In the News The American Lawyer

Litigation Department of the Year - Finalist

David Bernick describes his attempt to dispose of asbestos claims against the Big Three automakers with such exuberance and conviction that it sounds like he is trumpeting one of Kirkland & Ellis's biggest triumphs. In fact, his firm lost its effort to use the bankruptcy of automotive supplier Federal-Mogul Corporation to resolve General Motors Corporation's, Ford Motor Company's, and DaimlerChrysler AG's asbestos exposure in one fell swoop; he lists that defeat as the firm's biggest loss of the past two years. But Bernick, the head of Kirkland's litigation practice, still believes passionately that he should have won. It was, he insists, the most efficient way of dealing with the morass of asbestos litigation.

It's that sort of resolve and willingness to stand behind a novel legal theory that keeps clients coming to Kirkland. Indeed, several-including The Babcock & Wilcox Company, W.R. Grace & Co., and Armstrong World Industries, Inc.-have signed on with Kirkland specifically because of Bernick's mass tort experience, which lends itself to these asbestos cases. By taking advantage of a Chapter 11 proceeding, Bernick constructs a "prepackaged" plan, in which asbestos claims are consolidated in bankruptcy court and subject to federal law, rather than dealt with individually in state courts.

One beneficiary of such an approach is Zurich-based ABB Ltd. Its U.S. subsidiary, Combustion Engineering, could have cratered under the weight of billions of dollars in asbestos claims, says former ABB general counsel Beat Hess. [Hess is now general counsel of Royal Dutch/Shell.] Hess says that insurance companies, investment bankers, and other law firms had come to him with proposals for resolving Combustion Engineering's asbestos exposure, but none persuaded him. "David Bernick was the first one, in a detailed analysis, to convince me that we could reach a final conclusion," Hess says. Using one of Bernick's prepackaged plans, ABB settled $1.2 billion in asbestos claims as part of Combustion Engineering's reorganization, which has been confirmed, a first for a major prepackaged plan. [The settlement is now being appealed by certain insurance companies and a small group of asbestos claimants.]

Bernick is the stereotypical Kirkland litigator-opinionated, proactive, and relatively young. At 49, he has had a seat on the firm's senior management committee for ten years. Showing similar gumption, 44-year-old Alex Dimitrief, has handled two important settlements for Kirkland clients-UAL Corporation and Morgan Stanley. For UAL, the corporate parent of United Airlines, Dimitrief oversaw the litigation that led to settlements with United's unions that are expected to save the embattled airline $2.5 billion annually through 2008. For Morgan Stanley, Dimitrief coordinated the bank's response to Wall Street's investment research scandal.

Morgan Stanley general counsel Donald Kempf recalls that when New York attorney general Eliot Spitzer released evidence of his office's investigation into Merrill Lynch & Co., Inc., in March 2002, Kempf knew that Morgan Stanley's practices would soon also be under the microscope. "Merrill got blindsided," says Kempf, a former Kirkland partner. "We said, 'This is the first shoe to fall; we need to know the facts and indicate our desire to be part of the solution.' " So in addition to producing more than 400,000 pages of documents, Kirkland distilled the evidence into a pithy presentation for regulators. "Instead of hiding the ball and waiting for investigators to find what they could find," says Dimitrief, "we took a proactive approach." Of the ten firms investigated, only Morgan Stanley and JPMorgan Securities were not accused of issuing fraudulent or bad-faith research, although an official in Spitzer's office who declined to be identified says that the decision was driven by evidence, not the bank's presentations.

Kirkland has successfully defended corporate behavior in other high-stakes matters. The firm achieved denials of class certification in several actions against BP Products North America Inc., including one in a Chicago case in which plaintiffs alleged that the company's pay-at-the-pump practices discriminated against African Americans. "The case had important reputational significance," says Richard Godfrey, the Kirkland partner who headed the matter. [Citing a company policy, BP's in-house attorneys declined to comment on the case.]

In its appellate practice, Kirkland scored an important win for BP subsidiary Amoco Oil Company in Illinois Supreme Court on a consumer fraud class action involving false advertising claims. Plaintiffs accused Amoco of misrepresenting the merits of its premium-grade gasoline; the suit sought to certify as a class all purchasers of Amoco gasoline in the United States, even those who had not seen the ads. Just prior to this ruling a New Jersey court took the contrary position in a similar action against Exxon Mobil Corporation, finding that consumers can be harmed by ads, seen or unseen, since advertising affects demand, which in turn affects the price of gas. But in June 2002, the Illinois Supreme Court ruled in Amoco's favor, finding that someone had to actually see an ad to be harmed by it. Godfrey notes that this was the first such case decided in Illinois. "The case is being cited left and right now by defense attorneys, but it hasn't been damaging to the plaintiffs bar," says Michael Hyman of Chicago's Much Shelist Freed Denenberg Ament & Rubenstein, a counsel to plaintiffs. For the folks at Kirkland, setting the precedents that other attorneys follow is one of the rewards of taking the novel, determined approach.