Stanley Chesley, Sidley, Paul Hastings: Business of Law

The Kentucky Supreme Court upheld the disbarment of famed class action lawyer Stanley Chesley, a partner at Waite Schneider Bayless & Chesley Co. in Cincinnati, for “unreasonable” fees received in the settlement of a class action. Under Ohio Rules of Professional Responsibility, the disbarment may provide grounds for disbarment in Ohio as well.

In upholding the disbarment imposed by the Kentucky Bar Association yesterday, the court found that Chesley had committed eight counts of professional misconduct. The court, however, declined to order restitution.

The case stemmed from $20 million in fees Chesley received for his involvement in the class action originally filed in 1999 against Wyeth, now part of Pfizer Inc., over the diet drug known as fen-phen, which was shown to cause heart and lung damage. The case settled in 2001 for $200 million.

In 2009, two Kentucky lawyers involved in the case were sentenced to 20 years and 25 years in prison for stealing from the settlement fund. The lawyers had contracts entitling them to fees of as much as one-third of the $200 million awarded to a statewide group of Kentucky citizens who said they were harmed by diet drug. The lawyers tried to keep more than twice that amount, prosecutors said.

In its 38-page decision, the Kentucky Supreme Court noted that Chesley didn’t meet directly with any of the clients to effectuate the settlement and it wasn’t shown that he had specific knowledge of the deception practiced upon each client to secure the signed release.

The court did find that his “$20,497,121.87 share of the fee was unreasonable, especially in light of his professed ignorance and lack of responsibility for any aspect of the litigation except showing up at the mediation and going through the motions of announcing the agreement.”

Sheryl Snyder, the lawyer representing Chesley, yesterday said in a statement that “Stan Chesley has been a distinguished lawyer and continues to be a philanthropic supporter of his community. He has a previously unblemished record of legal service and we are therefore disappointed with the court’s decision to impose such a severe sanction, especially in light of its finding that ‘it is not shown that he had specific knowledge of the deception practiced on each client’ by the other lawyers.”

In a telephone interview yesterday, Snyder added that “the actions by the other lawyers in the fen-phen settlement were egregious.” Chesley “is situated differently from those lawyers,” she said.

Yesterday’s ruling is by no means the end to Chesley’s saga. Ohio, where his office is located, has reciprocity rules that require sanctions similar to those imposed by another state. Arthur Greenbaum, a professor at the Moritz College of Law at Ohio State University, said in an e-mail that the “Ohio Supreme Court uses the provision frequently.”

Snyder declined to comment on the impact of the ruling on Chesley in Ohio.

Chesley is married to Susan Dlott, the chief judge of the Southern District of Ohio in Cincinnati.

The case is Kentucky Bar Association v. Chesley, 2011- SC-000382-KB, Supreme Court of Kentucky.

Moves

Former Congressman Joins Akin Gump and Ietan Consulting

Dale Kildee, a Democrat from Michigan who served 18 terms in Congress, is joining Akin Gump Strauss Hauer & Feld LLP as a senior consultant in its American Indian law and policy practice as well as affiliated Ietan Consulting LLC as a policy adviser.

Kildee was the founder of the Congressional Native American Caucus. During his tenure in Congress, he was one of the foremost experts on Native American issues.

“We are thrilled to have Congressman Kildee join our firm,” Ietan managing partner Wilson K. Pipestem said in a statement. “Very few people have dedicated their lives to helping improve Indian Country like Dale Kildee, and we look forward to his continued advocacy for Indian Country.”

Don Pongrace, head of the public law and policy practice at Akin Gump, said: “Congressman Kildee is an icon in Indian Country, and we are very pleased to be able to tap into his experience and wisdom on behalf of our clients.”

Kildee said in the statement, “For most of my public career, both in the Michigan State Legislature and in the U.S. Congress, I have had the honor and privilege to work with Indian tribes to bring some justice to Indian Country.” He added that he looks forward “to continuing my role in advocating for the inherent sovereignty of tribal governments.”

Ietan Consulting is a Native-owned, Washington, D.C.-based consulting firm that specializes in working on behalf of tribal governments. Ietan Consulting has a strategic alliance with Akin Gump.

Technology Lawyer Joins New York Office of Sidley Austin

Jennifer B. Coplan joined Sidley Austin LLP in its New York office as a partner in its technology transactions practice. Coplan regularly advises public and emerging companies on digital media, intellectual property and information technology matters in both domestic and international transactions.

“Adding Jennifer to our team is a natural next step in the expansion of our global Technology Transactions practice and is a wonderful complement to our growing M&A and corporate practices in New York,” said Michael J. Schmidtberger, managing partner of Sidley’s New York office.

Coplan was a partner at Cooley LLP prior to joining Sidley.

Litigation Partner Joins Houston Office of Paul Hastings

Paul Hastings LLP announced that Sam Cooper joined the firm as a litigation partner in its Houston office.

According to a statement from the firm, Cooper possesses diverse litigation and energy industry expertise, which will help reinforce the complex litigation, white-collar, Foreign Corrupt Practices Act investigations, and international arbitration capabilities at Paul Hastings.

“Sam’s arrival is another important step in building our energy related litigation practice,” said William Sullivan, global chair of the litigation practice.

Cooper’s recent matters have included cases tried before the International Chamber of Commerce and the Stockholm Chamber of Commerce. He also has experience in representing companies in civil litigation arising out of government investigations, and has represented a number of clients, including boards of directors, in civil claims related to foreign bribery investigations. Cooper also represents companies and individuals under investigation by governmental entities and works for boards of directors conducting internal corporate investigations. He previously was a partner with Baker Botts LLP.

The firm opened its office in Houston in 2012.

Locke Lord Adds New Partner in its Washington Office

James Alford joined the Washington office of Locke Lord LLP as a partner in the corporate and energy practices. Alford has more than 25 years of experience in all phases of international project development and finance worldwide, with a particular focus on renewable energy, water, toll road and port projects in Central and Latin America.

Alford’s practice focuses on helping U.S. and foreign private and public sector clients design, develop, finance and complete energy, infrastructure, construction and related operations and transactions in the U.S. and globally, according to a statement from the firm.

He advises on a broad cross-section of corporate ventures, as well as planning, developing and financing private and public-private turnkey production facilities in renewable energy, infrastructure, utilities and large-scale real estate development.

“Jim has developed a wide network of experience and contacts in Central, Latin and South America, which gives our already strong Energy Practice even more depth and breadth in additional markets,” said William J. Kelty, office managing partner in Washington.

Previously, Alford was a partner in the Washington office of Curtis Mallet-Prevost Colt & Mosle LLP.

Litigation

Smith Barney Shareholder Class Approved in Fund Lawsuit

Investors in Smith Barney mutual funds can sue as a group over claims that shareholders were harmed by a kickback scheme in which Citigroup Inc. (C) pocketed fee savings, a judge ruled.

U.S. District Judge William Pauley in Manhattan certified a class of Smith Barney mutual fund investors who bought or redeemed shares from Sept. 11, 2000, to June 24, 2004, according to a decision filed yesterday.

A class action allows plaintiffs’ to share the costs of gathering evidence and pursuing claims. When cases are bundled together, plaintiffs have greater leverage in trying to persuade defendants to settle.

The lawsuit was filed against Smith Barney Fund Management LLC and Citigroup Global Markets Inc. in 2005, after Citigroup Securities and Exchange Commission that its subsidiaries kept fees that should have been turned over to Smith Barney’s mutual funds.

Citigroup replaced a stock transfer agent with an in-house transfer agent and subcontracted with the original company at lower rates than it had previously charged, according to court papers.

In 2009, Morgan Stanley (MS) bought a controlling stake in a joint venture that combined Smith Barney with its own brokerage. The New York-based bank has said it plans to buy the rest of the venture from Citigroup this year.

The case is In re Smith Barney Transfer Agent Litigation, 05-cv-07583, U.S. District Court, Southern District of New York (Manhattan).

Ex-Goldman Employee Suing in Sex-Bias Case Must Do Arbitration

Goldman Sachs Group Inc. (GS) persuaded a federal appeals court to rule that a female former managing director must pursue a gender-discrimination lawsuit through arbitration rather than in court.

The New York-based panel yesterday ruled that Lisa Parisi, one of three women who sued the firm in 2010 claiming they were subjected to pay and promotion discrimination, can’t maintain her case in federal court. Her employment contract contained a clause requiring disputes to be resolved through arbitration.

Parisi’s lawyers argued their client had a right under federal law to press her claim that Goldman Sachs has a pattern and practice of discriminating against managing directors who are women, and that such claims can only be litigated in the context of a class-action, or group, case.

A lower court judge agreed, denying Goldman Sachs’s request to order Parisi’s case to arbitration.

“Because we disagree that a substantive statutory right to pursue a pattern-or-practice claim exists, we reverse,” U.S. Circuit Judge Barrington Parker wrote for a unanimous three- judge panel. Joining him were Judges Gerard Lynch and Reena Raggi.

The appeals court said Parisi may present to the arbitrators any evidence of discriminatory practices or policies at Goldman Sachs that affected her employment.

Adam Klein, an attorney for Parisi, didn’t immediately reply yesterday to a telephone message seeking comment on the court’s ruling. Michael DuVally, a spokesman for Goldman Sachs, in an e-mail message said the firm is pleased with the court’s decision.

The case is Parisi v. Goldman Sachs & Co., U.S. Second Circuit Court of Appeals (Manhattan).

Gupta Sues New Silk Route Chief Saxena for Contract Breach

Former Goldman Sachs Group Inc. Director Rajat Gupta, convicted last year on insider-trading charges, sued Parag Saxena, chief executive officer of New Silk Route LLC, for breach of contract.

In February 2012, while securities charges were pending against him and in response to Saxena’s request that he distance himself from the company, Gupta entered into a voting agreement under which he would step down from the New Silk Route NSR board of directors, he said yesterday in a federal court complaint in Manhattan.

Gupta, 64, alleges that he transferred his voting shares in NSR, an investment firm he co-founded, to Saxena, his partner in the venture. Gupta claims Saxena breached the agreement by improperly removing Gupta’s current designee and refusing to permit NSR to acquire directors’ and officers’ insurance.

“Saxena is seeking to thwart Gupta’s contractual right to designate one member” of the company’s board, Gupta said in the complaint.

Gupta sat on the board of New York-based Goldman Sachs and Cincinnati-based Procter & Gamble Co. and ran the consulting firm McKinsey & Co. from 1994 to 2003. He was convicted in June of passing insider tips to Galleon Group LLC founder Raj Rajaratnam in a sprawling conspiracy that ran from 2007 to January 2009. Gupta is free pending his appeal.

Rajaratnam is serving an 11-year sentence. Gupta, who was sentenced to a two-year term, remains free while he appeals his conviction.

New Silk Route, based in New York, has offices in Mumbai, Dubai and Bangalore, India, according to its website. Gupta, who is chairman, leads the firm with Saxena and senior adviser Victor Menezes.

New Silk Route, a $1.4 billion private-equity firm that focuses on South Asia and the Middle East, said in a statement that the lawsuit is without merit.

“Since Mr. Gupta’s conviction of conspiracy and securities fraud in June of 2012, the firm has been actively working to sever all ties with him including offering to buy his remaining investment stake,” the firm said.

The case is Gupta v. Saxena, 13-civ-01891, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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