One of Minnesota's leading law firms is being accused of filing "demonstrably false" information in its defense of a Georgia-based subprime lender that is being sued for alleged fraud.
In a rare challenge to a law firm's conduct, a motion filed Friday in U.S. District Court in Minnesota alleges that attorneys for Robins, Kaplan, Miller & Ciresi filed a "factually groundless" antitrust complaint in litigation involving the firm's client, CompuCredit Holdings Corp.
Christopher Madel, one of two Robins attorneys representing CompuCredit, defended his conduct, saying the motion "is baseless and we look forward to beating it in court." He said it is a part of the aggressive litigation strategy by hedge funds to profit from the company's bonds.
The motion was brought by 24 funds, including Whitebox Advisors of Minneapolis, that hold more than $100 million in CompuCredit's convertible bonds. The funds sued CompuCredit in December accusing corporate insiders of running the company into the ground and siphoning off cash to enrich themselves at the expense of bondholders.
CompuCredit and Robins fired back in April, filing an antitrust lawsuit in federal court alleging the hedge funds conspired to fix prices on the company's bonds -- buying them while driving down the price by saying in court that the company would soon be going broke.
In the new motion seeking sanctions against the lender and the Robins firm, the funds' attorney Jeff Ross asserts that far from a buying spree, the hedge funds sold $15.5 million in bonds through mid-April this year -- and that Robins lawyers should have checked publicly available trading data before alleging otherwise.
The sanctions motion also alleges CompuCredit Treasurer William McCamey lied in an affidavit about a telephone conversation with one hedge fund official, who had recorded the call. McCamey asserted that the official told him that the funds "had been buying CompuCredit's notes as a group," but the transcript of the telephone conversation revealed just the opposite, the motion says.
"It is rare that a party and its sophisticated counsel would run afoul of so many legal road signs in filing a complaint and then persist in its advocacy," wrote Ross, who asked a federal judge to throw out the antitrust case and impose a monetary sanctions, including the funds' legal fees and costs. In court papers, Ross said he has not filed such a sanction motion in 25 years of practice.
Madel of the Robins firm said McCamey stands by his memory of the conversation and that not all of it was recorded. Madel also said CompuCredit stands by its assertion that the hedge funds violated antitrust laws. He said neither he nor his co-counsel, K. Craig Wildfang, have ever been subjects of sanction motions before.
The Robins firm has more than 250 attorneys in Minneapolis, New York, Los Angeles, Atlanta, Boston and Naples, Fla., according to the firm's website. In one of its most famous cases, the firm represented the state of Minnesota and Blue Cross and Blue Shield of Minnesota in the landmark lawsuit against cigarette companies over smoking and health, resulting in a $7 billion settlement in 1998.
CompuCredit, which offers credit cards and other loans to subprime customers, has lost money for the past three years, including $541 million in 2009. Its cash flow, though down, has remained positive and it recently offered a $7 stock buyback. Company CEO David Hanna and his brother, Frank Hanna III, a director, sold personal and family trust shares worth $57 million during the buyback on May 20, according to security filings. CompuCredit's stock closed at $4.09 per share, down 1 cent, at the close of trading Monday.
David Shaffer • 612-673-7090
