On The Case

Kessler Topaz wants to oust ex-partner from leadership of index-rigging MDL

(Reuters) - When a lawyer wins appointment to lead a big, complex multidistrict litigation that will require thousands of hours of work from other lawyers at her firm, who owns that plum job: the lawyer or her firm?

That’s the big question right now for U.S. District Judge Manish Shah of Chicago in an MDL alleging that the Chicago Board Options Exchange, now known as Cboe Exchange, Inc, rigged the volatility index, or VIX, to favor certain options traders.

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In August 2018, Judge Shah picked Kimberly Justice, then a partner at Kessler Topaz Meltzer & Check, to serve as co-lead counsel in the CBOE volatility index manipulation MDL, along with Jonathan Bunge of Quinn Emanuel Urquhart & Sullivan. Judge Shah said in his appointment order that he expected the lawyers he placed in charge of the case “to undertake personal responsibility to perform the designated functions.”

Justice and Bunge accepted that responsibility. When plaintiffs filed a complaint last September, their names were at the top of the signature page. Cboe Global Markets, represented by Jenner & Block, has moved to dismiss the suit, arguing that it is based on sheer speculation about the actions of unidentified individuals. Justice and Bunge, as co-leads, signed plaintiffs’ opposition to the dismissal motion in January. A big team of lawyers and investigators from Kessler Topaz worked the CBOE case alongside Justice, but she logged more hours on the MDL than anyone else at the firm.

Justice left Kessler Topaz on April 3 to join the Philadelphia office of the antitrust class action boutique Freed Kanner London & Millen. That day, Kessler Topaz moved to replace her as co-lead of the CBOE case with Sharan Nirmul, a senior Kessler securities partner. The firm argued that plaintiffs’ best interests would be served by keeping its team of lawyers and investigators on a case Kessler has been working on for more than a year.

“The replacement of Ms. Justice with Mr. Nirmul facilitates the continued representation of the putative class by Kessler Topaz and mitigates any disruption that would otherwise result from Ms. Justice’s departure from Kessler Topaz,” the April 3 motion said.

In an email statement, Kessler partner Nirmul added, “Kessler Topaz and Quinn Emmanuel have been jointly prosecuting this case for over a year. (Kessler Topaz) lawyers, analysts and investigators have developed significant institutional knowledge about the theory and claims at issue in this case and it is clearly in the best interests of the class that the leadership be preserved.”

Justice, who declined my request for comment, filed her response Wednesday night, reminding Judge Shah that she – not Kessler Topaz – was personally appointed co-lead of the MDL. Her new firm, Justice said, has deep experience with class action antitrust claims so the class won’t be disadvantaged, especially because Justice said she intends to continue assigning work to Kessler Topaz lawyers who have played a role in the litigation.

Most of the other plaintiffs’ firms in the CBOE case, she said, want her to remain in charge. In fact, as Justice noted in her brief, the three lawyers whom Judge Shah appointed to serve on the plaintiffs steering committee filed a letter urging Judge Shah to allow Justice to continue her “diligent and skillful” leadership of the case.

Kessler Topaz touted Justice’s credentials, not just those of the firm, when it applied in July 2018 to be appointed to lead the CBOE MDL. The brief pointed out that Justice had prosecuted big antitrust cases, including the LIBOR rate-rigging case, in her nearly 10 years in the Justice Department’s antitrust division; was cochair of the firm’s antitrust practice group; and signed the first complaint raising VIX-related antitrust allegations against the CBOE, before the cases were consolidated in an MDL. “Ms. Justice has been and will remain the partner in charge of this litigation and is uniquely qualified to lead the efforts in this case,” Kessler Topaz said in that 2018 brief.

Justice and her backers say her record remains stellar so she should not be replaced. “Ms. Justice’s transition to a new firm does not alter the basis for her personal appointment,” wrote PSC members Hilary Scherrer of Hausfeld, David Frederick of Kellogg, Hansen, Todd, Figel & Frederick and Michelle Clerkin of Motley Rice. “Ms. Justice continues to be well-qualified to serve as co-lead counsel in this case in light of her experience leading complex litigation, including both antitrust and securities matters.”

Notably, Justice’s co-lead, Quinn’s Bunge, was not among the firms she listed as supporters. (Quinn’s position was among the questions I posed to Justice and she declined to answer.) Bunge did not respond to my email asking whether he backs Kessler or Justice. As of Thursday afternoon, Quinn had not filed a response to Kessler’s motion to replace Justice.

There’s another important subtextual element of the fight for leadership of the CBOE MDL: gender diversity. As you probably know, women are drastically underrepresented in MDL leadership, considering their rising numbers in the profession. A 2018 Temple University study found that women were appointed to only 24 percent of the leadership slots in MDLs filed in 2016 and 2017. Nearly a quarter of those MDLs included no woman lawyer on the leadership team.

When Judge Shah called for applications to lead the CBOE MDL, he told plaintiffs’ firms to address leadership diversity. Kessler Topaz heeded that instruction. Its brief proposing a leadership role for Justice emphasized that Justice has been a champion of diversity in the MDL bar, serving on the Advisory Council for the Duke Law Bolch Judicial Institute and participating in the Institute’s conference on boosting diversity.

Of the five lawyers Judge Shah appointed, two co-leads and three members of the plaintiffs steering committee, three were women, making the CBOE case a rare MDL in which women lawyers dominate leadership. (U.S. District Judge Virginia Kendall of Chicago, a colleague of Judge Shah, appointed an all-women leadership team last year in a multidistrict class action involving alleged price-fixing in the market for local television ads.)

When one of the women Judge Shah originally appointed, Erin Durba, moved to withdraw last November from the CBOE case because she had decided to leave Motley Rice, Motley Rice proposed that Durba be replaced by another woman, Michelle Clerkin. Judge Shah granted the request. Kessler Topaz, on the other hand, is proposing to replace Justice with a man, Sharan Nirmul.

I should note, however, that Nirmul is one of the very few lawyers of color in the MDL plaintiffs’ bar. Diversity isn’t just a matter of gender.

“Kessler Topaz is strongly committed to advancing diversity initiatives in all aspect of the law including in MDL leadership because allowing qualified diverse voices into MDL leadership structures furthers the quality of the overall representation for the class,” Nirmul said in his email to me. “My application is consistent with that objective.”