NEW YORK (Reuters) - Several prominent plaintiffs' law firms, known for striking large settlements with companies like German carmaker Volkswagen AG VOWG_p.DE and Equifax Inc, were approved for loans that totaled tens of millions of dollars in government aid meant to help small businesses stay afloat during the coronavirus pandemic.
San Francisco-based Lieff Cabraser Heimann & Bernstein, which has 100 lawyers and bills itself on its website as “among the largest law firms in the United States that only represent plaintiffs” was approved to receive between $2 million and $5 million under the Paycheck Protection Program, according to data released Monday by the U.S. Treasury Department and Small Business Administration.
Steven Fineman, the firm’s managing partner, said Lieff Cabraser used the loan to compensate lawyers and staff members and prevent layoffs.
“We applied for a PPP loan at a time when our firm’s lawyers and staff were all required to work remotely... and we had no idea how the pandemic would impact our finances,” Fineman said in an email.
Fineman declined to comment on Lieff Cabraser’s finances, which are not public.
Other prominent plaintiffs’ firms that were approved for government aid include Motley Rice, Morgan & Morgan and Bernstein Litowitz Berger & Grossmann, according to a review of the government data by Reuters.
U.S. law firms have been hard hit by the pandemic and nearly 15,000 firms got the green light to receive up to $13.1 billion in federal loans.
Borrowers seeking PPP loans must certify “in good faith” that the aid is necessary after taking into account their business activity and their “ability to access other sources of liquidity.”
Private law firms are not required to publicly disclose their finances.Unlike defense firms, which charge clients by the hour, plaintiffs’ lawyers in the United States largely work on a contingency basis and receive a cut of the final settlement.
And with many courts shuttered and jury trials on pause, settlements and attorney payouts have been delayed, according to plaintiffs’ lawyer Stuart Grant, the managing director of Bench Walk Advisors, a litigation finance group.
Fineman said in an email that the pandemic has also “resulted in corporate defendants being unwilling or unable to settle.”
“Like most plaintiff-side firms, our revenue does not come in on a [predictable] schedule, but our expenses must, of course, be paid as they come due,” Fineman said.
Two legal industry experts said that plaintiffs’ firms have a business model that should enable them to weather financial uncertainty and questioned whether they really needed government aid.
Successful plaintiffs’ firms “almost certainly have resources to carry them over when waiting for big settlements,” said Herbert Kritzer, a University of Minnesota Law School professor.
Lieff Cabraser, which negotiated a nearly $15 billion settlement with Volkswagen over its diesel emissions scandal in 2016, in January was one of three firms approved to receive fees of up to $40 million for representing truck owners and lessees in litigation against Navistar International Corp, court records showed.
Leiff Cabraser’s Fineman said that the firm was one of three co-leads in that settlement, and that the fees were shared among 25 firms.
Motley Rice, which has been one of the lead firms negotiating settlements worth potentially tens of billions of dollars with drug manufacturers and distributors accused of fueling the U.S. opioid epidemic, applied for at least two PPP loans, totaling up to $10.35 million. Its website lists 108 attorneys.
Joe Rice, co-founder of Motley Rice, said Wednesday that the firm’s reason for applying for PPP aid is “fairly obvious, to keep the employees employed.”
Morgan & Morgan, an Orlando, Florida-based personal injury firm known for its television ads, applied at least four times, for up to $18 million. Representatives of the firm did not immediately respond to requests for comment.
Bernstein Litowitz, which last month was awarded $30.4 million in fees and expenses after it secured a $149 million settlement resolving an investor lawsuit related to Equifax Inc’s 2017 data breach, was approved for between $2 million and $5 million in aid.
Bernstein Litowitz spokeswoman Lisa Olney said Wednesday the firm did not have immediate comment.
NO ONE UNSCATHED
Although plaintiffs’ firms may have large cash reserves from settlements, the pandemic has not left them unscathed.
They generally must shell out large sums of money to fund years-long litigation whose outcome is uncertain.
Still, two prominent plaintiffs’ lawyers said they saw no reason to apply for taxpayer-funded loans despite the upheaval.
“The very nature of our business is that revenue streams are choppy, and we don’t rely on consistent, predictable paid invoices from billing clients,” said Paul Geller, a founding partner of plaintiffs’ firm Robbins Geller Rudman & Dowd.
Mark Lanier, a Texas-based lawyer whose Lanier Law Firm has won several multimillion- and billion-dollar verdicts against companies including Johnson & Johnson JNJ.N and Merck & Co MRK.N, said his firm did not believe it needed free money to keep going.
“Our folks are working fine from home, and we haven’t suffered one bit!” Lanier said.
Reporting by Caroline Spiezio in New York; additional reporting by Tina Bellon and Nate Raymond.; Editing by Noeleen Walder, Andrea Ricci and Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.