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Dallas�Look up. In the turbulent skies hovering above Jenkens & Gilchrist these days, one black cloud may soon float away. On March 5, the Dallas-based firm said it has agreed to a $75 million class action settlement of litigation filed by disgruntled ex-clients who had hired the firm for tax advice. The proposed settlement still requires the approval of a federal judge and participation by the former Jenkens clients who would fit into the class. The pact, however, ultimately may improve the atmosphere around the 466-lawyer firm, which has been battered by the civil suits filed by former clients and a federal investigation into tax shelters the firm once endorsed but the Internal Revenue Service now doesn’t allow. The settlement also may stanch the steady stream of lawyer departures from Jenkens, which had more than 600 attorneys just three years ago. “The settlement will have a positive effect in a lot of ways,” said Thomas Cantrill, a shareholder who was elected chairman of the firm in January. “We are very stable around here now. And we’re looking forward to getting back to the practice of the law.” “The publicity surrounding this entire controversy is hard on any organization, and it has not been easy on Jenkens,” said Rod Phelan, a partner in the Dallas office of Houston-based Baker Botts who led Jenkens’ negotiations in the settlement. Profits flat But despite its smaller size and tax troubles, the firm says net profits for 2003 were relatively flat compared to the $81 million Jenkens posted in 2002, although profits per shareholder improved moderately in 2003. Profits per shareholder totaled $526,000 in 2002, according to an annual report on firm finance compiled by Texas Lawyer, a sister publication of The National Law Journal. The increase in profits per shareholder is because of the loss of lawyers, Cantrill explained. If the settlement goes through, the firm will bear some of its costs. A lawyer for Jenkens’ insurers as well as a plaintiffs’ lawyer confirm that the proposed settlement calls for Jenkens to contribute $5.25 million to the pot, insurers to pay $63.5 million and three tax shareholders in the firm’s Chicago office to contribute. It calls for $3.96 million from Paul M. Daugerdas, $1.43 million from Erwin Mayer and $860,000 from Donna Guerin. The three shareholders did not return, before press time on March 11, telephone messages left at their offices, and their attorney, Larry Black, a solo practitioner in Austin, Texas, was out of the office and did not return two telephone messages. Former shareholders generally agree that the firm can afford to be cautiously optimistic. Former Jenkens Chairman David Laney, who left the firm a year ago to join Jackson Walker in Dallas, said, “I think the change in management, plus the beginning of the resolution of this [tax] matter, is a very important stabilizing influence.” Gerald “Jerry” Welch, a former Jenkens shareholder and a partner in the Dallas office of Washington’s Patton Boggs said, “Cantrill is a heads-up guy. They ought to be able to fix things.” Nevertheless, the proposed settlement is far from a fait accompli. The firm and the former Jenkens clients pushing for the deal must overcome a long sequence of hurdles before the deal is inked, said Cantrill and David Deary, a partner in Shore Deary in Dallas who negotiated the deal on behalf of the plaintiff class. Initially, attorneys for Jenkens, and the former Jenkens clients, represented by a team led by Deary, must convince U.S. District Judge Shira A. Scheindlin of New York, who is presiding over Denney v. Jenkens & Gilchrist, to certify a class of former Jenkens clients who received tax-strategy advice from Jenkens. Then, the judge must approve the terms of the settlement. If the judge is persuaded to certify the class and approve the terms, the plaintiffs’ lawyers must persuade the class members�wealthy people who could number in the hundreds and presumably have the money to hire any lawyers they wish�not to reject the deal. If even one class member decides to opt out, Jenkens could scrap the deal.

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