Former Labaton consultant’s suit details the company’s big-budget hiring of European clients


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Reuters represent in the class actions of shareholders.

The Sillam and Saulnier complaint claims that between 2006 and 2009, Sillam helped Labaton secure client relationships with, among other funds, AGF Asset Management, AXA Investment Managers, Bank Degroof, Eurizon Capital, Fortis Investments and KBC Asset Management NV. Labaton has reportedly agreed to pay Sillam a monthly retainer for presenting its partners to European fund managers, as well as “success fees” when the funds detained Labaton, according to the complaint.

Labaton entered into a separate agreement with Sillam’s French attorneys in which the US firm agreed to pay Sillam’s French counsel 15% of all fees that Labaton deducted from a case in which he represented a client recommended by Sillam as the lead applicant.

Sillam and Saulnier argue in the lawsuit filed in Manhattan federal court that the benchmark law firm agreements were a sham. Sillam’s lawyers, they say, were not supposed to do legal work. Instead, the lawsuit alleged that dismissal fees had to be paid to Sillam, despite New York’s ban on lawyers from sharing fees with non-lawyers.

In an emailed statement, Labaton said the lawsuit filed by Sillam and Saulnier was “an inappropriate attempt … to extract money from the company.”

“At no time was Labaton Sucharow selected by a client presented by Mr. Sillam and Mr. Saulnier,” said the statement from Labaton. “If a client had retained us, Mr. Saulnier would have been eligible to share the fees in accordance with New York rules of ethics… This did not happen.

Sillam admitted in a telephone interview that Labaton ultimately did not pay allegedly inappropriate referral fees to his French lawyer, as no client he referred had been a lead plaintiff.

Rather, Sillam and Saulnier allege that Labaton misled them about the administrative fees he received from clients presented by Sillam. According to the complaint, Labaton has filed millions of dollars in claims in class actions settled on behalf of European funds referred by Sillam. Labaton, which received a percentage-based fee for filing such claims, reportedly earned more than $ 4.2 million in administrative filing fees from a single client referred by Sillam, AXA.

Sillam and Saulnier claim that they were entitled to a share of these fees and that Labaton hid the payments from them.

The complaint and the underlying agreements between Labaton, Sillam and Sillam’s lawyers shed light on how the US plaintiff’s firm has developed client relationships with major European funds as these funds intensify their involvement in class actions. American Securities. In 2005, Sillam came to the attention of the US media for suing scandal-ridden commodity futures brokerage firm Refco for an allegedly unpaid commission. This media coverage, according to Sillam’s lawsuit against Labaton, brought it to the attention of Labaton’s partners who reportedly saw Sillam’s European contacts as an opportunity to break into large foreign investment funds.

In February 2006, Labaton signed a 15% referral fee agreement with a French lawyer who worked with Sillam, citing “our common intention and desire that we work cooperatively in opening and pursuing litigation in France. securities in the United States ”. In April, Labaton signed a separate advisory contract to pay Sillam $ 6,000 per month, plus a high success fee when the funds signed a mandate with Labaton (up to $ 30,000) and were named principal applicants. in a class action (up to $ 65,000).

Sillam – who told me he worked with five other U.S. shareholder companies whose identities he refused to reveal – said Labaton didn’t expect his French lawyers to do a job. The complaint alleged that partner by name Labaton, Lawrence Sucharow, admitted that the referral fee would be improperly routed to Sillam in a March 2007 email asking Sillam to reduce its fee percentage so that Labaton could pay. an Italian lawyer who also referred clients to the firm.

The complaint also cited a comment Sucharow allegedly made to Sillam in 2007 in Luxembourg. Sucharow, according to the complaint, “told Sillam that Labaton” was probably breaking several laws in several countries “” by “meeting with European fund managers without the presence of any European lawyer”.

Amid disputes over how much Labaton owed Sillam, the French businessman and his lawyer struck deals with Labaton in 2009. Labaton agreed to pay Sillam $ 400,000 to terminate his consulting contract . The affair with his lawyer, Saulnier, was more complex. Labaton represented certain funds referred by Sillam in a US stock market dispute against Vivendi SA. The firm agreed to pay Saulnier $ 150,000 as a non-refundable advance on the costs of referral for this litigation. (Vivendi’s cases ended up being dismissed.) Labaton also accepted semi-annual certifications of any additional fees it received from Sillam customers.

The 2009 Saulnier agreement, which cites New York’s ethical rules, refers to “pre- or post-litigation” representation of clients referred by Sillam. This language is the source of the dispute over the claim filing fees that Labaton received.

Sillam, who has a competing claims filing business, told me that Labaton violated the 2009 agreements by failing to disclose that it was raising millions of dollars in post-litigation claims fees for the funds Sillam had presented to. the society. Sillam and Saulnier allege in their complaint that they were fraudulently tricked into entering into a 2015 final deal to end their claims due to false certifications from Labaton.

The French plaintiffs’ complaint against Labaton was filed in August, shortly after a Texas attorney, Damon Chargois, who facilitated Labaton’s client relationship with an Arkansas pension fund, sued the firm for costs. unpaid benchmark. Labaton’s fee agreement with the Texas attorney was reviewed in the now famous State Street class action lawsuit, in which Labaton’s fees were reduced by $ 10 million.

Interestingly, the complaint – which was only served on the Labaton defendants this week – may be the last substantive thing we hear in the Sillam case. The 2009 agreements contain arbitration provisions. I wouldn’t be surprised to see Labaton move quickly to force arbitration.

Read more:

State Street fallout for Labaton: lawyer sues for unpaid ‘referral’ fees

Judge in Notorious State Street Case Calls for Lawyer in Lieff’s First Circuit Appeal

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the principles of trust, is committed to respecting integrity, independence and freedom from bias.

Alison frankel

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A graduate of Dartmouth University, she worked as a reporter in New York covering the legal and law industry for more than three decades. Prior to joining Reuters, she was a writer and editor for The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin. Contact her at [email protected]

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