One of three firms involved in a $300 million settlement of a Massachusetts securities class action has asked a Cook County judge to order an insurance company to pay their own legal bills, as they fight to safeguard their cut of more than $74 million in attorney fees from that settlement.
On Nov. 25, the Thornton Law Firm, of Boston, filed suit in Cook County Circuit Court against Chicago-based insurer Continental Casualty Company.
The complaint centers on an ongoing legal fight in Massachusetts federal court over the spoils resulting from a class action launched against Boston-based State Street Bank by a group of public pension funds.
In that action, the funds accused State Street Bank of allegedly improperly charging their “custodial clients” inflated foreign exchange transaction fees, and then pocketing the difference between the actual and reported rates.
The lawsuit was filed in 2011, and the class action was led by attorneys from the Thornton Firm, as well as the firms of Labaton Sucharow, of New York, and Lieff Cabraser, of New York.
State Street Bank eventually settled with the pension funds for $300 million. The settlement was approved in 2016.
At the same time, a Massachusetts federal judge approved the plaintiffs’ lawyers request for $74 million in attorney fees for their work on the case.
However, after the award was approved, one of the members of the plaintiffs’ legal team told the judge the documents filed by the plaintiffs’ lawyers in support of their fee request contained “inadvertent errors” that may have resulted in hours for “certain staff attorneys” being “mistakenly ‘double-counted,’” according to Thornton’s filing in Cook County.
As a result, the federal judge appointed a special master to look into the matter. The judge indicated the revelations cast doubt on the fee award, and placed the previous $74 million fee award amount in jeopardy.
As the special master began work on the investigation, Thornton said it hired outside lawyers to represent it amid the investigation.
However, when Thornton filed a claim with its insurer, Continental Casualty, to cover its expenses resulting from the investigation, the insurance company refused. Continental said it was not obligated under Thornton’s policy to pay those costs.
According to Thornton’s complaint, Continental asserted the policy would only cover expenses “arising out of an act or omission in the rendering of legal services.” They said they did not believe the additional legal expenses incurred by Thornton in defending its fee award counted as rendering of legal services.
Thornton asserted the insurance company “mischaracterized” the actions of the federal judge and the special master.
The State Street Bank case is still pending in Massachusetts federal court, as various parties continue to argue over legal fee awards.
Thornton has asked the court to order Continental to indemnify the firm, and to reimburse its expenses, under the policy.
Thornton is represented in the action by attorneys James Ocasek, of Cooney & Conway, of Chicago, and Lynda Bennett and Eric Jesse, of Lowenstein Sandler LLP, of Roseland, N.J.