No one doubts that Johnson Winter & Slattery, a 70-lawyer Sydney firm, knows about complex financial products. The firm actually advised Lehman Brothers on the creation of the sort of collateralized debt obligations (CDOs) that are at issue in these cases. It's now putting some of that knowledge at work for plaintiffs.
Johnson Winter is now advising 22 Australian clients who are part of a group of investors suing Lehman Bros. in New York federal court over the purchase of securities similar to those at issue in the IMFbacked case in Australia. (New York litigation firm Kasowitz Benson Torres & Friedman is handling the plaintiffs' case in the U.S.)
Litigation partner Jim Hunwick, who is leading the firm's work on the New York case, stresses that the firm has no conflict because none of the Lehman CDOs it advised on are at issue. He says the firm is also now considering taking on a class action in Australia, which IMF may fund, similarly focusing on securities rendered worthless during the financial crisis. (He declined to comment further, saying that it is too early to reveal more details about the case.)
IMF's Walker says that increased competition and diminished client loyalty in the Australian market means that the divide between plaintiffs and defense firms is "absolutely diminishing." As a result, he says, all firms are becoming less averse to participating in plaintiffs work.
McLachlan Thorpe Partners, a 20-lawyer Sydney firm, won its first IMFfunded class action against the Australian government in 2011. On behalf of Pan Pharmaceuticals' former CEO James Selim, the firm successfully sued regulators it said had willfully and maliciously taken actions that led to the alternative-drug company's collapse. McLachlan Thorpe then teamed with IMF to bring a class action on behalf of 162 of Pan's creditors, whom a Federal Court judge awarded $70 million in compensation.
Partner Andrew Thorpe says his firm would "without a doubt" take on another IMFfunded class action, even if it meant bringing a case against a bellwether Australian company. He acknowledges, though, that MT Partners has more leeway in taking on such cases than many larger firms. "We're of a size where conflicts are not an issue," he says.
Johnson Winter is likely to be more cautious about the IMF cases it takes on, Hunwick says. Many of the firm's clients are Australia Securities Exchange-listed companies. "We're limited in what IMF matters we can take on because of those relationships," he says.
IMF also funds a range of insolvency cases and commercial disputes. On such litigation matters, Walker says, they've funded cases handled by Australia's largest firms, though a number of senior partners at firms like King & Wood Mallesons, Clayton Utz, and Minter Ellison contacted for this article were not aware their firms had ever received funding from IMF. The litigation funder has worked with about 150 Australian firms, although only about 25 of those firms have handled class actions.
For now, the established plaintiffs firms will continue to dominate the class action practice, says Ben Slade, who heads Maurice Blackburn's New South Wales class actions team. Maurice Blackburn made a pitch to lead the Lehman Australia class action, he says, but lost out to Piper Alderman. Still, Slade asserts, the complexities involved with multiparty cases will prevent most corporate firms from making any serious moves into the space.
Slade notes that Maurice Blackburn's willingness to take on class actions even without funding has given it a depth of experience in the area he thinks newcomers to the practice will find hard to match. He notes that only plaintiffs firms have the infrastructure necessary to manage classes that number in the thousands and have the most experience countering the endless motions practice defense firms utilize in trying to kill cases in their infancy.
"If there are other firms that can climb the barriers to entry in these cases, then we'd say, good on 'em," Slade says.