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Dallas-based Jenkens & Gilchrist has moved significantly closer to finalizing a proposed class action settlement with former clients who sued the firm over its tax advice. A unanimous three-judge panel of the 2d U.S. Circuit Court of Appeals issued an opinion denying the objections to the proposed settlement raised by two former Jenkens clients who were members of the class but objected to the settlement terms and propriety of class certification. Denny v. Mattei, No. 05-1275-cv(L). The 2d Circuit opinion provides “the relief we are seeking,” said Thomas Cantrill, chairman and president of Jenkens. “We are very happy to have the 2d Circuit confirm what we thought they would.” The 2d Circuit’s March 31 opinion clears away most of the likely objections to Jenkens’ proposed $85 million settlement with some 1,000 former clients. Those clients sued Jenkens after receiving tax-shelter advice starting in the late 1990s from several of the firm’s partners, some of whom have since left Jenkens. The Internal Revenue Service subsequently questioned that tax advice. More than two years ago, U.S. District Judge Schira A. Scheindlin of the Southern District of New York issued a ruling approving the proposed settlement between Jenkens and its former clients. Scheindlin’s ruling certified the former Jenkens clients as a class of plaintiffs and approved a proposed settlement of the class’s claims with the firm. Two different groups appealed Scheindlin’s approval of Jenkens’ settlement of its portion of the Denny claims to the 2d Circuit. One group included plaintiffs (former Jenkens clients) who objected to the proposed settlement. The second group consisted of defendant banks and accountants who allegedly had promoted the tax shelters but refused to settle with the plaintiff class. In its 49-page opinion, the 2d Circuit overruled most of the two groups’ objections to Scheindlin’s ruling. The circuit court affirmed Scheindlin’s approval of the plaintiff class and approved Jenkens’ settlement, rejecting the arguments of the two former clients who had appealed. Robert Clary, a partner in Dallas’ Owens, Clary & Aiken who represents the plaintiffs who appealed to the 2d Circuit, said his clients have not decided whether they will appeal. But the 2d Circuit handed the remaining nonsettling defendant-Deutsche Bank A.G.-a small victory when the judges sent the case back to Scheindlin to revise provisions of the proposed Jenkens settlement that focus on the potential liability of other defendants in the tax-shelter litigation with the plaintiff class. “The bottom line is that the court has certified the class, approved the settlement, overruled all the objections and told us exactly what we need to do to fix a mechanical part of the settlement,” said David Deary, a partner in Dallas’ Deary Montgomery DeFeo & Canada who represents former Jenkens clients who are part of the plaintiff class that agreed to settle with the firm. Jenkens’ Cantrill said he expects the class counsel and Deutsche Bank lawyers to negotiate a proposal to revise provisions in the settlement about the potential liability of nonsettling defendants, as the 2d Circuit ordered.

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