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Ever wonder just what kind of machinations take place behind the scenes in securities class action lead counsel fights? A $22 million New York state supreme court suit filed late last month by Bernstein Litowitz Berger & Grossmann and Berman DeValerio reveals the dealmaking that led up to the selection of lead counsel in the Adelphia Communications case–and it ain’t pretty. Here’s the backstory. The Adelphia class action ended in 2006 with $455 million in settlements from Deloitte & Touche and almost three dozen banks. In 2007 Manhattan federal district court judge Lawrence McKenna approved $97 million in fees for the plaintiffs lawyers, who were led by class counsel from Abbey Spanier Rodd & Abrams and Kirby McInerney. But it turns out that Abbey Spanier and Kirby McInerney had a little help en route to their lead counsel appointment, according to the Bernstein Litowitz and Berman DeValerio complaint. The complaint asserts that Bernstein and Berman agreed in 2003 to withdraw a competing bid to lead the case. All four plaintiffs firms, according to the complaint, signed a contract in which, in exchange for Bernstein and Berman dropping their lead counsel motion, Abbey and Kirby pledged to support the other firms’ clients as class representatives in future complaints in the Adelphia litigation and to give Bernstein and Berman 25 percent of the legal work in the case. In the years since, Bernstein Litowitz and Berman DeValerio assert, they “completed every assignment they were given and repeatedly sought out additional assignments” from Abbey Spanier and Kirby McInerney. But Abbey and Kirby “rebuffed” the firms’ “good faith efforts” to take on more work, the complaint says. Bernstein Litowitz and Berman DeValerio alleged that they did not even know about the Deloitte and bank settlements until they were already negotiated, despite the firms’ right, under their deal, to participate in all major decisions. Part of the problem, the complaint suggests, is that the four plaintiffs firms actually had two different contracts. The first agreement, signed in September 2003, stipulated that Abbey and Kirby would give “not more than 25 percent” of the legal work to Bernstein Litowitz and Berman DeValerio. But according to the complaint, that wasn’t what Bernstein and Berman believed they had agreed to. So Max Berger at Bernstein Litowitz talked to Abbey Spanier partners Arthur Abbey and Judith Spanier, and both sides agreed to revise the language to say that Berman and Bernstein would get assignments “intended to generate 25 percent” of the combined legal work. Nevertheless, after the 2006 settlement, Robert Stone of Kirby McInerney claimed the original contract prevailed, according to the suit. After Judge McKenna awarded $97 million in fees, Abbey and Kirby kept $84 million, allocating only $3.5 million to Bernstein and Berman. This is not the first time a law firm has disputed the allocation of fees by Abbey Spanier and Kirby McInerney in the Adelphia litigation. In October, a three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled against Chimicles & Tikellis, which had sued to boost its share of the Adelphia fees from a lowly $155,610 to $17 million. “Although Abbey and Kirby were no doubt on the stingy side when it came to compensating their brethren, we have not been convinced that the district court abused its discretion in approving class counsel’s allocation,” the panel ruled. We reached out to lawyers and spokespeople at Bernstein, Berman, Abbey, and Kirby but did not hear back. Bernstein Litowitz and Berman DeValerio are represented by Gregory Joseph of the Gregory P. Joseph Law Offices. He did not return a call seeking comment.

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