from his Web site "proprietary" information such as the lawsuits he helped defend, statistical information about settlements, and Toyota's policies and procedures. Toyota claimed that each viewing of Biller's Web site violated the confidentiality clause of their agreement. With 135 hits at $250,000 a pop, that came to a cool $35 million. Toyota quickly obtained a temporary restraining order and, in January 2009, pushed the case into arbitration.
Nothing since has gone quite the way Toy ota had planned. The company may prevail, but it's been a very bumpy ride so far.
In July 2009 Biller countersued in Los Angeles federal district court. His new complaint made the earlier unfiled draft look like a thank-you note. It alleged that TMS was a criminal enterprise and that Biller was hired to further it. He argued that he was wrongfully constructively discharged at a time when he was not competent (as a result of his psychiatric condition), and that the confidentiality clause of the severance agreement was "illegal and against public policy." Furthermore, Toyota's assertion of privilege, he said, was trumped by the crime-fraud exception. As for his Web site, he countered that much of the information that Toyota objected to was either already in the public domain or referred to in Reynolds's recommendation. The complaint also commingled information he received from Toyota with information he brought to it, like negotiation strategies that were "my work product," he says.
Biller tried to keep his case in court, but ultimately the claims from both sides were rolled into the arbitration, which was Toyota's strong preference. But even this led to unwelcome surprises for the carmaker.
One reason that companies often seek arbitration is to keep proceedings and results confidential. Yet Toyota hasn't been able to do that. Its own contracts contain a clause that stipulates employment disputes will be resolved by arbitration administered by JAMS, but JAMS's rules say they're confidential only when both parties agree. Biller (no surprise here) didn't. "My guess," says Patricia O'Prey, a lawyer at Richards Kibbe & Orbe who has handled many arbitrations, "is that this is not at all what Toyota expected." Taylor refused the company's request for a gag order. What's more, Toyota's own press releases about Biller had led the lawyer to add defamation claims to his complaint.
The longer a case drags on, the more it generally benefits deep-pocket defendants. But the lag has helped Biller as well. When he first filed his complaint, the allegations against a company with a reputation for quality products struck many as outlandish. But the pounding the automaker has taken since then for the problems its cars have experienced has influenced public perception. Another ostensible disadvantage somehow hasn't seemed to hurt him either. Biller is handling the case alone. And he's up against a team of lawyers from Morgan, Lewis & Bockius and Littler Mendelson. He claims, of course, that the truth is on his side. But the other reason he's confident, he says, is that he knows the case and those documents better than anyone.
The arbitration is also being closely watched by plaintiffs lawyers in other jurisdictions, and possibly judges as well. And that's another anomaly, says O'Prey. "The idea that it may influence another decision is not what people sign up for when they sign up for arbitration," she says. She's never seen an arbitration quite like this, she adds: "It seems quite extraordinary."
One lawyer is doing more than watching. Jeff Embry of Hossley & Embry in Tyler, Texas, has taken Biller's allegations and used them to sue Toyota for contempt of court. Embry's client, Pennie Green, was injured in a rollover accident in 2005. The 17-year-old was driving a 1997 Camry, wearing her seat belt, when she collided with a car that made an illegal turn. She has never regained full use of her arms and legs, and will likely remain a quadriplegic for life. Her lawsuit blamed the failure of the car's roof for the severity of her injury.
Embry and Green spent 12 hours in mediation in December 2006 negotiating a settlement with Biller. What they didn't know at the time, according to Biller, was that Toyota had failed to produce all the ESI it should have, despite an order from Judge John Neill in state court in Cleburne, Texas. The first Embry heard of this was when he read Biller's lawsuit, which specifically mentioned Green's case. An exhibit alleged that Biller's supervisor decided to settle the case for a premium—$1.5 million—"to avoid e-discovery issues."
Embry brought the contempt action to try to force Toyota to produce the documents, answer questions about its discovery practices, and face sanctions. He subpoenaed Biller to appear in October before Neill, who (over Toyota's vehement objections) swore him in as a witness and asked him to turn over any documents he'd brought related to those Toyota failed to disclose. (Biller gave him about 20.)
Following briefing, the judge will decide whether to issue an order to show cause why Toyota should not be held in contempt for violating his discovery order. Toyota continues to argue that the documents are privileged, but Embry is buoyed by the crime-fraud ruling in Biller's arbitration. "I think Judge Taylor's ruling is going to influence our judge," he says.
Embry couldn't have predicted this turnabout on the basis of his earlier impressions of Biller: "I thought he was a true believer for Toyota, to be honest with you. There are some lawyers who go into a case representing their clients, but don't take it very personally. He did." Embry's client, now 22, graduated from college last May, and is teaching at the high school where she was a student. Her memories of Biller? "I was a 17-year-old girl. I thought he looked like a lawyer from TV—straight out of Law & Order ," she recalls. "He seemed like he was good at his job," but he was "brusque." And now? If what Biller says is true, "Toyota needs to be held responsible," Green says. "It seems that he's trying to right a wrong. I think it's pretty brave—going up against this worldwide corporation," she adds. "But for all I know, if he had not gotten fired, he might not have made these allegations."
Looking back at the case, Biller shakes his head. "Now I'm ashamed," he says. "If Toyota had turned over the data, she would have been better off."
Nothing looks certain for Toyota or Biller at this stage. Assuming that there isn't a last-minute settlement, the hearing will start November 15 and is scheduled to last ten days; Taylor is expected to rule in January.
It seems significant that Toyota sent its lead lawyer on the California arbitration to Texas to oppose Biller's involvement in the contempt case. If the company was once dismissive of his claims, the crime-fraud ruling probably changed that for good.
But whatever happens, it seems quite possible that Biller will have multiple court dates on his dance card in 2011. And the specter of a former in-house lawyer working in concert with lawyers he once opposed in the same matter is exactly what makes the University of Detroit's Robinson shudder. "Why would companies hire lawyers if they ended up in this situation?" he wonders.
Plaintiffs lawyer Todd Tracy isn't sure what to think about l'affaire Biller anymore. He was the lawyer who was able to get a peek at some of Biller's documents—and came away unimpressed. Tracy subpoenaed the documents last year in federal court in Marshall, Texas, on behalf of 17 clients who had previously sued and resolved their claims against Toyota. But Biller was able to establish, through a declaration by a Toyota lawyer, something that Tracy apparently didn't understand: The judge in his case allowed Toyota to review the documents first, and Tracy saw only those that the company did not claim were privileged.
Contacted after the arbitrator's crime-fraud ruling, Tracy e-mailed back: "I don't know who is right and who is wrong as it relates to Mr. Biller's ongoing legal proceedings." He added: "I will make the call myself to the [Justice Department] if it is proven that the four boxes I reviewed had somehow been sanitized by Toyota's counsel."
Tab Turner has been there. He's had trouble himself getting straight answers from Japanese and Korean car companies in discovery. When you ask for a record from Ford, he says, "there may be some wrangling, but in the end you get the record. But when you ask for the record from a Japanese company, they always seem not to have that record. But it's very difficult to prove, because what are you going to do, go to Japan?"
Turner declined to pass judgment on Biller's allegations. But he finds the situation, which he calls "unprecedented in my career," fascinating to watch. "Corporate lawyers everywhere are watching this pretty closely because it is on the knife edge," he says. "This is going to establish guidelines for what a corporate counsel should do and shouldn't do." •