Shutterstock.com
Milberg is vigorously opposing an ex-partner’s attempts to extract money from the law firm after a merger, claiming his demands “pose a grave danger” to the firm's ability to continue representing clients.
The claim to old profits was met with a response saying partners at the post-merger firm have taken no distributions.
The high-profile plaintiffs firm pointed to pressures — including lower profits and increasing competition — that led to the “strategic partnership” last year that created Milberg Tadler Phillips Grossman.
Disbarred attorney Steven Schulman, a former equity partner of Milberg, filed suit last month against Milberg and the new firm, alleging he is owed more than $15 million under a 2009 court judgment.
Schulman, one of several former Milberg partners convicted in a kickback scheme more than a decade ago, said the firm’s 2018 name change was part of a “fraudulent scheme” to evade Milberg’s creditors, including Schulman.
Shortly after suing, Schulman and his lawyers at Eisner filed more court papers to force Milberg, represented by Morrison Cohen, to immediately pay him under the 2009 judgment confirming an arbitration award. It directed Milberg to pay Schulman on a set schedule for funds like his capital account and for his withdrawal from the firm.
Firing back in late January, Milberg said the court should deny Schulman’s demands for immediate payment. The firm blamed him for the position Milberg found itself in, noting Schulman earned “fabulous wealth from Milberg.”
“He lied to many courts for many years, concealing the kickbacks he secretly paid that allowed him to obtain leadership positions in class actions and garner ever greater income for himself,” Milberg said, citing Schulman’s plea agreement.
All told, Milberg said it has paid Schulman over $10 million since his conviction, including all payments due through last November.
“After Schulman and others went to prison, the remaining partners of Milberg were left to pick up the pieces,” the firm said.
Milberg said its competitors sought to convince courts and clients that Milberg was not suited for leadership positions, “particularly in the types of cases that historically had been the lifeblood of Milberg and which had, at one time, generated large fees.”
“As the result of the crimes of Schulman and others, Milberg's profitability began to slowly and steadily decline, and Milberg resorted to borrowing to finance the prosecution of its contingency-fee cases,” the firm said.
Loans also were used to pay Schulman and other former partners, and distributions available for actively working partners steadily decreased, the firm said.
By 2017, Milberg had an inventory of pending contingent-fee cases, but they would require many years and substantial financial investment to bring to trial or settlement, the firm said. Meanwhile, “the significant debt that Milberg had incurred to finance its operations and pay former partners had matured,” Milberg said.