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Greenberg Traurig should consider opening a Texas office. The Miami-based firm has offices across the country, but it could sure use some Texas roots, in the event that it has to stand trial again in the Lone Star State. From late October through December 2001, the firm was a defendant in a Galveston, Texas, trial. It was accused of defrauding Robert Moody, Jr., arguably the most prominent citizen in Galveston. The Greenberg lawyers allegedly at fault were from New York City, a point not lost on Moody’s lawyer, Valorie Davenport. The homespun Texas native berated the “Park Avenue” defendants and peppered her presentation with homilies like, “even a blind hog can find an acorn.” Davenport clearly connected with the jury, which sided firmly with Moody. And in March, Galveston judge Wayne Mallia entered a judgment against Greenberg for more than $25 million. Greenberg is vowing to continue the fight. But how things went so wrong for the firm in the first place is a story, in part, about bad timing and bad strategy — getting “hometowned” (at least as Greenberg sees it) in a plaintiff-friendly venue, and at a time when jurors were itchy to punish financial chicanery. As befits Galveston, a beach town on the Gulf of Mexico, the case concerns a marine matter. In 1997 Moody invested in a Pennsylvania fish-farming venture, Integrated Food Technologies Corporation. The company planned to go public, and, in late 1997, it hired lawyers in Greenberg’s New York office to represent it. But the IPO never took place, and Moody lost his $600,000 investment. He later learned, according to his court complaint, that Integrated Food’s chief executive, Jack Summers, had a fishy track record. In 1981 the Securities and Exchange Commission barred Summers from selling unregistered securities for defrauding investors. And in 1997, Moody alleged, Summers faced a stock fraud suit in Oklahoma and used Moody’s investment in Integrated Food to settle that suit. In 1999 Moody sued Summers, Greenberg, and others connected with Integrated Food. Moody claimed that Greenberg knew but failed to warn him about Summers’ background. Greenberg countered that it had no involvement in Moody’s decision to invest in Integrated Food and that the firm had no duty to warn Moody about Summers. The firm claimed that it had been sued for one reason: its deep pockets. Indeed, by the time of trial, Greenberg was the only deep-pocketed defendant left standing. Many of the defendants, including Jack Summers and Integrated Food, didn’t show up for trial, and some defendants wiggled out of the case on jurisdictional grounds. In retrospect, Greenberg probably should have pulled out its checkbook before the trial got under way; it faced a monstrous home-field disadvantage. The Moody family is a major shareholder in American National Insurance Company, Galveston’s second-largest employer. And the Moody name is everywhere in town: Moody National Bank; Moody Plaza, Galveston’s tallest building; and, most conspicuously, Moody Gardens, a theme park that features a 1.5-million-gallon aquarium, an IMAX theatre, a 300-room hotel, and an ersatz “Palm Beach,” complete with imported white sand and filtered, clear-blue water. And then there is Greenberg. It not only had to overcome the lawyer thing, always a liability with juries, but it had to stand trial at the same time that Enron Corp. was imploding, just 45 miles up the road. “The timing was fortuitous,” says S. Tim Yusuf, Davenport’s co-counsel. “The same feelings that people have with regards to Arthur Andersen and holding them responsible … pervaded the Moody trial.” During jury selection, five prospective jurors expressed bias against large law firms, says Greenberg’s lead defense lawyer, Phillip Bruns. Bruns struck the five jurors, but it was a sour way to start the trial. “There is a lot of public antipathy toward lawyers and large law firms perceived to be part of big business,” says Bruns, of Houston’s Gibbs & Bruns. The trial would drag on for nearly six weeks. Davenport relied heavily on the testimony of two witnesses: Joseph Long, a securities professor at the University of Oklahoma School of Law, and James Wallace, a former Texas Supreme Court justice. Long testified that Greenberg was reckless in failing to delve more deeply into Summers’s background. And Wallace opined that lawyers have a duty to tell third parties, such as investors, about misdeeds committed by firm clients. Greenberg disagreed and argued that those were questions of law to be determined by the judge. Greenberg also complained about Davenport’s courtroom style. For starters, she had a hard time getting her mouth around the defendant’s name. She pronounced it Greenberg “Trog” instead of “Tror-ig.” On occasion, she referred to Greenberg as Goldberg and to Robert Kirshenberg, one of the Greenberg lawyers who represented Integrated Food, as Kirshenbaum. These mispronunciations, Greenberg complained, were a veiled attempt to highlight the defendants’ Jewish roots. The appeals to prejudice didn’t stop there, the firm claims. Before trial, the court entered an order prohibiting use of the word “Yankee” or any other term that might incite local bias against Greenberg. Davenport may not have used the Y-word, but, Greenberg claimed in a motion for new trial, she referred to the defendants as “privileged,” “Manhattan,” and “Park Avenue” lawyers, who attended “private schools” and wear “$3,000 suits,” “$500 shoes,” and “silk stockings.” Yusuf and Davenport even invoked that holiest of Texas icons, the Alamo. Yusuf told the jury, during the damages phase of the case, that it should return a verdict that would send a message to law firms everywhere not to bend the law on behalf of their clients. But in likening the jury to the defenders of the Alamo — saying that both groups should be remembered — Yusuf inadvertently suggested that the jurors might meet an untimely end. Davenport tried to rectify the rhetorical mistake, telling the jury in her closing, “You want to be remembered for a righteous jury, a righteous verdict, not a tragedy.” The jury will certainly be remembered by Greenberg. It concluded that the firm violated Texas securities law, committed fraud, and acted with malice. From the verdict, it was difficult to determine Greenberg’s monetary liability. But Mallia clarified it in March with his judgment in favor of Moody and two other, more minor investors. Greenberg was held liable for about $750,000 in actual damages, $22.5 million in punitive damages, and about $2 million in prejudgment interest and attorneys fees. The combined amount represents at least 15 percent of Greenberg’s 2001 profits. The investors’ total recovery against all the defendants, including Summers and Integrated Food, exceeded $63 million. At press time Bruns said that his client planned to file additional motions in the trial court challenging the judgment. If those fail, he says, Greenberg will appeal. In defense of his client, Bruns continues to press a legal argument — that Greenberg didn’t have a duty to protect Moody — and an extra-legal one. “You hear dishonest lawyer jokes all the time. The popular sentiment is that lawyers are not honest and that they make too much money,” says Bruns. “The fact that [Greenberg] is a big New York firm was used against it.” Davenport counters that Greenberg’s claims of regional prejudice are a smokescreen, and she vehemently denies that she is anti-Semitic. “They were found to have acted with malice and fraud,” she says. “Instead of looking at their conduct, they resort to saying this is a Jewish thing. Oh, come on.” In referencing Greenberg’s Park Avenue and private-school lineage, she says that her point was that the defendants are the best of the best and that they should know better. “Let’s not cast [Greenberg] away,” Davenport says she told the jury. “Let’s do what we do with children who do bad, which is care enough to bring them back in line.” For good measure, Greenberg’s New York office would do well to stay on the right side of another line: the Mason-Dixon.

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