The securities class action firm Robbins Geller Rudman & Dowd
keeps running into problems with confidential witnesses. I've previously told you about a case in federal court in Manhattan
in which U.S. Senior District Judge Jed Rakoff held a seven-hour hearing to decide if the plaintiffs' firm misrepresented its
contacts with four former Lockheed Martin employees who
disavowed the allegations Robbins Geller attributed to them in a
securities fraud complaint against Lockheed. Rakoff hasn't ruled
but, at the end of the hearing in October, said that three of
the former Lockheed employees that Robbins Geller cited as
confidential witnesses weren't credible when they denied
speaking with the plaintiffs' firm. The Manhattan judge is now
pondering whether hearsay evidence obtained from confidential witnesses is sufficient to push securities class actions past
defense dismissal motions.
Robbins Geller, meanwhile, is dealing with confidential
witness recantations -- and ensuing defense accusations of
misconduct -- in at least two other securities class actions,
one in federal court in Atlanta, the other in Birmingham,
Alabama. But an angry order issued Tuesday by the judge in
Alabama shows that the fallout from these disputes over
confidential witnesses isn't limited to the plaintiffs' bar.
U.S. District Judge Inge Johnson ordered Victor Hayslip of Burr
& Forman -- who represents individual defendants in Robbins
Geller's Alabama class action against Regions Financial -- to
send a letter to U.S. District Judge William Duffey in Atlanta,
apologizing for Hayslip's previous "inappropriate and
unprofessional" letter alerting Duffey to accusations against
Robbins Geller in the Alabama case.
The backstory on Johnson's order is a bit complicated, but
it shows how messy these confidential witness recantations can
be. Duffey, the Atlanta judge, is presiding over Robbins
Geller's securities class fraud case against SunTrust Banks. The
complaint in that case, like so many in securities class
actions, relied on information from a former employee. Yet when
the former SunTrust worker was contacted by defense counsel, he
denied telling Robbins Geller's investigator what was attributed
to him and said he wasn't even employed by the bank at the time
of the events described in the complaint. Based on the
recantation, Duffey ended up dismissing the class action.
But that wasn't the end of the matter. Robbins Geller had
told the judge that its lawyers had no direct knowledge of when
the witness was employed at SunTrust, since he had only spoken
with the firm's investigator, Desiree Torres. After Duffey
issued his dismissal order, Torres contacted the judge's clerk.
According to a subsequent order by Duffey, the investigator said
that Robbins Geller lawyers had, in fact, sat in on interviews
in which the informant said he didn't have direct knowledge of
the supposed fraud. Concerned about the disparity in the
accounts of Robbins Geller and its own investigator, Duffey
scheduled a Dec. 18 hearing to hear testimony from Torres. He
later denied a motion by Robbins Geller to close the hearing to
The Alabama case against Regions featured similar
recantations by five former employees cited in Robbins Geller's
complaint. All five Regions witnesses were interviewed by
Torres, the investigator in the SunTrust case. But unlike the
judge in Atlanta, Johnson refused to dismiss the Regions
Financial class action, despite the recantations. After she
certified a class of investors in June, the defendants appealed
certification to the U.S. Court of Appeals for the 11th Circuit.
On Nov. 28, the Alabama and Atlanta cases intersected.
Defense counsel Hayslip sent a letter to Duffey, describing the
controversy over Torres, Robbins Geller and the confidential
witnesses in the Regions Financial case in Alabama. Because of
those events, Hayslip told the Atlanta judge, his clients in the
Alabama class action had "a very strong and legitimate interest"
in keeping the Dec. 18 hearing in the SunTrust case open to the
Hayslip sent his letter to all of the lawyers in the
SunTrust case, including Andrew Brown of Robbins Geller, who is
also lead counsel for the class in the Regions Financial case.
The next day, Robbins Geller asked Johnson to hold a status conference on Hayslip's letter. The defense lawyer, Robbins
Geller asserted, had violated protective orders issued by
Johnson and had misrepresented the facts of the Regions case.
"Additionally, defendants' letter gratuitously seeks to impugn
the integrity of plaintiffs' counsel and investigator in this
case for their conduct in this case, in that unrelated matter,"
the plaintiffs' motion said.
Hayslip sent another letter to Duffey on Nov. 30,
withdrawing his previous letter "as I represent no party to (the
SunTrust) action." He also said he hadn't meant to cast doubt on
That letter wasn't enough to appease Judge Johnson in
Alabama, however, especially after Hayslip told her he was out
of the country and unavailable to attend the status conference
Robbins Geller had requested. In the seven-page order Johnson
issued Tuesday, she blasted Hayslip for contacting Duffey and
for accusing Robbins Geller of misleading her. Indeed, she said
the defense lawyer was the one who had "engaged in a pattern and
practice of submitting unsubstantiated and misleading statements
to this court." Johnson ordered Hayslip to draft a letter to
Duffey and to the 11th Circuit "containing a sincere apology for
misleading and attempting to mislead (them)." The judge also
said she'd lift the protective order in the Regions case so
Robbins Geller could address the assertions in Hayslip's letter
when it appears before Duffey in the SunTrust hearing later this
I reached out to Brown of Robbins Geller but didn't hear
back. Hayslip told me in an email that he is still out of the
country and is working on a response to Judge Johnson's order.
In his Nov. 30 letter to Duffey, he said that he did not believe
he'd done anything wrong or violated a protective order by
sending his first letter to the Atlanta judge.
(Reporting by Alison Frankel)
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