X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A Cautionary Tale The holiday season has had a frenzied quality this year for Thomas Cantrill, the chairman and chief executive officer of Dallas-based Jenkens & Gilchrist, but not in the office-revelry, gift-giving and mistletoe sense. Yes, Cantrill may have celebrated some, but he also has spent the better part of December attending multiple mediation sessions with lawyers for some of the firm’s estimated 1,100 disgruntled former tax clients. “I’ve been pretty busy,” Cantrill says. The Jenkens chairman, who assumed the helm of the 53-year-old firm 11 months ago, hopes that all of his hard work will persuade those former clients to enter � before a Dec. 17 deadline (after Texas Lawyer’s presstime) � a proposed class-action settlement that could resolve the bulk of the firm’s tax shelter-related woes. Initially valued at some $75 million but now expected to rise, say two lawyers familiar with the negotiations, the proposed settlement is Jenkens’ 11th-hour attempt to erase the firm’s potential liabilities. Those liabilities first surfaced when the Internal Revenue Service ruled that tax shelters that lawyers in Jenkens’ Chicago office helped structure for clients were invalid. The Jenkens lawyers also had issued opinions advising those clients that the tax shelters were lawful. Among big-firm lawyers in Texas and particularly in its hometown Dallas, the rise and fall of Jenkens’ once phenomenally fast-growing tax-shelter practice, no matter what the ultimate outcome of the pending litigation, serves as a cautionary tale. Texas Lawyer interviewed seven former Jenkens shareholders for this article. To them, the moral of the firm’s story seems obvious: Varying components of too much success, lateral growth and greed � all pumped up by the spectacular growth of a tax-shelter practice � ripped through the very core and culture of the firm, which has lost 150 lawyers over the past two years and now has a firmwide roster of 450. David Laney, who served as Jenkens’ chairman from 1990 to 2002 and now is a member of Dallas’ Jackson Walker, says, “You had a board that had become so enamored and blinded by revenue targets that it eroded a law firm culture, structure and cohesiveness. It was dollars versus culture, and dollars can attract a level of avarice that doesn’t allow for a longer-term vision.” Laney concedes he was chairman of the board and instrumental in setting goals to expand the firm geographically and to develop an industrially diversified client base, a strategy that led in the late ’90s to the hiring of the Chicago shareholders and interest in developing the tax-shelter practice. But, Laney says, by 2000 the financial success of the Chicago office’s tax-shelter strategies became its own force with which to reckon. Laney says he failed to persuade others in management that it was time to restrain that group. “They ran away from me,” Laney says. For other former Jenkens shareholders, however, Chicago wasn’t the only problem. “The troubles that the firm is experiencing right now are the result of a lot of things happening at once,” says Toby Gerber, a former Jenkens shareholder who served on the firm’s executive committee but has since become a partner in Fulbright & Jaworski in Dallas. Gerber believes that Jenkens’ fast-paced hiring of laterals in offices outside Texas contributed greatly to the lack of cohesion among the firm’s shareholders. “Times in any law firm are not always good, but as the good and bad take place, you need something more than the phone number of another attorney in another office as something you know about that person. Those types of relationships didn’t have the opportunity to develop at Jenkens,” Gerber says. Jenkens’ current chairman, Cantrill, draws even more specific lessons from his firm’s predicament. But his are lessons that require an understanding of the firm’s recent management history. In 1998, Laney served as Jenkens’ chairman and the firm had developed a plan to diversify geographically and began exploring options to open offices in large metropolitan areas nationwide, Cantrill says. During that year, Laney recalls he received a call from a lawyer working with Paul Daugerdas and a group of Chicago tax attorneys. Formerly with Altheimer & Gray (which is now defunct), Daugerdas approached Jenkens about joining the firm and bringing with him a team of lawyers and a then-fledgling tax-shelter practice. When he heard about Daugerdas’ proposal, Laney says, he asked shareholder William P. Durbin to handle the negotiations with Daugerdas and his Chicago team. Durbin previously had served on Jenkens’ executive board. “I got a call from one of the people in Daugerdas’ group, and then I said, “Here Bill [Durbin], take what you can make of it,’ ” Laney recalls. Within a year, Durbin had developed and structured a lateral hiring deal with Daugerdas’ group and received approval for the hires from Jenkens’ board and electoral committee. Durbin also was the chief architect behind establishing Jenkens’ New York office. Durbin did not return two telephone calls seeking comment before presstime on Dec. 16. [See "Jenkens & Gilchrist Blows Into the Windy City," Texas Lawyer, Jan. 11, 1999, page 15, and "Two Texas Firms Announce Upcoming Mergers," Texas Lawyer, Dec. 18, 2000, page 8.] Durbin’s achievements � the establishment of the firm’s New York and Chicago offices � set the stage for him to run a successful campaign in 2001 to be elected Jenkens’ chairman. For his part, Laney says he had taken his name out of the running; he left for Jackson Walker one year later. Laney says he realized he didn’t see eye to eye with other shareholders who were more accepting of the management team than he was. “I truly wanted to move to a law firm whose leadership I highly respected and where I was excited about being,” Laney says. Before he left and while he was still chairman, Laney says he had grown concerned about the direction and powerful effect the Chicago office had on the entire firm. Daugerdas, who had joined the firm as a shareholder, is a forceful personality, Laney and Cantrill say. Laney says Daugerdas expressed himself adamantly with the board. Indeed, Daugerdas and the board had “knock down, drag out battles,” Laney says. Typically, Laney says, the discussions centered on analysis of the firm’s financial results and attorneys’ compensation issues. In the next few years, with Durbin at the helm, Daugerdas and the other Chicago lawyers’ tax-shelter practice grew to be extremely lucrative. The New York Times reported on Oct. 13, 2004, that the firm generated some $267 million in fees. Between 1999 and 2003, The Times reported, Daugerdas, who had negotiated a contract with Jenkens to receive a percentage of his practice’s revenues, took home $93 million. Daugerdas did not return two phone calls seeking comment. But Patrick Dorton, Daugerdas’ spokesman, says the Chicago lawyer, now of counsel with Jenkens, declines to comment on the revenue figure. With the tax-shelter practice booming, the shareholders re-elected Durbin to the chairmanship in 2002 and 2003. Meanwhile, the Chicago office got the go ahead to hire another 20 lawyers between 2002 and 2003. It was in 2003 that Jenkens’ tax-shelter woes first surfaced, and the tide changed dramatically for Durbin and Daugerdas. In August 2003, the IRS sued the firm in the U.S. District Court for the Northern District of Illinois. In briefs it filed in USA v. Jenkens & Gilchrist, the government demanded that Jenkens reveal the clients to whom it had provided tax advice and alleged the firm had a role in organizing and selling some “potentially abusive tax shelters.” The firm’s former clients subsequently made related allegations in seven suits filed nationwide against the firm and individual Jenkens lawyers. In the IRS’ case, Jenkens initially argued in response motions that it could not reveal the names because of attorney-client privilege. On April 20, U.S. District Judge James B. Moran of Chicago issued a memorandum opinion that denied Jenkens’ motion to dismiss the government’s suit seeking the identity of more than 1,000 of the firm’s tax shelter clients. Moran cited the 7th U.S. Circuit Court of Appeals’ 2003 opinion in United States v. BDO Seidman, which found that a group of former clients of an accounting firm did not have the right to intervene to protect attorney-client privilege. Jenkens subsequently agreed to turn over the former clients’ names to the government. On the advice of counsel, the firm and its shareholders are not commenting about the merits of the government’s or former clients’ allegations about “potentially abusive tax shelters,” says Petri Darby, public relations/marketing manager for Jenkens. Daugerdas’ spokesman Dorton, however, says all the tax-shelter work the Chicago partners performed as well as the opinions they issued for clients would be upheld under any “impartial scrutiny.” Under the class-action settlement as initially proposed, Daugerdas would pay some $3.96 million personally. [See "Taxing Times," Texas Lawyer, March 15, 2004, page 1.] Daugerdas, however, is only negotiating now with disgruntled clients to save Jenkens the cost of drawn-out litigation, Dorton says. By early 2004, the tax-shelter litigation pressures � with former clients suing nationwide � had mounted. In November 2003, Jenkens shareholders re-elected Durbin as chairman. But less than two months later, he resigned suddenly. “I just think it was a good time for change,” Durbin told Texas Lawyer at the time. As Durbin’s successor, Cantrill was a familiar face in a leadership position for many Jenkens shareholders. He had led the firm for three-and-a-half years in the late ’80s, another troubled period when the government had opposed the firm in litigation related to its savings and loan clients. Having helped extricate Jenkens from those troubles, Cantrill left management to return to his practice, precisely when many of the management decisions that precipitated the tax-shelter woes were made. Cantrill does not fault the firm leaders at that time � Laney or Durbin � for adopting an aggressive growth and diversification strategy, which led to the hiring of laterals in Chicago and New York. Nor does Cantrill believe the firm made a mistake in agreeing to hire Daugerdas and his Chicago team with its tax-shelter practice. Cantrill does believe, however, that he would have overhauled how the firm managed and oversaw that tax practice if he could turn the clock back. Cantrill confirms the firm had a two-shareholder review requirement for any opinions it issued. Typically, that process was followed in Jenkens’ tax strategies practice and an attorney outside of the Chicago practice penned the second sign off. But for Cantrill, who is facing lawyers for former clients in negotiations over those opinions, that may not have been enough. “I can surely say with 20/20 hindsight, and Bill Durbin would agree, we would have handled the tax-shelter representations different from A to Z if we had the opportunity to do it over again. We would have spent a lot more time on each and every opinion and taken the time to develop every file. . . . We should have gone a little bit more slowly.” � Miriam Rozen What an Education Judge John Dietz isn’t afraid to take on the tough cases. As administrative judge for Travis County’s civil district courts, Dietz assigned himself West Orange Cove Consolidated Independent School District, et al. v. Shirley Neeley, et al., the outcome of which could determine how Texas public schools will be funded in the future. It’s unlikely many judges would volunteer to hear a case in which they would be inundated with financial figures and statistics. George Bramblett, an attorney for the 48 school district plaintiffs in West Orange Cove, says more than 7,860 exhibits were introduced, 35 witnesses testified at the trial and depositions were presented from 55 others. But Dietz, presiding judge of the 250th District Court, calls the experience a delight. “It was a once-in-a-judicial-lifetime case,” the 57-year-old Dietz says, adding that a judge rarely has an opportunity to hear a case that has the potential to have as much impact as this one. A former prosecutor and criminal-defense attorney in Austin, Dietz first won election to the civil district court bench in 1990 and has a reputation for being demanding. Attorneys representing various parties in West Orange Cove say Dietz runs an efficient trial. “He kept us on task, kept us moving,” says David Thompson, a partner in Houston’s Bracewell & Patterson and Bramblett’s co-counsel in representing the plaintiff districts. Although attorneys in the case had contended that the trial would last at least two months, Dietz says he told them it could be done in less time. The trial wrapped up in six weeks, and Dietz ruled from the bench on Sept. 15 that the state’s school finance system is unconstitutional. On Nov. 30, Dietz fleshed out the reasons for his ruling in an opinion and extensive findings of fact and conclusions of law. Dietz wrote in the opinion that the system violates Article VIII, 1-e of the Texas Constitution because the state-imposed $1.50 cap on maintenance and operation (M&O) tax rates is a floor and a ceiling, denying school districts “meaningful discretion” in setting their tax rates. Attorneys for the state had argued that districts at the $1.50 cap have discretion to reduce their M&O rate by a fraction of a cent if they still can meet the state’s educational requirements and can eliminate a course, extracurricular activity, benefit or program not required by state law. The state’s proposed definition would remove the word “meaningful” from the phrase, Dietz wrote. Dietz also wrote that the system is unconstitutional because it violates the “general diffusion of knowledge” clause in Article VII, 1 in that the maximum amount of funding available is not sufficient for districts to meet state education standards. According to Dietz’s findings of fact, the Texas Education Agency’s (TEA) “academically acceptable” ranking for accreditation is not the equivalent of an adequate education. Under the state’s 2003-2004 accountability system, a district receives an acceptable rating if 25 percent of its students pass the math portion of state-mandated skills test and 35 percent pass the science portion of that test, Dietz wrote. In addition, Dietz wrote in the opinion that the system violates Article VII, 1 because the state has failed to provide the funds necessary for poor districts to have substantially equal access to funding to improve their school facilities and to meet the needs of economically disadvantaged and bilingual students. Thompson, who was TEA’s general counsel in 1989 when the Texas Supreme Court first held the state’s school finance system unconstitutional in Edgewood v. Kirby, says Dietz provided a “first-of-a-kind ruling” on the adequacy of the system and detailed findings of fact and conclusions of law that back up his ruling on that issue. Previous rulings in school finance cases have focused on the equity of the Texas school finance system more than on the adequacy of the funding. “It is significant for all the school districts in Texas and all the schoolchildren in Texas,” Bramblett, a partner in Haynes and Boone in Dallas, says of Dietz’s opinion. “It’s the opinion everybody in the state is reading.” Bramblett says the plaintiffs filed the suit in 2001 and have asked the Texas Legislature since that time to come up with a better way to fund schools. “I think some of [the legislators] were waiting to see if we could win this case,” he says. David Hinojosa, staff attorney at the San Antonio-based Mexican-American Legal Defense and Education Fund, which represents 21 poor districts that intervened in the case, says Dietz’s findings look not just at what is happening now under the state’s school funding system but also at what the system holds for the future of Texas. David Anderson, TEA’s current general counsel, says no one knows the effect the opinion will have until after the appeals process has ended. But Anderson says Dietz’s opinion is much more formal, more directed toward findings of fact and “much less a philosophical treatise” than the opinions in Edgewood v. Kirby and the three subsequent Edgewood cases. Texas Attorney General Greg Abbott, whose office defended the system, says he will appeal Dietz’s ruling directly to the state Supreme Court. Assistant Attorney General Jeff Rose, lead counsel for the state in the West Orange Cove trial, declines comment on Dietz’s opinion. But Rose says Dietz has a great courtroom demeanor and clearly had taken the time to educate himself on the school finance issue before the trial. “He dishes out plenty of good-natured ribbing, but, ultimately, I think he’s very respectful of the lawyers and treats them as professionals,” Rose says. “There is never any doubt he is in control of that courtroom.” Thompson says he was impressed with the level of preparation Dietz had done before West Orange Cove went to trial. Dietz says he spent several months reviewing past school finance cases before the trial. “If I say I read at least 20 times each case, that’s not an exaggeration,” he says. But Dietz says he didn’t necessarily understand all the concepts at the time he was reading about them. During the trial, he would suddenly have an “aha moment” when he understood how various things work together in the system, Dietz says. Dietz says he believes the attorneys were able to try West Orange Cove so quickly despite the enormous amount of evidence they had to present, because he required everything to be done electronically. Lawyers had to present their case visually, instead of presenting evidence through a witness talking on the stand, Dietz says. Because so much of the evidence involved financial data and statistics, he says, it was easier to read the information on the computer screen than to have lawyers hand him a lot of paper. Anderson says the paperless trial was difficult at times. He says some files were so large that people’s e-mails rejected them and that lawyers tended not to edit the electronic files as well as paper documents. Anderson also questions whether a judge hears everything a witness is saying while scrolling up the testimony as it appears on the screen. However, Dietz says, “You’re going to be able to read faster than a person can talk.” Dietz keeps a small collection of Godzilla figures on a shelf in one corner of his courtroom. When he wants to hold an off-the-record conference with attorneys during a trial, Dietz has been known to direct them to meet him “over in the Godzilla corner.” Bramblett says Dietz summoned the attorneys to the Godzilla corner infrequently during the West Orange Cove trial. And Bramblett says Dietz handed out Godzilla figures to the attorneys during one day of the trial. “These are baby Godzillas,” he says. � Mary Alice Robbins Death, Insanity and Videotape Any attorney who has practiced criminal law for more than 10 minutes knows that mounting an insanity defense is one of the toughest legal maneuvers possible. But Tyler lawyer F.R. “Buck” Files Jr. did it so well earlier this year that lawmakers are discussing changing the law. Files’ victory also paved the way for another high-profile insanity-defense win. Files, a partner in Bain, Files, Jarrett & Bain, represented Deanna Laney in a capital murder case in which she was accused of killing two of her sons by hitting them in the head with rocks; her third son survived the attack but was left seriously injured. On April 3, a Tyler County jury found Laney not guilty by reason of insanity. A month later, a Texas Senate Jurisprudence Committee, alarmed that the trials of Laney and Andrea Yates � a Houston mother sentenced to life in prison for drowning three of her children � had similar evidence yet different results, held a hearing about changing the Texas insanity defense law to include “guilty but insane” as a possible jury charge so that jurors have another option when confronted with these difficult cases. The Laney case was a big topic during that hearing. The Senate committee issued a report last week that recommended no significant changes to the law. Psychiatrists hired by the state, the defense and even the court eventually testified at her trial that Laney suffered from a psychotic disorder so severe that she did not know right from wrong at the time of the killings. But even with unanimous opinions from expert witnesses who found that Laney was insane, Files still had to prove to 12 citizens of Smith County � one of the most conservative jurisdictions in Texas � that Laney didn’t know right from wrong. And conservative or not, juries have a hard time sympathizing with mothers accused of killing their children, several criminal-defense attorneys say. “When Buck first sat down with me, he didn’t think this case was in the bag,” says Smith County District Attorney Matt Bingham, who prosecuted Laney; Bingham did not seek the death penalty. “It was not an open-and-shut case, and there was a lot of things for a jury to consider in this case.” Judge Cynthia Stevens Kent of the 114th District appointed Files to represent Laney. Thirty minutes later, Files says he was on the phone to George Parnham, of Houston’s George Parnham & Associates, the lawyer who defended Yates in 2002. “I asked George Parnham what he would do different if he had scripted” the Yates trial, Files says. “And his comment was they didn’t have a videotape of her early on.” So on the same day Kent appointed Files, he had a licensed counselor at the jail videotaping an interview with Laney. The counselor also videotaped Laney after she had taken medication to stabilize her mental condition. “It was very good for Buck and his case,” Bingham says of the videotapes. “The plus for Buck � this was his argument � was when the tape was first made, she’s very calm and doesn’t appear upset. And later, when she gets on medication, she appears very upset.” Files’ expert witnesses included several psychologists who dissected the tapes and explained Laney’s behavior to the jury � two of whom told prosecutors they wouldn’t have found Laney insane if they hadn’t seen the tapes, Files says. Months later, when Robert Udashen, a partner in Dallas’ Sorrels & Udashen, was preparing to defend Lisa Diaz, a Plano mother accused of killing her two children, he consulted with Files about using videotapes of interviews with Diaz at her trial. “I called him and was struggling on whether to use those tapes,” Udashen says. “He told me they were the best thing in his case. It allowed the jurors to see what Ms. Laney looked like at that time. It also helped them understand Lisa Diaz.” Just like Files, Udashen won a not guilty by reason of insanity verdict from a conservative Collin County jury. Files say he was happy to pass along the advice to Udashen, as Parnham had done to him. “Someone helps you, you help someone else,” Files says. “It’s what lawyers do.” � John Council Mission: Not-So-Impossible State Bar of Texas leaders handed Austin attorney Richard C. “Dickie” Hile a tall order in January 2004, appointing him to chair a task force that had only five months to conduct an intensive study of lawyers’ referral fees and to propose new rules. Bar officials had succeeded in persuading the Texas Supreme Court to postpone the effective date of a proposed amendment to the Texas Civil Practices & Remedies Code � Rule 8a � that would have capped fees paid to lawyers for referring cases and required disclosure of those fees. A special panel appointed by the Supreme Court and chaired by Joe Jamail, a partner in Houston’s Jamail & Kolius, had recommended setting limits on referral fees. But the high court’s effort to regulate referral fees through the rules for civil practice prompted criticism from two of its justices and from civil lawyers around the state. [See "Supreme Court Proposes Capping Referral Fees," Texas Lawyer, Oct. 20, 2003, page 1.] When the Supreme Court agreed to set aside its proposed rule, the court directed the Bar to propose another solution � and to do it quickly. In need of someone who could bring the task force to consensus on the referral-fee issue within a short amount of time, the Bar leadership turned to Hile. Well known at the Bar, Hile served as a director on the Bar board of directors and as its chairman in 1990-1991. “From the very outset, I felt comfortable that, if it could be done, Dickie could do it,” recalls Kelly Frels, State Bar president and a senior partner in Houston’s Bracewell & Patterson. “I knew him to be somebody who is a consensus-builder,” Frels says of Hile. Another reason Hile was the leadership’s choice to chair the Referral Fee Task Force was his expertise in drafting the rules governing lawyer advertising, Frels says. Hile served on a Bar committee that proposed changes in the advertising rules, Part VII of the Texas Rules of Professional Conduct, that were submitted to Bar members in a 1993 referendum, which failed because less than 51 percent of the members voted. The Bar membership approved the advertising rules in a 1994 referendum. The task force worked on the rules for advertising as well as the rules for referral fees. The 56-year-old Hile, a civil trial lawyer and partner in Dies & Hile, says he agreed to the mission because he thought it was important for the Bar to assert itself as the proper entity for evaluating and making proposed changes in the Texas Disciplinary Rules of Professional Conduct. “I thought it was bad precedent for the [Texas Supreme] Court to promulgate what essentially is a disciplinary rule as part of the rules of civil practice,” Hile says. With Hile at the helm, the task force heard testimony in five hearings conducted around the state, spent long hours reviewing input on the issue from lawyers and members of the general public, and wrote a 75-page report that provided an overview of the issues and recommended solutions. Bar leaders received the task force’s report in late May and recommended the proposed rule changes to the Supreme Court, which authorized a Bar referendum on the rules in an Oct. 1 order. Voting on the proposals concludes on Dec. 20. “It is one of the most important things, if not the most important, that the Bar took on and completed this year,” task force member Alistair Dawson says of the effort to rewrite the referral-fee rules. If Hile and the task force had not recommended new rules, the Supreme Court’s Rule 8a would have taken effect, says Dawson, a partner in Houston’s Beck, Redden & Secrest. Coming up with a recommendation wasn’t easy, however. And Hile admits he had some concerns about chairing a 19-member task force made up of lawyers, who are “talented” and “opinionated,” and getting them to reach a consensus on any issue in a short amount of time. “There were heated discussions,” he says. Hile says much of the debate in the task force focused on whether to eliminate the pure forwarding fee. “A lot of testimony in the public hearings indicates the current system is working well,” he says. In the end, the task force recommended that referral fees be allowed but that the rules be amended to require lawyers to perform legal services to earn those fees and be paid in proportion to the services they provide. The rules crafted by the task force also require lawyers to have some responsibility for the cases they refer. Public disclosure was another hot item of debate, Hile says. A requirement in the Supreme Court’s proposed rule would have required lawyers to disclose referral fees to the court in which a case is filed. Hile says the task force opted to beef up the rules governing disclosure of referral-fee arrangements to clients so that clients know in advance that a referral fee will be paid, the terms of the fee arrangement and the names of the lawyers who will be paid. “We wanted to make sure the client is informed before the arrangement takes place,” he says. Dawson says members of the task force were “very talkative lawyers, very opinionated lawyers and very outspoken lawyers.” Getting all of those lawyers to come to a consensus, with only one dissenting vote on the task force’s final recommendation, was difficult, he says. “It was the most amazing leadership I’ve ever seen,” Dawson says of Hile’s skill at guiding task force members as they worked through the issues. “I don’t know how he did it, but he did it.” Hugh Rice Kelly of Houston, another member of the task force, says Hile has the gift of being able to deal with people who have divergent views. He says Hile often uses humor to defuse a heated debate and to prevent tempers from flaring. “He just knows how to keep a group harmonized,” says Kelly, who describes himself as a public interest practitioner who works for litigation reforms. One reason for Hile’s success, Dawson says, is that he allows people to express their views fully. “He may not agree with you, but at least you’re able to present your position,” Dawson says. Kelly, the only member of the task force who voted against its final recommendations to the Bar board, says Hile treated him fairly. “I got a full hearing, got my views out there. It’s just that I was a minority of one,” Kelly says. “Getting out-voted is a lot different than getting run over.” � Mary Alice Robbins Busting the Cap? The $1 billion verdict Houston plaintiffs lawyer John M. O’Quinn won in a fen-phen suit in Beaumont in May resonated far outside the Jefferson County Courthouse. Even in Jefferson County, which has a reputation as a plaintiffs-favorable venue, a $1.01 billion verdict that includes $900 million in punitive damages, is massive � so huge that its very existence has drawn attention from the public, from plaintiffs lawyers who salivate at the effect the hefty verdict may have on settlement negotiations in other fen-phen suits, from defense attorneys who can sympathize with the losing trial team and from supporters of tort reform who are noting the size of the award. While O’Quinn, a partner in O’Quinn, Laminack & Pirtle, can’t help but grin when talking about his team’s courtroom accomplishment in Beaumont and the jury finding that he says will allow the huge punitive damage award, it almost could be too much of a good thing. Tort reformers, worried about the precedent appeals courts could set if they uphold 172nd District Judge Donald Floyd’s judgment in the fen-phen suit, could be thinking of new ways to close the loophole O’Quinn found in the law to achieve the record-setting damage award � or, alternatively, to find some other way to rein in O’Quinn’s success in the courtroom. Then again, they may not. State Rep. Joe Nixon, R-Houston, who sponsored H.B. 4, the tort reform measure that was approved by the Texas Legislature in 2003, says he’s heard no rumblings of any tort reform efforts that would change any provisions in the law to prevent a repeat of O’Quinn’s verdict. Neither has Ken Hoagland, the communications director for Texans for Lawsuit Reform. Hoagland says that in the wake of voter approval of Proposition 12 in September � a measure that authorized the Legislature to cap non-economic damages for health care-related and other personal-injury claims � he anticipates no effort by his group to try to further cap damages along the lines of what was allowed in Proposition 12. “There were certain areas that should be exempt from the punitive damages cap,” he says, noting that fraud was intentionally written in as an exception to the cap on punitive damages. Nixon, a shareholder in trial firm Phillips & Akers, says tort reform issues likely will take a back seat during the upcoming session of the Texas Legislature. “The focus this coming session will be on public schools � how to pay for them � and how to give taxpayers some kind of meaningful relief,” Nixon says. But O’Quinn says he wouldn’t be surprised at anything. “I don’t know of anything for sure they are trying to do. I don’t know of any bills proposed yet, but knowing the forces of evil, they will come up with something to keep my clients from having justice,” he says. He says the real impact of the $1 billion verdict is good for fen-phen clients. “It’s going to cause Wyeth to do a 180 and start settling these cases,” O’Quinn says. O’Quinn, a nationally known plaintiffs lawyer, says the $900 million in punitive damages will pass appellate muster because the jury found Wyeth knowingly or intentionally destroyed, altered or concealed public documents. O’Quinn says because of that finding, the cap that would limit punitive damages to twice the amount of compensatory damages plus up to $750,000 does not apply. [See "Record-Setting $1 Billion Verdict Returned in Fen-Phen Suit," Texas Lawyer, May 3, 2004, page 1.] But one of Wyeth’s trial attorneys, Leslie Benitez, a partner in Clark, Thomas & Winters in Austin, says the cap will apply. The jury in Jerry Coffey, et al. v. Wyeth, et al. awarded $113.9 million in actual damages and $900 million in punitives to the family of Cynthia Cappel-Coffey, who died at age 41 on New Year’s Day 2003 of primary pulmonary hypertension, a rare and deadly lung disease. The plaintiffs � Cappel-Coffey’s husband and their three daughters � alleged in the suit that Cappel-Coffey contracted PPH because of drugs she took to lose weight, including Pondimin. Wyeth, which manufactured the Pondimin Cappel-Coffey took, is appealing the verdict. Pondimin, recalled from the market in 1997, is one of the drugs that was prescribed in the diet-drug combination known as fen-phen. In May, Judge Floyd entered a judgment awarding the $113.9 million in actual damages and $900 million in punitive damages. As he waits for the appeal in Coffey to proceed � the case is pending before the 9th Court of Appeals in Beaumont � O’Quinn says he is anxious to go to trial in another PPH suit. He says he has four set for trial in 2005, including another one in Beaumont. “I’m going to bankrupt Wyeth,” O’Quinn says. Benitez says Wyeth will appeal on several grounds, including the argument that the plaintiffs presented no valid scientific or medical evidence to prove Cappel-Coffey’s injuries were caused by Wyeth’s drugs. Also, Benitez says, the damages awards are “grossly excessive,” and Floyd had no basis under Texas law to refuse to apply the punitive damages cap. O’Quinn says his plan is to win another PPH suit against Wyeth and then another, and another, in an effort to push up the settlement value of his docket of PPH suits. George Fleming, another Houston lawyer with a large fen-phen docket, says Coffey should have a big impact on settlement values if Texas appeals courts uphold the billion-dollar judgment. He says the plaintiff deserves substantial damages because of the jury’s fraud finding and because O’Quinn’s plaintiff died and left three young daughters behind. He also notes that the punitive damages in the judgment are about nine times the actual damages, a ratio he says is reasonable. “Legally, John’s got something to talk about as it [Coffey] goes through the appellate courts,” says Fleming, of Fleming & Associates. Fleming says he has settled PPH suits before and after Coffey, but confidentiality agreements bar him from saying if the settlement values improved after the $1 billion verdict. “I can’t tell you up, down [or] sideways on the thing. What I will tell you is we have had a number of clients who had contracted PPH, and some of our clients are no longer alive. . . . What I’ve become convinced of is this [PPH] ain’t something you play around with,” Fleming says. “The amount of the [Coffey] jury verdict, to me, justified the significance of those cases.” A Wyeth spokesman says the company does not comment on settlement offers. � Brenda Sapino Jeffreys Swift and Steady Wins the Race John E. O’Neill’s plans after donating a kidney to his wife in February were simple. He would recover from the surgery and resume his trial practice. Instead, O’Neill, a partner in Houston’s Clements, O’Neill, Pierce, Wilson & Fulkerson, wrote a book attacking U.S. Sen. John Kerry’s war record and spent months as the point man for a group of veterans intent on discrediting the Democrat’s war record. While it’s difficult to quantify the effect of the Swift Boat Veterans for Truth on the presidential election, O’Neill’s efforts clearly aided the re-election campaign of President George W. Bush by causing Kerry to spend time defending his Vietnam service instead of attacking Bush’s domestic and international policies. “It took the momentum away from Kerry after the convention,” says Bob Stein, dean of the School of Social Science at Rice University in Houston. “Did that mean he [Kerry] lost the election because of that? I don’t think so. Did it help him? Clearly not,” Stein notes. Bruce Buchanan, a professor in the Department of Government at the University of Texas who studies presidential politics, says the time Kerry ultimately spent responding to the Swift Boat group’s claims was time he wasn’t talking about the economy or his credentials. What the Swift Boat Veterans for Truth campaign “did was to reinforce the general message that the Bush campaign was putting out for a slightly different reason, perhaps, that this guy wasn’t suitable to be president in a time of war,” Buchanan says. O’Neill discounts the effect of his work on the outcome of the election. “I really believe Bush is the author of his own victory, and Kerry is the author of his own defeat,” O’Neill says. But during the height of the campaign, O’Neill was busy giving interviews promoting the message of the Swift Boat Veterans for Truth that questioned Kerry’s war record in Vietnam, including the circumstances surrounding two of the three Purple Hearts he received, and criticized his anti-war activities after he left Vietnam. O’Neill’s stint on the political circuit was somewhat of a departure for the 58-year-old trial lawyer. Although he has given money to candidates from both political parties over the years, O’Neill says he focused on the law and left politics behind after he graduated from the University of Texas School of Law in 1973. For a time before that, politics was O’Neill’s thing. In 1971, O’Neill debated Kerry on “The Dick Cavett Show.” Kerry, a former U.S. Navy lieutenant, represented Vietnam Veterans Against the War, while O’Neill, also a Navy veteran, represented Vietnam Veterans for a Just Peace. In 1972, O’Neill gave a speech at the Republican National Convention. But O’Neill says politics wasn’t his interest after law school. He spent the past 30 years trying commercial cases. Fast forward to February 2004, when O’Neill, in a hospital bed recuperating from the kidney surgery, saw Kerry on television wearing a leather flight jacket and announcing a primary victory. That rankled O’Neill, because he had served on a swift boat in Vietnam like Kerry; it was too hot in Vietnam to wear those jackets. O’Neill says he served on PCF 94, the same Patrol Crafts Fast (Swift Boat) as Kerry, but his service began six weeks after Kerry left the boat. O’Neill says he started talking to some other Swift Boat veterans about Kerry’s fitness for presidential office, and in May, he and others held a press conference, where they criticized Kerry’s war record and made it clear that they did not believe Kerry would make a good president. But because the national media paid little attention to their message, O’Neill says they decided to ratchet up the heat on Kerry. O’Neill, by his account working harder than ever in his life, spent May and June writing “Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry” along with co-author Jerome R. Corsi. The book, which questions Kerry’s war record and his involvement in the antiwar effort after he returned from Vietnam, was released in August, and according to O’Neill, stayed on The New York Times best-seller list from Aug. 12 until the election in November. More than 900,000 copies of the book were sold, with profits going to the Admiral Ray Hoffman Foundation, named after the retired rear admiral who, like O’Neill, was a founding member of the Swift Boat Veterans for Truth. Between the spring and the election, the Swift Boat Veterans for Truth, a 527 nonprofit organization (pursuant to 527 of the U.S. Tax Code) formed to engage in political activity, raised about $27 (million and spent about $22 million of it on advertisements that ran primarily in the battleground states. O’Neill says he personally spent the time traveling and giving more than 2,000 media interviews, mostly in the battleground states of Ohio, Florida and Iowa. “It was like trying a real large civil case, with as many as 17 interviews a day,” he says. Richard Murray, a professor of political science at the University of Houston, says, “O’Neill put a face on this because he had a history with John Kerry, and he was willing to be a national spokesperson and get out in a highly visible role, challenging the Democrats.” Murray, who teaches political marketing, (monitored the campaign on a daily basis with his students, and he noticed that the Swift Boat ads were the only ones that would regularly move the poll figures. “The Swift Boat ads made some difference partly because I don’t think the Kerry campaign responded very effectively,” Murray says. But Democrats say allegations made by O’Neill and Swift Boat Veterans for Truth were not accurate. “The Swift Boat deal was never about the truth. It was just a character assassination deal,” says Charles Soechting, the chairman of the Texas Democratic Party who is a plaintiffs lawyer at Houston’s O’Quinn, Laminack & Pirtle. He acknowledges the efforts of O’Neill and the group had some effect on the election. Now that the election is over, O’Neill says he’s done with politics again and is back to his practice. He says he’s ready for the change, and notes that 2004 has been an “incredibly lean year” financially because of all the time he took off for the operation and the political work. He concedes his public and partisan role in the campaign probably hurt his practice, but may also have helped it. If he lost some potential clients because of that, O’Neill says, “It really doesn’t matter. I’ve always had too much to do.” O’Neill says his only regret is that he didn’t start organizing the Swift Boat Veterans for Truth before the Democratic primaries. He says, “I’m proud of what I did. I think it will be a good story to tell my children and grandchildren.” � Brenda Sapino Jeffreys

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.