A Hennepin County jury Wednesday ordered a Minneapolis law firm and two partners to pay $1.6 million to an attorney who complained he had been cut out of some of the legal fees earned representing the state of Minnesota and others in a securities fraud case.
The jury rejected a second claim against the law firm.
Attorney Brian Williams had already received $4.5 million from the Minneapolis law firm of Heins Mills & Olson but said he was due more.
In issuing its verdict, the jury concluded Williams was a victim of "misrepresentation by omission." Williams' attorney, Vince Louwagie, said the verdict meant the jury found Heins Mills failed to tell Williams the formula it intended to use to set his share of the fees.
Besides the Heins Mills firm, Williams also sued partners Samuel Heins and his wife, Stacey Mills.
The firm collected $103 million in legal fees, with Heins getting $48 million and Mills getting $32 million.
Heins Mills represented the state of Minnesota and many others in a national suit against AOL Time Warner, which was accused of violating securities laws by making misleading statements about its finances, such as inflating the company's stock price.
Minnesota lost nearly $250 million in pension fund investments. It recovered $3.3 million in a $2.65 billion settlement involving 600,000 claimants.
A partner at Heins Mills, Daniel Hedlund, also sued the law firm and reached an undisclosed settlement. Williams left Heins Mills voluntarily in January 2007, Louwagie said.
The jury rejected Williams' second claim that Heins Mills committed fraud by misrepresenting how fees in the case would be distributed. The trial lasted eight days.
"We are very pleased the jury was able to follow the evidence in a very complicated case and come to the right conclusions," said Louwagie, a member of the law firm of Anthony Ostlund Baer Louwagie & Ross of Minneapolis.
Law firm might appeal
Lawyers for Heins Mills issued a statement indicating that they might appeal and said the jury award was considerably less than Williams had sought.
William Pentelovich, attorney for Heins Mills, said the verdict lays out a standard for disclosing information to company employees about discretionary raises and bonuses that "goes far beyond anything that has been permitted by Minnesota courts in the past."
Lewis Remele, attorney for the two lawyers, Mills and Heins, called the damage award "highly irregular."
The Minnesota State Board of Investment, which oversees the investment of pension funds for thousands of government employees and retirees, was among numerous investors across the nation filing securities lawsuits in 2002 against AOL Time Warner.
The office of then-Attorney General Mike Hatch, a DFLer who also sat on the State Investment Board, recommended in 2002 retaining Heins Mills to press the state's case.
Lawsuits were consolidated
A federal judge in New York consolidated all the lawsuits against AOL Time Warner, and in 2003 named Minnesota the lead plaintiff because it claimed the biggest loss and appointed Heins Mills lead attorney for the entire class of plaintiffs.
Heins Mills reached a $2.65 billion settlement with AOL Time Warner in 2005, and distributions to about 600,000 claimants began last summer.
The total claims exceeded the settlement, and investors received a small portion of their alleged losses. The Minnesota pension funds' $3.3 million recovery represented a little more than 1 percent of their claimed losses.
The law firm's $103 million fee -- the distribution of which led to the internal disputes at the firm -- was part of $147 million in total legal fees in the case.
The firm was awarded the fee, with the approval of U.S. District Judge Shirley Wohl Kram, for its representation of the entire class.
Before the trial in Williams' lawsuit got underway, the Star Tribune published an article in February on the case that led Judge Denise Reilly to postpone the trial, citing "unflattering" pretrial publicity.
Later, she allowed the newspaper to intervene to oppose Heins Mills' request to keep documents involved in the case under seal.
The documents were eventually made public.
Randy Furst • 612-673-7382