Thomson Reuters; March 25, 2013
(Reuters) – Joseph Alioto, a prominent plaintiffs’ antitrust attorney in San Francisco, has been ordered to pay attorneys’ fees for defendants in a merger case, a rare reprimand that has fueled a debate over the merits of private litigation.
The 9th U.S. Circuit Court of Appeals on Thursday ordered Alioto and the Alioto Law Firm to pay defendants $67,495 in a case challenging the 2011 merger between Southwest Airlines Co and AirTran Holdings Inc. The court had previously granted a motion for sanctions filed against Alioto for what the airlines argued was “unreasonable and vexatious” litigation.
“That almost never happens,” said Robert Lande, a professor at the University of Baltimore School of Law. “It’s routinely asked for but rarely granted.”
Alioto did not return a call seeking comment.
The case is notable further because of the debate it set off about the value of private antitrust lawsuits challenging mergers and whether the order would deter other plaintiffs’ lawyers from bringing such cases. It also provided a peek into the fees generated by Skadden, Arps, Slate, Meagher & Flom, which represented the airlines.
Alioto, who is the son of a former San Francisco mayor, first brought the case on behalf of passengers on May 3, 2011, alleging the deal would hurt consumers. The lawsuit sought a temporary restraining order to prevent the merger from going through. Southwest and AirTran had closed the merger the day before, less than a week after receiving clearance from the U.S. Department of Justice.
After the district court dismissed the case, Alioto further pursued it by filing an emergency motion with the 9th Circuit seeking an order forcing Southwest and AirTran to keep their assets separate. The motion was denied on June 2, 2011.
In their subsequent motion for sanctions, the defendants called into question similar lawsuits filed by Alioto contesting mergers.
“Counsel’s modus operandi in these cases is to sue companies that are attempting to complete high profile mergers at the most time-sensitive stage of the transaction in hopes of extracting a cash settlement that does not benefit (and indeed ultimately increases the costs to) the public at large,” lawyers for the defendants wrote.
NEW LOW OR JUSTIFIED?
In the Southwest case, the defendants said, Alioto had “sunk to a new low” by bringing a case the day after the deal had closed and then by later filing an emergency appeal that had sought broader relief than the original complaint.
Alioto argued in response that the lawsuits criticized by the defendants were “fully and completely justified” and that the appeal to the 9th Circuit was necessary to prevent the “alleged, unlawful, technically consummated merger.”
Alioto received support from one judge on the 9th Circuit. When the panel refused to rehear arguments on the sanction motion, Judge Ronald Gould dissented.
Gould wrote that the “requisite degree of recklessness of plaintiffs or their counsel has not been shown, and the sanctions award may incorrectly discourage vigorous private prosecution of antitrust law claims that is beneficial to the public.”
The 9th Circuit’s attorneys’ fee order was first issued on March 5, 2013, and it held Alioto, his firm and three other attorneys at his firm jointly and severally liable for payment.
On Thursday, the 9th Circuit amended its order to make only Alioto and his law firm responsible for paying the attorneys’ fees. The change followed a stipulation filed by both sides that the other lawyers should not be included in the order.
In its order, the 9th Circuit did not grant all of the fees that Southwest had sought for work opposing Alioto’s appeal. Skadden Arps submitted a request for around $82,000 for 126.5 hours of work by six attorneys and one paralegal. Among the top billers in the group were partner Steven Sunshine whose rate was listed at $986 an hour and Gary MacDonald at $927 an hour.
The 9th Circuit found some of Skadden’s request unreasonable. For example, it disallowed $1,125.60 in fees incurred by an associate for traveling from Palo Alto to San Francisco to attend “oral argument in an unrelated appeal.” The court noted that an audio recording of the argument was available to the associate the next day.
Skadden Arps declined to comment.
The case is Taleff v. Southwest Airlines Co, 9th U.S. Circuit Court of Appeals, No. 11-16173.
For Taleff: Joseph Alioto of the Alioto Law Firm.
For Defendants: Steven Sunshine, Gary MacDonald and Sara Bensley of Skadden, Arps, Slate, Meagher & Flom.