WASHINGTON -- Is there a hot social issue that attorney Michael Hausfeld hasn't turned into a lawsuit lately?
His 30-lawyer firm here is helping lead courtroom assaults on managed-health-care companies and handgun manufacturers. Just as anxiety over bioengineered food expands from Europe to the U.S., he is suing Monsanto Co. for allegedly attempting to amass a global monopoly of genetically modified crops.
On a typically harried morning, the 53-year-old lawyer juggles conference calls coordinating antitrust litigation against Microsoft Corp. and the vitamin industry, as well as a $5.2 billion settlement he helped negotiate on behalf of people enslaved 60 years ago by the Nazis and major German corporations. "It's a little crazy around here," he apologizes, cheerfully.
Some observers think his frenetic activities are crazy in another sense. "It's something new, the next stage," says Victor Schwartz, a veteran corporate defense attorney. Sophisticated plaintiffs' lawyers, he continues, "are playing off politics, anticipating the industries that will be vilified, then attacking en masse."
Boxes of bulging loose-leaf notebooks on Mr. Hausfeld's conference table underscore this impression. Expecting growing consumer resentment of health-maintenance organizations, he began in the early 1990s to gather ammunition for a class-action assault on managed care. He says his role is to fill the gap when government doesn't achieve social goals he considers vital. His goals tend to have a liberal or populist tinge.
Corporate gadfly Jeremy Rifkin celebrates what he describes as the evolution of mass litigation into a full-fledged adjunct to lawmaking and regulating. Mr. Rifkin, who more than a year ago pushed Mr. Hausfeld to sue over genetically modified crops, speaks of the lawyer as an interest-group leader might speak of his Capitol Hill lobbyist: "Michael is using the courts as a bully pulpit, as well as an institution that arbitrates disputes."
Often inefficient and expensive -- sometimes perverse in its effects -- litigation has gone beyond being a quirk of American culture; it is a central pillar of society. People fret over lawyers' windfalls and whether plaintiffs are truly served by the latest mass settlement, yet more and more frequently, they turn to courts when the traditional avenues of politics or activism seem obstructed.
It isn't only conservatives who express concern. "We seem to have agreed that the era of big government is over, that 'regulation' is a dirty word," says Robert Reich, former labor secretary in the Clinton administration. "So how do we deal with the big regulatory issues: tobacco, handguns, sweatshops, high-tech? Through lawsuits." He worries that judges lack the expertise to superintend entire industries and that cases are settled without a close look at the fate of alleged victims.
Mr. Hausfeld embodies the litigation society. Heavily influenced by accounts of the Holocaust he heard growing up in a left-leaning Jewish family in Brooklyn, N.Y., he went to law school thinking he could combine good works with good pay. He has used his firm's winnings from securities and antitrust suits to underwrite an ever-broadening portfolio of what he considers social-reform suits. These include successful representations of native Alaskans affected by the 1989 Exxon Valdez oil spill and of black employees who won a historic $176 million racial-bias settlement from Texaco Inc. in 1996.
Soft-spoken and earnest, Mr. Hausfeld generally prefers to force a deal rather than take cases to juries. American society, he maintains, is implicitly deferring sticky problems to lawyers, who have an obligation to resolve them. "Companies have a right to make a profit," he says, "but we have a right to protect the general good, which is basically human rights." If not for the plaintiffs' attorneys, he argues, makers of guns or cigarettes wouldn't come to the bargaining table.
Although he personally takes home more than $1 million in good years, Mr. Hausfeld is far from the nation's wealthiest or best-known plaintiffs' lawyer. To the chagrin of some of his partners, he handles certain cases for free and has invested millions in others that have flopped. Still, his burgeoning caseload reflects as well as any attorney's the stunning proliferation of issues that have become the subject of civil litigation.
His first job out of law school was at a big corporate law firm, Arent Fox Kintner Plotkin & Kahn in Washington, with a salary, he says, that "was hard to turn down." But six months later, after proposing lawsuits against corporations, he was told the firm "didn't need any Ralph Naders" and was encouraged to leave.
He landed at a small firm doing pioneering class-action work. In 1966, a change in the federal court rules had unleashed mass suits as a courtroom force. Previously, only people who affirmatively said they wanted to be in a class could be included -- but the little-noticed rule change allowed everyone who fit a class description to be counted as part of the class, unless they explicitly withdrew. That greatly multiplied the potential liability of corporate defendants. State courts soon followed the federal lead, and the enactment of new consumer-rights statutes in the 1970s expanded the grounds on which class actions could be brought.
The courtroom balance of power continued to shift toward plaintiffs in the 1980s, as attorneys specializing in personal injury pooled thousands of cases on behalf of shipyard and petrochemical workers exposed to asbestos. Mr. Hausfeld and a few colleagues in 1986 formed their own firm -- Cohen, Milstein, Hausfeld & Toll, or CMH&T -- to focus on securities and antitrust cases. "We didn't see ourselves as personal-injury guys," says partner Steven Toll, meaning that ''asbestos just wasn't on our radarscope.'' There is a popular misconception, he adds, that every prominent plaintiffs' firm participates in every big-bucks case.
Like any vibrant business, though, CMH&T did look for new revenue streams. "We had successes, some large fees, and we reinvested the money in areas that interested us," says Mr. Hausfeld. One example was industrial pollution.
The Hausfeld firm was one of dozens that assailed Exxon, now part of Exxon Mobil Corp., after the Exxon Valdez tanker ran aground in Alaska's Prince William Sound in 1989, spilling 11 million gallons of oil. "You had the usual entourage of ambulance chasers and a total mess," says David Oesting, a commercial litigator in Anchorage who usually defends companies. The Hausfeld firm landed as clients a group of 5,400 native Alaskans, a relationship that grew out of earlier legal work Mr. Hausfeld had done for free for other Native Americans seeking to recover artifacts from museum collections.
Mr. Oesting, who in this case served as the lead plaintiffs' lawyer, praises Mr. Hausfeld for crafting arguments that persuaded the presiding federal judge to stretch legal precedent to allow oil-spill damages for subsistence -- not just commercial -- fishermen. That ruling prompted Exxon to settle the Native American claims for $20 million -- on top of a separate $10 million deal with a major pipeline company.
Class-action firms increasingly have formed coalitions to heighten pressure on corporate defendants to settle before trial and pay healthy legal fees. Even among skeptics of large lawyer payouts, however, CMH&T's "reputation is generally good," says Brian Wolfman, an attorney with Public Citizen Litigation Group, a pro-consumer firm that regularly intervenes in class actions to try to reduce legal fees.
Mr. Hausfeld blames greedy rivals for tarnishing the reputation of the plaintiffs' bar. He says he deplores the rash of class settlements in the 1990s in which consumers received discount coupons redeemable only by buying more products from the very corporate defendants they had sued, while lawyers walked away with millions in cash. "That's abuse of the system," he says.
In at least one major case, though, his firm participated in such an arrangement. A group of major airlines settled price-fixing allegations in 1992 by issuing discount coupons with a face value in excess of $400 million, but limited in their practical value to the class of more than four million passengers because of restrictions on how the coupons could be used. The dozens of lawyers in the case received a total of $16 million in fees -- more than $1.5 million of which went to CMH&T. Mr. Hausfeld says that many of the coupons were collected by companies that were plaintiffs and whose employees travel frequently, putting the discounts to good use. But he says his firm hasn't done another coupon settlement since.
A source of great pride -- but also internal strain -- at the Hausfeld firm is his work on behalf of Holocaust victims. For decades, the German government and major German companies, including some affiliated with U.S. corporations, stonewalled tens of thousands of survivors who claim they were forced to work for Nazi industry. Swiss banks accused of improperly keeping assets of Holocaust victims were equally unwavering.
But in a series of federal class-actions filed in U.S. courts beginning in the mid-1990s, American lawyers, including Mr. Hausfeld, broke down the wall, says Martin Mendelsohn, outside general counsel for the Simon Wiesenthal Center, one of the Jewish organizations supporting the effort. American politicians and diplomats also applied pressure, he says, but the critical factor was German and Swiss fear of being subject to pretrial investigation by American lawyers like Mr. Hausfeld.
In 1998, the case against the Swiss banks was settled for $1.25 billion. Last month, the separate forced-labor case was settled for another $5.2 billion. There has been intense and highly visible feuding among some of the American lawyers, largely over how much they should be paid. Mr. Hausfeld notes that even though his firm worked for three years on the Swiss banks case -- hiring a dozen researchers to pore over archival documents -- he made it clear from the outset that CMH&T won't ask for a dime in payment.
He says that this sort of sacrifice justifies the large rewards gained from other cases. Some of his partners, however, were more worried than Mr. Hausfeld about the firm's bottom line.
"We couldn't afford to keep going that way," says Mr. Toll, the managing partner, who runs the firm with Mr. Hausfeld, the chairman. The firm's annual revenues in recent years have generally ranged between $10 million and $15 million. The top several partners take home low-seven-figure checks in good years -- similar to what heavyweights make in top-tier corporate firms -- but in lean years, as little as $200,000, which is what senior associates receive at the premier corporate firms.
In 1998, CMH&T was borrowing heavily to finance the Holocaust litigation and other cases. After tense internal debate, Mr. Hausfeld agreed that the firm would seek a yet-to-be-determined fee in connection with the slave-labor case. The concession, he admits, dilutes the impressiveness of having done the Swiss banks case for free, and will lead inevitably to friction with other firms.
The irony, says Mr. Hausfeld, is that if his partners had listened to him years earlier about tobacco, they wouldn't be arguing about money now. CMH&T received feelers in the early 1990s about joining other firms representing various states as they prepared suits against cigarette makers. Mr. Hausfeld wanted to plunge in. Mr. Toll, who describes himself as a traditional securities-fraud lawyer, doubted the novel liability theories under consideration. The firm skipped tobacco.
The cigarette companies ultimately agreed to pay $246 billion to settle the state suits, with some law firms expected to collect hundreds of millions of dollars each in fees. Mr. Toll acknowledges regret. "We could have done a lot" with a slice of the tobacco money, Mr. Hausfeld says.
Missing the tobacco fight made Mr. Hausfeld all the more determined to get involved in its progeny: the wave of municipal lawsuits against the gun industry that started in late 1998. Though his partners generally share his desire for more gun control, some complained that the relatively small gun industry lacks the cash flow to fuel substantial settlements. Mr. Hausfeld prevailed on this one; the firm is helping represent Boston, San Francisco and other cities suing gun makers.
He points out that many of his current activities have deep personal roots. In the 1970s, he filed suit to try to force the federal government to ban bullets as an excessively dangerous product. That effort failed. In the 1980s, he mused about suing gun makers on behalf of communities, asserting the need to protect citizens' welfare. Now, he and other gun foes are back, demanding that gun companies be held liable for public costs of gun violence, a theory the industry rejects, saying blame belongs with criminals.
His collection of loose-leaf notebooks serves a dual purpose: holding course material for law-school teaching he has done and charting potential courtroom targets. As managed health care expanded in the early 1990s, the volume on HMOs swelled. Congress, in his view, has failed to protect patients' rights. Late last year, he and a cadre of class-action lawyers launched mass suits against major HMOs. A CMH&T suit filed in federal court in Miami alleges that Humana Inc. has defrauded millions of people by concealing the financial criteria used in coverage decisions. (Humana spokesman Tom Noland calls the suit "groundless," adding that the company makes numerous disclosures to regulatory bodies and members.)
Mr. Schwartz, the corporate defense attorney, says that mass lawsuits against entire industries, such as health care, make a mockery of legislators, who for years have been struggling over HMO regulation. Leave it to Congress, he says.
But deferring to Congress doesn't always work for corporate advocates. Mr. Schwartz, a partner with the Washington firm Crowell & Moring, has made a good living for many years, lobbying lawmakers on behalf of business interests who want to rein in the plaintiffs' bar. Some restrictions on securities litigation were enacted in 1995, but beyond that, Congress has generally allowed plaintiffs' lawyers to roam free.
In the future, Mr. Hausfeld predicts, the plaintiffs' bar won't wait to attack until after Congress gets bogged down in controversies such as those over cigarettes, guns or HMOs. He offers his class-action suit against Monsanto as a model.
In the winter of 1998, long before popular anxiety over genetically modified crops migrated from Europe to the U.S., a mutual acquaintance arranged for Mr. Hausfeld to have lunch with Mr. Rifkin, the antibioengineering activist. Their discussion blossomed 18 months later into the lawsuit filed against the St. Louis-based food and pharmaceuticals giant in December. In the suit, a group of farmers accuse the company of failing to adequately test the safety of genetically modified corn and soybean plants and of trying to monopolize how staple crops are grown. Nine other plaintiffs' firms are backing CMH&T in the case, which Mr. Rifkin predicts will become a centerpiece in a campaign to roll back the widespread U.S. planting of genetically modified crops.
Monsanto denies wrongdoing and predicts the suit will be thrown out. The Wall Street Journal's editorial page used the case as an occasion to brand Mr. Hausfeld a "corporate shakedown artist."
The epithet irritated him a little, he says. But then, he says, he decided that the notice signals that he has truly arrived.
Write to Paul M. Barrett at paul.barrett@wsj.com
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