by Ron Liebman
“Thank you,” he finally said.
No, thank you, I was about to say when I realized I was being dismissed. (“Thank you” was spelled “good-bye.”)
This time it was me who nodded at Carl Smith. Then I got up and left.
2.
So I was back in my broom closet of an office.
I spent the rest of the day reading Smith’s e-mailed file. It was a doozy of a case. It looked like the case had come in through a young Indian lawyer who had handled it in his home country but now needed help from an American law firm.
Of course, that wasn’t the real story.
The case was a monkey trap. (I’ll explain in a minute.) It began with another lawyer named Peter Moss.
And who was he?
A Harvard Law School classmate of Carl’s. They didn’t get along. Not then, not ever.
Peter Moss had accepted a post-law-school offer from Dunn & Sullivan. Two years later, after Carl Smith’s Supreme Court clerkship ended, he also came to Dunn & Sullivan. From the start they were oil and water. Two young associate attorneys in heavy competition for a hard-to-get partnership.
The partners at the time were amused by their rivalry. These two bright and aggressive young lawyers neck and neck, racing to the finish line, jostling each other at every available opportunity.
And then Peter was brought into a supervising partner’s office and told he had no future at the firm. Just like that he was out of a job. And to make matters worse, an innuendo of bothersome behavior clung to his abrupt departure like chewing gum to the sole of a shoe.
Peter was convinced that Smith’s invisible hand had pushed him out the door. Carl was an absolute master of behind-the-scenes maneuvering, a regular Svengali. The partners had done the firing, but Peter was convinced that Carl was the snitch.
There was nothing specific, only a murky rumor. But it was enough. Peter had difficulty finding another job.
Was it true? The bad behavior?
Probably not.
The best that Peter Moss could do was a modest, midsize law firm in Washington, D.C. He sucked it up, accepted the offer (at considerably less pay), and moved his young family to the District.
And he gave it his all. In addition to being very smart, Peter was a good-looking, engaging guy. Just over six feet tall, he kept his wiry build with YMCA indoor-pool laps, much as he had done on his high-school and college swim teams. His stick-straight sandy hair and bright eyes gave him a familiarity that clients found reassuring.
So he threw himself into his new firm. It didn’t take long before he had risen to a position of leadership. And then he set about growing the firm. Taking a page out of the playbook of Wall Street’s mergers-and-acquisitions gurus, Peter acquired other law firms, and before long he sat at the head of a Big Law contender.
As the firm ballooned in size, Peter opened an office in New York, then Chicago, then Miami, and so on. And then he set his sights on Dunn & Sullivan.
After all, Peter had a score to settle.
And so the monkey trap.
3.
You need a sealed box with a coconut in it.
You cut a hole in the box large enough for the monkey’s hand but too small to prevent the coconut from being removed from inside the box. The monkey has his arm through the hole, his fist around the delicious coconut, but he can’t get the coconut out. The monkey holds on to the coconut. The monkey gets caught.
If the new case was the coconut, Peter Moss figured Carl Smith for the monkey.
There was a method to Peter’s madness. This was more than vindictiveness. Sure, he wanted to settle a score, but Peter had indeed become a “Wall Street” type. It was inevitable. Commercial law was all about big business. Gone were the days of practicing law like some kind of country doctor.
Mason Rose (that was the name of Peter’s law firm) needed to grow. A takeover of Dunn & Sullivan would catapult them squarely into the majors. To survive you needed big clients with big cases who paid big bucks for their legal representation. Peter had kept his eye on Carl Smith’s law firm. He considered it an underperformer stock. So he was first going to hobble it. Then gobble it.
But could he pull it off? He thought so. He also knew his enemy. While his firm might be in trouble, Carl Smith was a formidable opponent. There were definite risks here. As the saying goes, if you take a shot at the king, you’d better kill him. Otherwise he’ll kill you.
So what was this case about?
GRE, for General Renewable Energy, was part of an American conglomerate whose sticky corporate fingers were in many pots. This one was natural gas.
When GRE’s gas plant in the Assam region of India blew, the American and European managers delayed employee evacuation, hoping to put a lid on what was already an uncontrollable situation.
Some of the recovered bodies were burned to a crisp. For those who survived, toxic-chemical inhalation affected lungs and central nervous systems. A cloud of poisoned air descended on the nearby villages where the workers’ families lived. It was a horrible mess.
The company quickly settled claims for environmental damage brought by the Indian government. Its compensation offers to its impoverished Indian workforce and their families were far less generous. There was also some evidence of sabotage. The company brass thought a cabal of workers were the culprits. There was no way they were going to reward them for this with big payouts.
A young Indian lawyer named Dipak Singh, trying to make an independent name for himself as the youngest member of a Brahman family of lawyers and jurists, took on the case for the workers and their families. (And so the “class” of the class-action suit was established. This was the Indian legal version, a cousin to the American legal version.)
Indian justice was swift. It was also slippery.
Jury trials had been abolished in India, so a single judge in the local court of Guwahati, the closest city to the plant, heard the case. The company lost big-time. At the current exchange rate of Indian rupees to U.S. dollars, the judgment was just shy of two and a half billion dollars. That’s right: billion.
GRE refused to pay up and had begun an investigation into just how the case ended as it had. (Possible improprieties hadn’t yet come to light. But there were rumors. Among them the strong ties between the judge and the powerful Singh family.) It shuttered its plant and self-sabotaged its equipment. So company assets in the U.S. and elsewhere had to be seized by the judgment plaintiffs and then sold off to satisfy the Indian court’s monetary award.
Dipak Singh needed to file suit in the U.S. to seize GRE’s corporate assets. For that he needed a U.S. law firm. Dunn & Sullivan got the job. The case looked good to Carl Smith. It could last for years, and the fees earned would be humongous. GRE had retained Peter Moss and Mason Rose to defend them against these seizures.
But there was some real skulduggery going on. As I later learned, Peter had paid Dipak under the table for him to retain Dunn & Sullivan as the plaintiffs’ American counsel. That’s right. Peter Moss had secretly selected his own adversary. Why? Part of the plan. Peter’s scheme to topple Dunn & Sullivan.
So Dipak came to New York and met with Smith. He sat in the very same needlepoint chair that I occupied the next day when Smith tapped me to head the case.
When they were later interrogated about that meeting, they told different stories.
What a shocker. But when you put the two stories together, examine them side by side, you can figure out what really happened.
4.
Coffee?”
“Tea, actually.”
Smith buzzed his secretary. Dipak Singh’s tea came quickly enough for Smith to endure small talk (Good flight? Been to New York before?) only briefly.
What was Carl expecting in this Indian lawyer? Who knows? Our law firm’s chairman was unquestionably urbane and polished, a cultivated and highly educated man. Yet wh
en it came to preconceived notions about people, the upper crust harbored the same kind of ethnic and racial bias you’d expect to see in some low-life dunce. Carl Smith masked it well, but cultural tolerance was not among his finer points.
So what was he expecting? Some subservient and ingratiating dark-skinned Indian in a cheap suit spouting singsongy, accented colonial English? If he was, that’s not what he got.
Sitting across from him was a young man with an unmistakably regal bearing. And while there were definite traces of a subcontinental accent in his speech, his enunciation was straight out of Oxford University, where he had completed his law studies. He was young, about the same age as a first-year Dunn & Sullivan associate, with powdery beige Brahman skin, gray eyes, ruler-straight, side-parted thick black hair. He was Savile Row–suited, sporting a fashionable five-o’clock-shadowed stubble shave and a beautiful though oversize gold watch on his hairy left wrist. This kid lawyer looked like he’d be perfectly at ease sipping tea in the presence of the queen of England.
And while Carl was studying Dipak, Dipak was studying Carl. This American senior partner dressed to the nines behind his massive desk in this mausoleum of an office.
Dipak had something Carl wanted. So Carl switched on his patented charm.
“I’ve read your e-mail and the case-file attachments you sent along with it,” he said, beaming, as Dipak replaced his teacup on the edge of Carl’s desk.
Carl reached into a side drawer, retrieved a coaster, and slid it under Dipak’s saucer. Dipak’s smile of thanks seemed more in tune for a servant’s actions than for a law firm chairman’s. This was not lost on Carl.
“It is, I assure you, a very good case,” Dipak said.
“Of that I have no doubt,” Carl assured him, adding, “We are pleased that you have chosen us for this assignment.”
The fact was that Carl Smith desperately needed to bring in some substantial legal fees. The recent recession had upended things. Corporate clients had begun questioning their legal expenses, many requiring reductions and discounts if their law firms wanted to keep their business. Client loyalty had disappeared. Legal work went to the lowest bidder. Carl’s law firm was hurting, though none of this was public yet.
Carl Smith guarded Dunn & Sullivan’s books like a sentry in a combat zone.
“You are wondering perhaps how I acquired this case?” Dipak asked.
Not only didn’t Carl wonder, he didn’t give a shit.
But he should have.
As we all later learned, Dipak took the case on what we American lawyers call a contingent fee. Meaning that Dipak was paid nothing by these dirt-poor peasant workers and their families. He would take his fee as a percentage of any and all money recovered. The problem was that in India contingent-fee arrangements between lawyers and their clients were strictly forbidden.
Our enterprising Dipak Singh had circumvented this prohibition by on paper fictitiously “lending” his clients the money with which to hire him. He also had a secret side agreement for a percentage share of the award. Fifty percent of every rupee/dollar recovered. Totally unacceptable in the U.S., where a third of any recovery was the norm, and for cases of this magnitude the percentage would be even smaller. Carl would have been shocked had he known that Dipak stood to receive fifty cents on every dollar collected.
Can you imagine? Dipak becomes a billionaire off one case? And he, too, needed the money. Dipak’s family might have enjoyed Indian high-caste status, but when it came to actual earnings, a string of careless investments had drained the coffers of his father and each and every one of his uncles. The kid was broke and overly ambitious. Sometimes a good combination. Sometimes not.
While contingent-fee arrangements were commonplace in the U.S., the major law firms did not normally take on such work. Their clients paid by the hour, and that was what funded the firms’ day-to-day operations. Carl knew there was no money here until GRE’s assets were seized by court order and then liquidated. But he knew how to handle the pay-as-you-go problem.
Hedge funds, always in search of new markets to score outlandish profits, had focused on litigation financing. Lending money to law firms to finance cases where up-front money simply wasn’t available and at interest rates that were sky-high and therefore unlawful if the loan had come from a bank.
But hedge funds weren’t banks. Regulatory Washington was once again asleep at the wheel. Litigation finance was the new next-best thing for law firms.
So Big Law took a high-board dive into the deep waters of OPM (other people’s money) to bet on legal case outcomes. And the hedge funds showered money on the law firms in what was called “non-recourse” financing. Meaning if the case was lost, the law firm owed nothing further on the money it borrowed. The loan was wiped off its books, and the hedge fund took the hit.
How could they do this and survive? Sky-high interest-rate payments were demanded and regularly remitted by the law firms as the cases wound their often years-long slog through the courts.
There was more.
On increasing occasions big law firms took to adding a kicker to their hourly rates. It was in the form of what was called a “success fee.” A bonus earned for a favorable result. The hedge funds would take a portion of that success fee. So between monthly interest payments and their share of success fees, incoming money was large enough to offset any funds lost on unsuccessful cases.
Big Law had placed its invisible hand on the blackboard eraser and began smoothing away the chalk line between lawyering as a profession and lawyering as Wall Street wheeling and dealing.
While Carl was thinking about this, Dipak Singh was explaining how resourceful he had been to take on this case but providing next to no detail. Carl was tuned out. Then Dipak came back into range.
“There are many GRE assets in your country and also in Europe that can be seized.”
“And we will have them seized as quickly as possible.”
“As to your fee. May I call you Carl . . . ?”
A delighted by all means nod. An if you must thought.
There was something about this cheerful senior partner entertaining him, something Dipak couldn’t quite put his finger on, that didn’t square with the bubbly enthusiasm. He decided to forgo any informality.
“I would propose for your firm a substantial success fee of ten percent of all monies recovered above your hourly rates.”
The math here was easy. Ten percent of two and a half billion was two hundred and fifty million. More than enough on its own to pay whatever interest was charged on the litigation-finance loan needed to satisfy hourly rate charges and put a very healthy sum on the law firm’s books. Win-win.
Carl wanted this case in the firm’s accounts as soon as possible. It would be the largest single legal fee that Dunn & Sullivan had ever received. There was already a judgment. The Indian court had spoken. This was a mop-up operation. Find company assets, then use the courts to seize and sell them? Candy from a baby.
And it fit in nicely with Carl’s exit strategy.
Yes, he had an exit strategy.
But I’m getting ahead of myself.
Carl was going to take on this case. Anyone looking at Dunn & Sullivan’s balance sheet would see this money-in-the-bank asset. Not yet realized, but just around the corner.
In his zeal to haul the GRE case on board, Carl didn’t stop to consider the odds of this young Indian lawyer, dashing though he might have been, hitting the home run of home runs with what was likely his first real case. Instead he mentally searched Dunn & Sullivan’s young-lawyer roster, looking for the right kind of junior partner to run the case: someone relatively inexperienced, eager to head up an asset-seizure litigation team. Someone who wouldn’t ask too many questions.
That would be me.
Peter Moss and his law firm? At that point light-years away from Carl’s radar screen.
S
o Carl Smith closed his fist around the coconut.
5.
I should be married.
What I mean is that I would like to be married. Have a family.
I’m thirty-seven years old. I can easily afford a family. But that’s not the point. What I’m trying to say is that my life is one-dimensional.
My brother keeps asking me, Where’s the Porsche?
It’s an inside joke. He’s flat broke. And here I am. Loaded and spending none of it.
I don’t even own a car. Who needs a car in New York City?
My life as a young partner is marginally better than when I was an associate, but I’m still at the office, or on a plane to some other office or courthouse, all the time. I have a nice enough apartment in one of the new high-rise rentals on the far West Side of the city, at Sixty-second Street and West End Avenue. I’m on the top floor and have a fairly decent Hudson River view. I still haven’t hung anything on my walls.
I’m not asking you to play an imaginary fiddle over my “poor and unfortunate” situation. I’ve come a long way, and I am proud of myself for what I’ve accomplished.
My brother and I grew up in a section of Manhattan called Hell’s Kitchen. It’s also on the far West Side, between Thirty-fourth and Fifty-ninth Streets bounded by Eighth Avenue and the Hudson.
To this day six-story walk-ups still line the streets, but they now contain remodeled apartments with state-of-the-art kitchens, central air, and recessed lighting.
Back when my brother and I were kids, the neighborhood was different. The Westies gang—friends of the infamous Colombo mob—still ruled the streets. Irish immigrants and their families lived in the walk-ups. Hell’s Kitchen was not a nice place.
Our apartment was rent-controlled. Still is. My brother lives there with our dad. One of the few like that left in the neighborhood. I pay the rent, but my brother pays the price. Our dad, Seamus, is a handful.