For Shartsis Friese, the last two years have been a fast ride. It started at the end of 2008, when Frank Cialone, a Shartsis partner, was gearing up for a high-stakes trial that was anticipated to last eight months. Instead, the opponent in the case, Princeton University, abruptly settled for about $90 million.
It didn’t take Cialone long to find more to do. Although lawyers at other firms scrambled for work as the economy collapsed, Cialone was able to quickly step into another case. It involved representing a group of lawyers from now-defunct Day Casebeer Madrid & Batchelder. The lawyers had been sanctioned for failing to turn over e-mails in a closely watched patent dispute between Broadcom Corp. and Qualcomm Inc.
“I had pretty much cleared my plate,” he said. “In that sense, it was fortuitous timing.”
Perhaps, but Shartsis Friese’s managing partner, Art Shartsis, said his firm has not seen a slowdown in work since. In fact, 2009 was a “gargantuan” year for the San Francisco firm, he said. As for this year, Shartsis said repeating 2009′s good fortune — which included a windfall of nearly $11 million in fees from the Princeton case — may be a stretch.
Things could still change. Shartsis Friese has been retained to represent California’s Department of Insurance in the retrial of a case stemming from the largest insurance failure in California history. In 2008, the U.S. Court of Appeals for the 9th Circuit overturned a $241 million restitution award for the state of California. Both sides are awaiting a trial date. “It could be tried anytime from November on. It’s a real epic case,” Shartsis said.
Shartsis Friese, founded in 1975, has added no more than three lawyers in any year as profits have inched up (Shartsis declined to give details about the firm’s finances). The firm also doesn’t borrow money and maintains a single office, which is home to 54 attorneys. Partners outnumber associates nearly 2-to-1, with 29 partners and 15 associates. Another 10 lawyers are of counsel. “There’s no rush to be oversized, to have lots of bodies waiting for work to come in,” Shartsis said. “Our model is the other way around. We’re always busy when work comes in.”
In general, Shartsis said, the firm refuses to discount its rates and recovers 90% of its billable time each year. But it faced some challenges in the Princeton case and was forced last year to sue the fund that had agreed to pay for its client’s lawsuit against the school. Shartsis Friese represented the descendants of two Princeton donors who alleged that the university diverted hundreds of millions of dollars from the foundation’s designated purpose, which was to support students who pursued government careers.
Seth Lapidow, a partner in the Princeton, N.J., office of Blank Rome and co-counsel in the case, said that he had never heard of Shartsis Friese before the Princeton matter. He was impressed. “They understand how to litigate a case effectively and with real style and aggression,” Lapidow said. “They’re very smart and very hard-working and very detail oriented, and they bring the fight to the enemy.”
Princeton’s lead counsel, Douglas Eakeley, a partner at Lowenstein Sandler in Roseland, N.J., described the lawyers at Shartsis Friese as “worthy adversaries” with whom he had “an extensive adversarial relationship.” Eakeley said that the attorneys “pursued a scorched earth litigation policy,” and that it was “lengthy, grueling, no-holds-barred litigation.”
In the Qualcomm patent dispute, Shartsis Friese represented 11 of the 13 lawyers at Day Casebeer who had been attorneys for Qualcomm. U.S. Magistrate Judge Barbara Major issued sanctions in 2008 against three of the attorneys after discovering that tens of thousands of e-mails had not been turned over to Broadcom’s legal team. Another three attorneys later were sanctioned. Last year, the lawyers filed court papers indicating for the first time that Qualcomm was to blame for the failure to turn over the e-mails. She lifted her sanctions order.
These days, the firm is handling a securities fraud case brought by the U.S. Securities and Exchange Commission against a former executive of Veritas Software Corp. who is accused of artificially inflating the financial results of the company.
LITIGATION FOR STATE CONTINUES
But the biggest case for the firm is the state’s suit over Executive Life Insurance Co., which dissolved in 1991. California’s insurance commissioner sold the firm’s junk bond portfolio to a group of French investors. In 1999, however, the commissioner sued those investors, claiming they had conspired to commit fraud by circumventing regulations pertaining to foreign entities. Most of the investors settled. But a federal jury in Los Angeles found that the remaining investor was in fact part of a conspiracy that harmed the state. The jury awarded $700 million in punitive damages for the commissioner. The judge later vacated that award but granted the commissioner $241 million in restitution.
Both sides appealed. The 9th Circuit affirmed the judge’s punitive damages decision but threw out the $241 million restitution award. Chip Rice, one of three partners at Shartsis Friese handling the case, said his team will seek punitive and compensatory damages, as well as restitution. They will try to show that, if the conspiracy had come to light, the commissioner would have selected another bid. “Which would’ve turned out to be better for policyholders and the state,” he said.
Amanda Bronstad can be contacted at firstname.lastname@example.org.