Finding Deal Created Conflict for Firm, Circuit Revives Suit

Finding Deal Created Conflict for Firm, Circuit Revives Suit

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A putative class action charging Leeds, Morelli & Brown with striking a collusive settlement of employment discrimination claims with Nextel has been brought back to life.

The U.S. Court of Appeals for the Second Circuit vacated the dismissal of claims by a class of Nextel employees who allege Leeds Morelli breached its fiduciary duty by accepting a deal with Nextel in which the firm would be paid $2 million to persuade its clients to settle en masse, $3.5 million more on a sliding scale as claims were settled and another $2 million to work as a consultant for Nextel for two years once the claims were resolved.

Under the terms of the settlement, Leeds Morelli also promised it would not accept new clients with claims against the company or refer any non-claimants to other lawyers or law firms, according to both sides in the litigation.

The settlement agreement, the Second Circuit found in Johnson v. Nextel Communications Inc., 09-1892, "created an enormous conflict of interest between" the law firm and its clients.

The circuit reversed Southern District Judge George Daniels, who had granted Nextel's motion to dismiss on March 31, 2009.

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