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WASHINGTON — Kenneth Adams bets — and often wins — thousands of dollars in Las Vegas every year as a competitor in national poker tournaments. Five years ago, the Dickstein Shapiro Morin & Oshinsky antitrust litigator persuaded his firm to underwrite what sounded like a much bigger gamble — represent on a contingent-fee basis 153 corporations injured by a now-legendary price-fixing conspiracy in the vitamins industry. The companies had at one point been part of a massive class action against the vitamin industry, but decided to go their own way after what they say was a paltry settlement offer. The strategy paid off. Washington, D.C.’s Dickstein says it won its clients $2 billion — compared with the $400 million they would have been entitled to had they stayed in the class action. The returns for Dickstein, which invested $50 million of its time and money in the case, were also staggering. The firm’s revenue doubled between 2001 and 2003, thanks in part to the firm’s cut of the settlement with the vitamin manufacturers. Partners on average took home $1.9 million in 2003, compared with $650,000 two years before, although draws varied widely throughout the partnership. Dickstein’s standard contingent-fee rate for the breakaway plaintiffs in the case was 15 percent, Adams says, but varied from client to client. Typically, a law firm in class action work will charge 25 percent to 30 percent of the return. Still, a rate of 15 percent would have given Dickstein $300 million in fees. (The exact terms of the settlement are confidential.) By the time Dickstein brought the first suit in 1999, more than a dozen defendants had entered guilty pleas in a criminal investigation by the Department of Justice, admitting to participation in a cartel that lasted for nearly 10 years and cost industrial vitamin buyers, most of them in the agriculture industry, billions of dollars. That made their civil liability almost guaranteed. “These were very culpable defendants and very rich defendants,” says Carmine Zalenga, a Howrey Simon Arnold & White partner who represented Foster Farms Inc. as an opt-out plaintiff in the vitamins litigation. “It’s not going to happen again.” It was, in the words of one client, a “perfect storm.” In 1973, on a suggestion from Ralph Nader, Kenneth Adams joined Dickstein, then a small Washington plaintiffs firm. “It sounded to me like a way to be a lawyer without selling your soul,” says Adams of the firm, then a place where he says partners had once mortgaged their homes to bring pioneering class actions on behalf of state attorneys general. But it wasn’t that the partners were indifferent to moneymaking. They used to say that they could “do well by doing good.” When asked if he thinks that he is still accomplishing the second part of this mission, Adams pauses, then answers that he is. For an attorney who as a law student once counted Black Panther defense lawyer Faye Stender among his professional idols, and who defended Watergate conspirator Charles Colson, Adams is, in some ways, an unlikely rainmaker. “Life,” Adams says, “is what happens when you’re making other plans.” In the mid-1990s Adams decided that he wanted to devote himself to plaintiffs work, and asked then-Managing Partner Angelo Arcadipane for a year to develop his new practice. Adams was conscious of developing a practice that wouldn’t conflict with the firm’s defense work. “A lot of the firm’s growth was being fueled by a client base that was more often defendants than plaintiffs,” Adams says. Throughout the 1980s, Dickstein had altered its profile, assembling a roster of corporate clients that balanced those that didn’t fit the corporate defense model, such as the International Brotherhood of Teamsters. Adams couldn’t promise instant results. Another venture into class actions, a suit he filed in 1989 as co-counsel on behalf of about 40,000 commercial fishermen in Alaska damaged by the Exxon Valdez oil spill, had not yielded returns. (It still hasn’t.) Adams asked anyway for half of the resources the firm devoted to contingent-fee work. Some partners were cautious of venturing too far into plaintiffs-side litigation, both because of financial risk and because of fears that it could affect the firm’s reputation, says Arcadipane, now the firm’s managing partner emeritus. One of the firm’s founding partners and an antitrust class action pioneer, David Shapiro, told Adams quite plainly that he was crazy for thinking that his dream could pay off quickly enough to be viable. Instead, Shapiro says, he encouraged Adams to “get in with the class action boys.” But Adams says that would have put him in conflict with the firm’s increasingly defense-oriented corporate practices. But the other dimension of Adams’ practice — charging on a contingent basis — also had its naysayers within the firm, which had relied on that fee structure early in its history, says Shapiro, who with partner Sidney Dickstein borrowed $750,000 in the 1960s to bring one class action. By the 1980s, Shapiro says, the firm was billing more and more of its work by the hour. Adams is proof that the combination of hourly and contingent-fee billing can be sustainable and hugely rewarding, Shapiro says. “If you’re careful and make a balanced investment, you can pay the rent and pay everybody with the hourly work. If you hit one of these contingent-fee cases right, you make a bonanza,” Shapiro says. “Basically, you can send your kids to Harvard on it.” In and Out In 1999, six of the world’s largest vitamin makers agreed to pay a little more than $1 billion to a class of about 1,000 wholesale vitamin buyers affected by the price-fixing conspiracy. Dissatisfied with the result, one of the largest plaintiffs, Tyson Foods Inc., opted out of the class. Already a Dickstein client, the poultry company asked Adams to represent it. All told, nearly 40 percent of the class followed Tyson out of the class and to Adams’ door, including Kraft Foods Inc. and Quaker Oats Co., which fortify many of their products with vitamins. In the class action settlement, Adams says his clients would have gotten about $400 million. He says that he won them $2 billion. The diminished class is slated to receive about $450 million, down from $1.05 billion as a result of Dickstein’s clients and other companies leaving. The settlement propelled Dickstein partners into the ranks of the nation’s most profitable lawyers. But if the rewards of contingent-fee litigation are obvious, however, so are the risks. Not all of Adams’ cases have paid off — at least not yet. The firm is still awaiting money for its clients in the Exxon Valdez case. ExxonMobil, which could be forced to pay nearly $4.5 billion in punitive damages, has been appealing the verdict. Dickstein has spent more than $10 million since filing the case in 1989, but has yet to receive any reimbursement, says Adams. Dickstein’s model for representing corporations as both plaintiffs and defendants is a hybrid between corporate law and a reliance on class actions, says Francis McGovern, a Duke University School of Law professor who has served as a special master in class action litigation. “You have firms with an exceptional, nontraditional nature and a willingness to take some of the risks you typically see in plaintiffs firms,” McGovern says. The tiny bar of lawyers with opt-out practices draws a bright line between themselves and traditional plaintiffs firms in class actions. “We’ve got someone to answer to,” says Adams, referring to his role as counsel to individual clients in opt-out litigation vs. the role of class counsel, in which the lawyer represents no single client, but only the interests of the class as a whole. “The economic realities of class actions are that they are not driven by the client.” But Michael Hausfeld of D.C.’s Cohen Milstein Hausfeld & Toll, one of the lead class counsel in the vitamins litigation who helped negotiate the original $1 billion settlement for the entire class, says that what Dickstein does in its opt-out practice is not so far afield from the work of a class action firm. “These are classes among classes,” Hausfeld says of the large number of opt-out plaintiffs Dickstein represented in the vitamins litigation. “It’s not a given that an opt-out will get a greater benefit or greater settlement in a class matter.” William Isaacson, a D.C. partner with Boies, Schiller & Flexner who served as co-counsel with Hausfeld for the class, says that while class counsel and the firms representing individual plaintiffs had a smooth relationship over the course of the litigation, there is inherent competition between class counsel and the lawyers for opt-out plaintiffs. “If too many people opt out, there obviously isn’t a class,” says Isaacson. The competition is not only for clients, but for settlement money as well. In the vitamins litigation, the class counsel tried to prevent the opt-out plaintiffs from collecting larger settlements than the class by negotiating a provision with the vitamin companies stipulating that if the opt-out plaintiffs were paid more, the class would be paid additionally to make up for the difference. That provision, however, expired after two years. Adams took that time to further dig into the cartel’s activity, and ultimately, to negotiate a higher settlement. Cash Up Front For a firm founded in 1953 by lawyers dedicated to plaintiffs work and known for a sharp-elbowed and opportunistic edge, Dickstein’s foray into opt-out litigation is perhaps less surprising than if one of its Washington peers entered the same area. “We have a legacy of entrepreneurship,” says Arcadipane. “If someone had walked into my office like Ken did with a plan and we didn’t have this legacy, I would have looked at it differently.” In some contingency cases, the firm shoulders not only its own costs, but the fees for other litigation expenses, such as expert witnesses. In-house law departments too have to weigh the risks of opting out, says Gary Schulte, general counsel of the ContiGroup Cos., one of Adams’ clients in the vitamins litigation. In class actions, only named plaintiffs, usually a minute fraction of the class, are subject to discovery obligations such as making their employees available for depositions. But all plaintiffs who opt out and go their own way are exposed to discovery. “I’m a little bit cynical about plaintiffs lawyers,” Schulte says. “But this was one of the few times I got to be a plaintiff — and it was a lot of fun.” Fun, perhaps, because it meant Schulte could bring a several-million-dollar check back to management (he won’t say exactly how much), without having had to pay hourly fees to the lawyers who won the settlement. “[The clients] don’t really care if we make a lot of money as long as they make a lot of money, too,” says R. Bruce Holcomb, an antitrust partner at Dickstein who works closely with Adams. “And not being second-guessed [about billing] is a very liberating way to work.” For Dickstein’s partnership, the promise of future windfalls can act as golden handcuffs, Holcomb says. In recent years, Dickstein has had a low turnover rate, losing just six partners since 2001. Even so, as at most law firms, partner compensation varies widely and could range between $300,000 to $7 million, says a lawyer familiar with the firm. Arcadipane says that the lowest partnership salary is higher than $300,000, but won’t say by how much, and that the highest partnership draw exceeds $7 million. The firm has delivered seniority-based prosperity bonuses to associates and staff in the past two years and gave associate bonuses in 2003 ranging from $10,000 to $100,000. As shareholders in the firm, the entire equity partnership saw a significant rise in compensation as well. As a result, the partners have poured money into college tuition accounts, bought vacation homes — and there has been, as Holcomb puts it, “a substantial upgrade in the partners’ wheels.” Firm leaders also say they used part of the windfall to pay off all of the firm’s debt. Adams and Dickstein say they will continue to invest up to 10 percent of the firm’s resources in contingent-fee work. They say that any risk is a calculated one. “We don’t just put chips on a lot of numbers and hope that it comes out well,” Arcadipane says. Profits in 2004 will be lower than last year, but Arcadipane says that in the next five years, the firm’s 90 equity partners will still bring home an average of $775,000 to $1 million. There are still traces of a scrappy past: for example, two threadbare armchairs in Bruce Holcomb’s office. And then there is Adams’ own office, with its bare walls and black laminate desk sitting in an expanse of practical gray carpeting. That’s set to change, however, as befits the firm’s new wealth. Dickstein last year signed a 15-year lease for a new, 417,000-square-foot space at International Square in 2006. Even better, it’s already paid for. Lily Henning is a reporter with Legal Times , a Recorder affiliate based in Washington, D.C.

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