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Plaintiffs’ lawyers face a nagging question as they attempt to exact damages from two law firms they’re targeting in the securities class action against Enron Corp.: How deep will the lawyers’ pockets be? To be sure, Houston’s Vinson & Elkins — Enron’s chief outside counsel — and Chicago’s Kirkland & Ellis — which worked on several of the off-balance sheet vehicles that led to Enron’s downfall — are two of America’s largest law firms. For 2000, Vinson & Elkins grossed $386.5 million and Kirkland racked up $470 million in revenues. That, however, doesn’t mean the money is available for plaintiffs — instead the pot of gold may lie in the firms’ insurance policies. But tapping the insurance could prove a complicated task, particularly for Vinson, which is part of a pool that some observers say might frown on paying off plaintiffs. The Chicago-based Attorneys’ Liability Assurance Society Inc. provides Vinson & Elkins with its professional liability insurance. With hundreds of law firms as clients, ALAS bills itself as the largest legal liability carrier in the country. Kirkland did not return a call for comment on its insurance. Vinson and ALAS have a few close connections. One of the closest is the firm’s defense counsel in the Enron matter, John Villa, a partner at Williams & Connolly in Washington, D.C. Villa is also lead claims counsel for ALAS. Villa did not a return a call for comment by press time, and Vinson, through a spokesman, declined to comment about the firm’s insurance policy other than to confirm that ALAS was its carrier. An ALAS spokeswoman declined to discuss the company’s clients or policies. However, given Vinson’s size, it’s unlikely the firm’s coverage stops at the limits of most ALAS primary policies, said Ronald Palmer, a retired partner from Houston’s Baker Botts who still handles the firm’s insurance policies with ALAS. Palmer said he believes that with ALAS policies, liability coverage tops out at $50 million or $75 million. But Palmer said most firms, including Baker Botts, buy extra layers of insurance from other companies and stack them on top of the primary policy from ALAS. Those other policies, called excess insurance, protect the firm from exorbitant payouts that exceed limits of other policies. Excess layers can give firms $100 million or more in coverage, Palmer said. “I would be very, very surprised if Vinson & Elkins didn’t have excess insurance,” Palmer said. According to its Web site, “ALAS is an unaffiliated, integrated mutual insurance organization owned by its member-insureds.” Gidon Caine, a securities litigation partner at California’s Silicon Valley office of Minneapolis-based Oppenheimer Wolff & Donnelly, said Vinson’s managers could be facing intense scrutiny from other large firms that ALAS insures. “In theory, they’re all on the hook,” said Caine. If infighting occurs among members of ALAS, that could make a settlement more difficult, Caine said. That would make life particularly tough for the plaintiffs’ lead counsel, William Lerach, of Milberg Weiss Bershad Hynes & Lerach. Bruce Simon, a partner at plaintiffs firm Cotchett, Pitre, Simon & McCarthy, said the best way for the plaintiffs to proceed is to take the most direct means for recovering, and that may be to get a payout from an insurance policy and move on. If that doesn’t work, Simon said the plaintiffs will have to show the individual lawyers participated in the fraud or knew about fraudulent conduct. “In terms of proceeding against the partners versus the firm,” Simon said, “it seems to me, it’s the acts of the partners that bind the firm.” Whether the plaintiffs can take a stab at individual partners at Vinson could be limited by the firm’s structure as a limited liability partnership. An LLP is designed to give partners protection from individual liability. LLPs came in vogue over a decade ago, and professional services providers, like lawyers, took advantage of them. But Jonathan Axelrad, a partner at Wilson Sonsini Goodrich & Rosati who specializes in partnerships, warned that LLPs aren’t necessarily ironclad. If individual partners misbehave, they could lose the professional protection afforded by the partnership. “An LLP will not, by itself, protect a partner from the consequences of his or her own misdeeds,” Axelrad said.

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