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April 2008
NEW
JERSEY
Bias Plaintiff Says Lawyer Sell-Out Warrants Vacating of
Arbitration
Mary
Pat Gallagher, New Jersey Law Journal
04-08-08 --
A former Prudential Ins. Co. executive who claims the company
discriminated against her is asking a federal judge to set aside
an arbitration award, alleging her lawyers were given improper
financial inducement to keep her claim and hundreds of others
out of court. . . . According to Linda Guyden, the company paid
$5 million to the law firm representing her and 358 other
employees, in return for which Prudential's total exposure was
capped at $10 million and the claims were kept secret just as
the company was about to be taken public. . . . Guyden, an
African-American woman who was a vice president for Prudential
in Newark, N.J., claims she was paid less and denied promotions
on account of her race and that Prudential retaliated against
her for complaining of discrimination. . . . In 1999, she signed
a retainer agreement with Leeds Morelli & Brown of Carle Place,
N.Y., which represented hundreds
of other Prudential employees with similar claims. That May, she
and the other 358 employees signed an agreement with Prudential
and Leeds Morelli to decide the case by alternative dispute
resolution. Prudential agreed to pay the employees' legal fees
and both sides consented to keep the matter confidential. . . .
Guyden alleges there was another, secret agreement the same day,
by which Prudential agreed to pay the firm $5 million on the
claimants' anticipated legal fees, $3.5 million on execution and
the rest by Aug. 31, 1999. In addition, $4 million was
nonrefundable.
February 2008
Plaintiffs sue Prudential,
law firm for $6.5 billion
02-28-08 --
Current and former Prudential Financial Inc. employees,
continuing a legal process that began in 2002, have sued for
$6.5 billion in damages for alleged fraud, breach of contract
and other charges, the company has disclosed. . . . More than
350 people who work or worked for Prudential are suing the
company and the law firm Leeds Morelli & Brown, alleging the two
conspired to commit fraud, according to Prudential's annual
report filed Wednesday with the Securities and Exchange
Commission. The case claims Prudential advanced legal fees to
the firm in order to limit Prudential's liability to the
claimants in employment discrimination cases. . . . In March, a
court overseeing the cases granted a motion from the plaintiffs
to add over 200 additional plaintiffs. In November, the court
granted in part a move by Prudential to dismiss the complaint
and dismissed commercial bribery and conspiracy to commit
malpractice claims but let stand other claims.
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PRUDENTIAL FINANCIAL, INC. 2007 SEC Filing
Litigation and Regulatory Matters – Pages 269 & 270
The Company is subject to legal and regulatory
actions in the ordinary course of its businesses.
Pending legal and regulatory actions include
proceedings relating to aspects of the Company’s
businesses and operations that are specific to it
and proceedings that are typical of the businesses
in which it operates, including in both cases
businesses that have either been divested or placed
in wind-down status. Some of these proceedings have
been brought on behalf of various alleged classes of
complainants. In certain of these matters, the
plaintiffs are seeking large and/or indeterminate
amounts, including punitive or exemplary damages.
The outcome of a litigation or regulatory matter,
and the amount or range of potential loss at any
particular time, is often inherently uncertain.
21. COMMITMENTS AND GUARANTEES, CONTINGENT LIABILITIES
AND
LITIGATION
AND
REGULATORY MATTERS
From November 2002 to March 2005, eleven separate
complaints were filed against the Company and the
law firm of Leeds Morelli & Brown in New Jersey
state court. The cases were consolidated for
pre-trial proceedings in New Jersey Superior Court,
Essex County and captioned Lederman v. Prudential
Financial, Inc., et al. The complaints allege
that an alternative dispute resolution agreement
entered into among Prudential Insurance, over 350
claimants who are current and former Prudential
Insurance employees, and Leeds Morelli & Brown (the
law firm representing the claimants) was illegal and
that Prudential Insurance conspired with Leeds
Morelli & Brown to commit fraud, malpractice, breach
of contract, and violate racketeering laws by
advancing legal fees to the law firm with the
purpose of limiting Prudential’s liability to the
claimants. In 2004, the Superior Court sealed these
lawsuits and compelled them to arbitration. In May
2006, the Appellate Division reversed the trial
court’s decisions, held that the cases were
improperly sealed, and should be heard in court
rather than arbitrated. In November 2006, plaintiffs
filed a motion seeking to permit over 200
individuals to join the cases as additional
plaintiffs, to authorize a joint trial on liability
issues for all plaintiffs, and to add a claim under
the New Jersey discrimination law. In March 2007, the court granted plaintiffs’
motion to amend the complaint to add over 200
additional plaintiffs and a claim under the
New Jersey discrimination law but denied without prejudice
plaintiffs’ motion for a joint trial on liability
issues. In June 2007,
PFI and PICA moved to dismiss the complaint.
In
November 2007, the court granted the motion, in
part, and dismissed the commercial bribery and
conspiracy to commit malpractice claims and denied
the motion with respect to other claims. In January
2008, plaintiffs filed a demand pursuant to
New Jersey
law stating that they were seeking damages in the
amount of $6.5 billion.
The Company, along with a number of other insurance
companies, received formal requests for information
from the State of New York Attorney General’s Office
(“NYAG”), the Securities and Exchange Commission
(“SEC”), the Connecticut Attorney General’s Office,
the Massachusetts Office of the Attorney General,
the Department of Labor, the United States Attorney
for the Southern District of California, the
District Attorney of the County of San Diego, and
various state insurance departments relating to
payments to insurance intermediaries and certain
other practices that may be viewed as
anti-competitive. The Company may receive additional
requests from these and other regulators and
governmental authorities concerning these and
related subjects. The Company is cooperating with
these inquiries and has had discussions with certain
authorities in an effort to resolve the inquiries
into this matter. In December 2006, Prudential
Insurance reached a resolution of the NYAG
investigation. Under the terms of the settlement,
Prudential Insurance paid a $2.5 million penalty and
established a $16.5 million fund for policyholders,
adopted business reforms and agreed, among other
things, to continue to cooperate with the NYAG in
any litigation, ongoing investigations or other
proceedings. Prudential Insurance also settled the
litigation brought by the California Department of
Insurance and agreed to business reforms and
disclosures as to group insurance contracts insuring
customers or residents in
California
and to pay certain costs of investigation. These
matters are also the subject of litigation brought
by private plaintiffs, including purported class
actions that have been consolidated in the
multidistrict litigation in the United States
District Court for the District of New Jersey, In re
Employee Benefit Insurance Brokerage Antitrust
Litigation . In August and September 2007, the court
dismissed the anti-trust and RICO claims. In January
2008, the court dismissed the ERISA claims with
prejudice but has not yet resolved the state law
claims. The regulatory
settlement may adversely affect the existing
litigation or cause additional litigation and result
in adverse publicity and other potentially adverse
impacts to the Company’s business. |
219 plaintiffs join
Prudential suit
By
Peter J. Sampson, Staff Writer
03-14-07 --
The number of former and current
employees suing The Prudential Insurance Company of America on
discrimination, fraud and commercial bribery charges swelled to
236 from 17 following a judge's ruling. . . . State Superior
Court Judge Walter Koprowski granted permission for the
plaintiffs' lawyers to amend their lawsuit to drop class-action
claims and allow 219 individuals join as plaintiffs. . . . The
lawyers said it would have been extremely difficult to prove
damages in a class action because of the varied circumstances of
their clients. . . . The judge also ruled that the plaintiffs
may add charges under the state's Law Against Discrimination. .
. . That could make a big difference if the plaintiffs win, said
Totowa attorney Kenneth S. Thyne. Punitive damages are normally
capped at five times compensatory damages, but under the state
law there is no limit to what a jury can award, he said. . . .
From November 2002 to March 2005, 11 lawsuits filed in New
Jersey named as defendants the insurance giant and Leeds Morelli
& Brown, a New York law firm that represented 359 current and
former employees. . . . The suits allege a conspiracy to commit
fraud, malpractice, breach of contract and racketeering by
advancing a $5 million "bribe" to the law firm to cap
Prudential's liability to the claimants at $15 million. . . .
The employees claimed they were duped into agreeing to an
alternate-dispute resolution process instead of litigating
claims that Prudential discriminated against them for selling
insurance to minorities. . . . In 2004, a Superior Court judge
sealed the record in the first suit and ordered it to
arbitration. In May, that decision was reversed by an appellate
panel, which held that the case was improperly sealed and should
be heard in court rather than arbitrated.
N.J. Judge Who Cited Lawyers for Contempt
Pulls Out of Prudential Case
Mary Pat Gallagher, New Jersey Law Journal
Hon. Theodore A. Winard
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11-29-06 --
A judge who brought criminal
contempt charges against two lawyers for violating a sealing
order -- and battled a prosecutor's attempt to drop the charges
after the sealing order was vacated on appeal -- has taken
himself off the litigation that set off the imbroglio. . .. In
a letter to counsel in Lederman v. Prudential and 11
consolidated cases, Superior Court Judge Theodore Winard of
Essex County, N.J., said, "I am recusing myself sua sponte. I
think in the interests of justice it would be better to have a
different judge manage this case from this point forward." . . .
Winard's letter was dated Nov. 15, the same day the lawyers,
Angela Roper and Kenneth Thyne, filed an interlocutory appeal
from his denial of their recusal motion on Oct. 6. . .. The
letter mentioned that another Essex County judge, Donald
Goldman, had dismissed the criminal charges against the two
lawyers on Oct. 11. . .. The underlying case is now assigned to
Superior Court Judge Walter Koprowski Jr. . . . The plaintiffs
charge that a law firm, Leeds Morelli & Brown, which 359
employees had retained to pursue discrimination claims against
Prudential Ins. Co., entered into a secret side deal with the
company to keep the claims out of court and send them to
alternative dispute resolution where recovery was capped at $10
million. In return, Prudential paid the Carle Place, N.Y., firm
$5 million in fees up front, the plaintiffs say. . .. They also
contend that with Prudential about to sell shares in an initial
public offering, it was especially eager to bury the plaintiffs'
claims that agents were told not to sell insurance to
minorities, and other embarrassing allegations.
A victory for former
Prudential Insurance employees
By
Sarah Wallace, WABC
05-24-06 -- There
is a victory for former employees of Prudential Insurance. They
have for years claimed that the law firm they hired to represent
them against Prudential, instead sold them out. Now, documents
are about to be unsealed and they will get their day in court. .
. . You have to wonder what are they trying to hide? For three
and a half years, this case has been shrouded in secrecy --
sealed at the request of both Prudential and a law firm that was
supposed to be their adversary. Instead, they became legal
allies trying to keep their dealings in the dark. Well, that's
about to change. . . . These former Prudential Insurance agents
and mangers claim they were punished for one reason. . . .
Schubert Jacques, former Prudential employee: "Prudential did
not want us to write to minorities. They did not want the
minority business." . . . Here's some background: By 1999,
Prudential Insurance, headquartered in Newark, New Jersey, had
been accused of various types of discrimination by a staggering
359 current and former employees. They signed to be represented
by the New York based law firm, Leeds, Morelli and Brown.
Prudential, determined to keep the claims out of court and the
media, agreed to a confidential mediation process to settle
them. . . . What these men and others say they didn't know is
that Prudential and LMB entered into a separate secret
agreement, which we obtained. The law firm got $5,000,000 from
Prudential up front. The companies deny that was improper.
Court documents open despite
secrecy agreement
"Documents filed in court cannot be sealed merely because the
parties previously agreed to keep them confidential," a state
intermediate court ruled in a case involving allegations of
discrimination, fraud and bribery.
Reporters Committee for Freedom of the Press
05-12-06 --
The public's right to court
documents trumps a confidentiality agreement between parties in
a lawsuit, the Superior Court of New Jersey Appellate Division
decided Tuesday, ruling that a trial court erroneously sealed
virtually all pleadings, documents and hearings based on the
pact. . . . "Mere deprivation of the right to enforce a
contractual obligation is not, without an additional showing of
serious harm, sufficient to override the public's right of
access to the courts," Judge Michael Winkelstein wrote for the
unanimous three-judge panel. . . . The court rejected Essex
County Superior Court Judge Theodore Winard's concern for the
potential harm to the parties' reputations should the documents
become public. "If embarrassment were the yardstick, sealing
court records would be the rule, not the exception," Winkelstein
wrote. . .. Attorney Bruce S. Rosen, who has spent three years
fighting to get the documents opened for the intervening media
companies, said the court's decision reinforces the fundamental
principle of openness that underlies the public court system. .
.. Allowing Winard's decision to stand "would've privatized the
court system," he said.
Lederman v.
Prudential
DOCKET No. A-1449-04T5
Court Unseals Prudential suit
By
Amy Klein, Staff Writer
05-11-06 --
In a
scathing opinion released Wednesday, the state
appellate court unsealed a class-action law suit against
Prudential Insurance Co. and a mediation law firm, ordering a
judge to open all records regarding allegations of sweetheart
deals and redlining. . . . In a separate move, the appellate
panel also sent the case back to Superior Court rather than
allow it to be resolved in closed-door arbitration. . . . The
rulings marked a sweeping victory for former Prudential
employees who have fought for their case to go to trial, as well
as for the three media outlets -- The Record, ABC News and
Bloomberg -- that had sued for access to the court records. . .
. "The presumption of openness to court proceedings requires
more than a passing nod," the three appellate judges wrote.
"Open access is the lens through which the public views our
government institutions. It is essential to foster public
confidence in the judiciary." . . . The lawsuit against
Prudential and Long Island law firm Leeds, Morelli & Brown was
filed in 2002 by Prudential manager Lawrence Lederman, who
accused his employer of repeatedly telling him to stop selling
auto insurance in Hudson and Essex counties in the mid-1990s. .
. . In 2001, Lederman and 358 other employees entered into
arbitration with Prudential and were represented by Leeds,
Morelli. Lederman received $500,000 in the confidential
negotiations, according to Lederman's lawsuit. . . . The suit
alleges that Prudential paid Leeds, Morelli $5 million up front
to cap the settlement at $10 million. Traditionally, attorneys
earn a percentage of the final agreement as an incentive to work
for a larger settlement. . . . Lawyers for Prudential and Leeds,
Morelli had argued that the case should be sealed be cause the
allegations concerned matters that were confidential under the
terms of the arbitration and could embarrass the companies.
Essex County Superior Court Judge Theodore Winard agreed and
yanked the original complaint and all further motions and briefs
out of the public eye.
Lederman v.
Prudential
DOCKET No. A-1449-04T5
Whistleblower Alleges
Conspiracy Between Plaintiffs Attorneys and Employer Voids
Arbitration Agreement
Henry Gottlieb, New Jersey Law Journal
04-13-06 --
Lawyers for a former Prudential
Insurance Co. agent with a whistleblower claim asked an appeals
court April 5 to buck a national trend in favor of alternate
dispute resolution and rule that litigation alleging fraud in an
arbitration clause belongs before a judge, not an arbitrator. .
. . And Bloomberg News, ABC-TV and The Record of Hackensack,
N.J., asked the appeals judges to reverse a sealing order that
has kept details of the allegations against Prudential secret
for three years. . . The media group won a small victory even
before the argument began in a packed Morris County, N.J.,
courtroom. . . . Presiding Appellate Division Judge Harvey
Weissbard announced that the tribunal had rejected a request
that the hearing be closed to the public. "We're not sealing
anything," he said. . . . He expressed confidence that the
lawyers would be circumspect about confidential facts, and they
were. They referred only obliquely to the plaintiff's claim that
he and 358 other Prudential employees were defrauded into a
bogus arbitration by Prudential and their own law firm, New
York's Leeds, Morelli & Brown. . . . Openness aside, the case of
Lederman v. Prudential, A-1449-04T5, could add to
the long-running debate between plaintiffs lawyers and
corporations over confidential arbitrations. The question this
time: Are ADR agreements that cover large numbers of employees
enforceable if the workers claim that their own lawyers
conspired with the corporation to limit recoveries and enrich
the lawyers?
Ex-Prudential worker fights
to unseal suit
By
Amy Klein, Staff Writer
04-06-06 --
For more than three years, a
class-action lawsuit accusing Prudential Insurance Co. and a
mediation law firm of duping former employees out of millions of
dollars has wound through the state's courts shrouded in
secrecy. . . . But on Wednesday, a three-judge appellate panel
in Morris County broke the seal that kept proceedings closed and
offered a rare glimpse into allegations that Long Island law
firm Leeds, Morelli & Brown concocted a sweetheart deal with
Prudential to shortchange employees in arbitration negotiations.
. . . The accusations echo those in
other lawsuits against Leeds, Morelli across the country,
including one in which the firm has fought just as hard to keep
information out of the public eye. . . . New Jersey state judges
have yanked the original complaint against Prudential -- which
was initially public and widely reported -- from sight. . . .
Despite repeated opposition from lawyers representing The
Record, ABC News and Bloomberg, the judges have sealed their
opinions, as well as the briefs filed by media lawyers arguing
for more access. . . "I'm at a loss to understand how a case
rose to trump First Amendment rights," said lawyer Bruce Rosen,
who asked the appellate court Wednesday to open the entire case.
"Why were they so vehement in trying to seal this?"
Press Is Refused Access to
Files in Prudential Fraud Case
Judge also places unusual seal on opinion outlining his
reasoning
Henry Gottlieb, New Jersey Law Journal
09-05-03 --
Taking secrecy in civil
proceedings to a new height, a New Jersey judge has sealed an
opinion denying three news organizations' request for access to
documents and proceedings in a case against Prudential Insurance
Co. . . . Essex County Superior Court Judge Theodore Winard also
ordered lawyers for ABC, Bloomberg News and The Record of
Hackensack to refrain from showing the opinion to their clients,
allowing them to give news executives only enough information to
decide whether to appeal. . . . Winard also denied an unsealing
motion by the plaintiffs in the case, a group of former
Prudential employees suing the company for fraud. . . . A gag
order bars lawyers from commenting on the judge's Aug. 7 order
denying the motion, the only public record of the secrecy
dispute, a clerk in Winard's office said Aug. 27. . . .
Attorneys outside the case who have litigated other court
secrecy cases say they can recall no instance in which a judge
who rejected a motion to unseal went further and declined to
allow public access to the opinion outlining the reasoning. . .
. "I have never experienced that," says Thomas Cafferty of
Somerset's McGimpsey & Cafferty, counsel to the New Jersey Press
Association. . . . Cafferty and other experts in the field say
the traditional procedure in such cases is for judges to issue
public opinions that explain the legal reasoning while avoiding
sensitive factual revelations. . . . When a ruling is made at a
hearing and the opinion is in the form of a transcript, as in
the Prudential case, judges avoid problems by picking their
words carefully or redacting the transcript before making it
part of the public record.
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