Photo by Hugh Williams.
Take a Canadian-born entrepreneur and lawyer, add a native San Francisco class action trial attorney and you may just have the formula for the future of class action firms.
Clifford Pearson left Montreal in the mid-‘70s when the Parti Quebecois and its separatist notions took power. He intended to attend law school in Quebec. But, along with thousands of others of his generation, left, moving to Toronto, London and the States as French became the official language of the province. Pearson moved to Miami, got an MBA and a wife and made his way across country, arriving in Los Angeles with nothing except his enrollment at law school. He became a standout lawyer at one of the San Fernando Valley’s most accomplished firms, helping win millions for those who suffered toxic torts, including from Skunk Works. Despite his success, he couldn’t quite shake his entrepreneurial bug and in 2006, he formed his own firm.
A few hundred miles to the North, Bruce Simon was having similar thoughts. His great grandparents moved to the Bay Area in the late 1800s, survived the 1906 earthquake and started a mattress company, the Simon Mattress & Manufacturing Co., best known for its Serta mattress line. Simon grew up in the Jordan Park area of San Francisco (sometimes playing on the construction site for the very building where he now has his office). Instead of going into the family business, Simon decided to attend law school. The standout class action star had won hundreds of millions for consumers ripped off by corporations as a partner at one of Northern California’s preeminent trial firms. He, too, was yearning to spread his wings.
Despite the oncoming economic collapse that had lawyers everywhere ducking for cover, the two joined forces, merging their firms two years ago. Since then, there’s been no looking back. They have won the coveted role of lead counsel in four cases. Just a week ago, they won approval for a multi-million dollar settlement for consumers who bought iPod Nanos with allegedly defective screens, a settlement that included praise from the judge overseeing the case.
We caught up with Cliff and Bruce to talk about their firm and what it takes to build a successful law firm in these challenging times.
Lawdragon: Why don’t you tell me how the two of you joined forces?
Pearson: In the mid ‘90s [noted plaintiffs lawyer] Tom Girardi and I had a case called Central Sprinkler, which involved defective fire sprinkler systems in buildings. Tom said “I know this good class action attorney up North,” and introduced me to Bruce and his firm
Simon: I remember meeting Cliff a little bit before the sprinkler case through a toxic tort case where we both had clients. We were able to meet and talk, which resulted in us coming together on Central Sprinkler, which was a class action brought after tests showed that one-third of their fire sprinklers didn’t work. We got a very good result in that case, the company agreed to replace the defective sprinkler heads in Canada and the US with ones that worked.
Lawdragon: Cliff, what impressed you about Bruce?
Pearson:: I had not done any class actions before that. I had been doing toxic torts. And I was impressed with Bruce’s abilities as both a class action lawyer and a professional.
Simon: The first thing that struck me was we got along immediately and with Cliff, what you saw is what you got. We developed a friendship, a great degree of trust in each other. That’s what I value in my professional relationships.
Lawdragon: Cliff, for years you were a prominent attorney in Los Angeles, based in the Valley. Can you give me some examples of the cases you handled at your old firm?
Pearson: My career took a right turn with Lockheed. We represented 1,500 neighbors of the Skunk Works facility in Burbank. The firm was real successful in reaching a confidential settlement in the mid ‘90s to obtain relief for residents. I started doing class actions, also with Bruce’s firm, including a predatory lending case against Citibank in the late 90s, early 2000s, which settled for many hundreds of millions. When people refinanced their homes, Citibank sold life insurance to them at predatory rates, especially lower income and minority people. We’re real proud of our result in that case.
Lawdragon: Given that success, why did you start your own firm in 2006?
Pearson: My old law firm [Wasserman, Comden, Casselman & Pearson] had become one of the largest firms in the Valley with a variety of practices. I felt a big area of the law for growth was class actions. I saw this as an opportunity to go out and have our own little boutique firm focused on this specific area. This was a unique opportunity to do that.
Lawdragon: I know you also have a business background.
Pearson: I’ve been a banker, but I had also been with my old firm for 22 years. I like to change with the times. I did insurance defense, toxic torts and now wanted to do class actions, especially with Bruce. That’s part of being entrepreneurial, moving into areas that are hot at the time.
Lawdragon: Bruce, you were also an incredibly successful partner, at one of Northern California’s highest-profile firms [Cotchett, Pitre, Simon & McCarthy]. You, too, had hundreds of millions in judgments to your name. How did Cliff persuade you to join him?
Simon: Well, it didn’t really happen quite that way. I left my old firm to spread my wings and fly on my own. But then the rapid success of my firm and the number of cases coming in made it clear I had to grow pretty quickly. It became obvious that if we put our two firms together, we could immediately have a nationwide practice and handle the cases coming in to me.
Cliff has been a confidante and we talked a little about Cliff leaving his firm, and his reasons for that big decision. Once I got set up, we were still working together on some cases I brought from my old firm. We started talking about how we could do more cases together and that evolved into putting our two firms together.
Lawdragon: Tell me a little about the fast success the two of you and your partners have had. From what I’ve read, you’re handling some of the biggest class actions going on right now.
Simon: In the past, I did mainly securities class actions, antitrust class actions, product cases and consumer fraud cases. I’ve tried a lot of cases including several professional liability cases. I developed a niche of taking on the largest CPA firms for securities fraud and professional negligence. I also was able to get lead in some large antitrust cases. In starting my own firm, I was trying to build on my reputation as an attorney who takes a case from the beginning all the way through trial. I was hopeful in opening my own firm that my reputation would bring in a steady stream of cases.
We came together just over two years ago and have gotten lead counsel in four major antitrust cases.
The first is the TFT LCD antitrust case, venued in the Northern District of California before Judge Susan Illston. It’s an international price fixing case involving LCD panels that are in most computer monitors, laptop computers and TVs. There have been a series of guilty pleas, and it’s a multi-billion dollar market. It’s probably the largest antitrust case in the country right now.
The second is the flash memory case before Judge Saundra Brown Armstrong in Oakland, also in the Northern District. Flash Memory is a type of memory that goes in most MP3 players and Blackberries and cameras. It’s also an international price fixing case involving a multibillion-dollar industry. We just got over the motions to dismiss and the case is about to take off.
Third is the Hawaiian Shipping case in the Western District of Washington, before Judge Thomas Zilly. It involves claims of rigging fuel surcharges on the amounts paid by people who ship in containers between the mainland, Hawaii and Guam. We’re one of three co-leads, including with my old firm. We still like to work with them.
The fourth is the Potash case. Potash is the central ingredient in fertilizer. The price of potash has gone up astronomically to the point it has actually caused farmers to not be able to buy fertilizer to develop crops in underdeveloped nations, which has then led to not enough food being produced. American, Canadian and Russian companies control most of the market for this very essential ingredient in the production of food.
We just filed on behalf of the City of Long Beach a major securities case against directors and officers of Lehman Brothers, as well as their underwriters and auditors. These professionals gave Lehman the credibility that allowed it to continue in business and raise money from public entities, which lost their investments when Lehman went bankrupt. That’s in front of Judge Lewis Kaplan in the Southern District of New York. It’s very cutting edge, with lots of issues related to subprime lending, when people knew about the risk and should have disclosed that. We also represent the City of South San Francisco, Fremont and Tuolumne County in similar actions.
Pearson: Just recently, we settled a case involving the first-generation Nano, the smaller version of the iPods. We represented plaintiffs who claimed that despite being marketed as the slickest, coolest mp3 player out, the device was so scratch-prone that its appearance would be marred by normal use. We settled the case for $22.5 million, which Los Angeles Superior Court Judge Carl West approved. He said he thought it was a model for the way a large complex case should be handled. It was a big settlement against a tough opponent, Apple, who denied any wrongdoing and fought us tooth and nail.
Earlier this year we obtained final approval from Judge Manuel Real in a class action against Audi and VW involving over 175,000 vehicles with potentially defective timing belts. The relief included repair to the vehicle if the timing belt failed and an extended warranty.
And we’re going to trial in the fall on an airplane crash off the coast of Orange County. Our little firm is already up to 12 attorneys, with six in Los Angeles and six in San Francisco. We have grown a little faster than we first anticipated.
Lawdragon: That’s unique for these times.
Pearson: Yes. And we’re trying to be very cautious.
Simon: Our practice seems pretty recession proof, although these have been interesting times in which to build a practice. A well-positioned litigation practice can thrive in bad economic times. People who may not think about bringing a lawsuit feel so victimized, they may not have a choice but to do so.
Lawdragon: For readers who may have suffered losses in their pensions or other investments during the economic crisis, can you offer some guidance on what kind of losses are likely to have some legal liability attached as opposed to losses that are just the result of poor investments and a bad economy?
Simon: Every investor should be looking for the red flags of potential investment fraud. No one should think that because they had people helping them make smart decisions that there’s no one at fault. It’s not enough to presume the overall market has gone down a certain percentage and we all need to take our lumps. A number of the largest companies in the U.S., including Lehman Brothers, put investors in a bad position by taking enormous risks with other people’s money.
So people need to ask themselves the common sense question: Did they feel they were misled by any information they received that caused them to invest? The average person could not have known the amount of Lehman Brothers’ investments that were in extremely risky subprime mortgages. To the outside world, because their accountants were giving them a clean bill of health, people kept putting money in. Underwriters of their bonds propped them up as well. They looked like they were doing OK, almost up to the brink of bankruptcy.
You ask the basic questions. Did you feel misled? Listen to your gut if it says, “That doesn’t sound right to me. I wasn’t aware this could happen that way.” The reason class actions are so valuable is that one person doing something won’t get a big company to change its ways. But when everyone teams up in a class, companies listen.
Lawdragon: What do you want the name Pearson Simon Warshaw & Penny to stand for?
Simon: What I want our name to stand for, and I think it does, is we are trustworthy, that we work hard and we never give up on doing the best we can for our clients.
Pearson: In addition, we try to be as efficient as possible in reaching those goals.
Simon: There’s a tremendous synergy between Cliff and myself. It comes from the fact that not only do we put great legal talent to work for our clients, Cliff also has the uncanny ability to see the business aspects of the practice, so through our cases we can accomplish practical solutions.
Pearson: Bruce is truly a lawyer’s lawyer. I’m an entrepreneur. We’re very different and very similar. So together, we can do things that create unique value and results.
Simon: There’s trust, transparency and confidence in each other’s opinions about the best thing to do.
Lawdragon: What are you most proud of that you’ve done so far?
Pearson: In two short years, we’ve built ourselves into a nationally recognized firm that provides top quality service and is a really good place to work. We’ve got talent in everyone, the partners, lawyers, secretaries, clerks. Everyone is working hard and maximizes his or her own abilities within the firm.
Simon: I’m most proud of the team we’ve built and the reception our firm has received in the community. Neither one of us has lost a step by going out on our own.
Lawdragon: OK, final questions. Why did each of you become a lawyer? And are there lawyers you’ve learned from or admire?
Pearson: Do you want a corny answer? Growing up as a young boy in Montreal, I would go to court to see my Uncle, who was a judge. In those days in Quebec, they wore wigs and other traditional garb. I thought that the legal profession was an honorable way to make a living. I really look up to those plaintiff lawyers that are looking out for the little guy. Truth be told, the plaintiff bar seems like about the only thing that keeps corporations honest.
Simon: I became a lawyer because my Dad said, “Son, you shouldn’t go into the family mattress business. You need a profession.” Once I started to take law classes, and learned to argue effectively, I knew that’s what I excelled at and enjoyed.
As to the lawyers I look up to, I really think back on things that caused me to be interested in law in the first place. I was an avid reader of books about Abraham Lincoln. Even back in grammar school I read everything I could about him. The way he practiced law, rode the circuit town to town, handled every case that came in the door. That’s what really led to his populist view of life and what he was. What I took away was that being a lawyer is the ultimate way of giving back to the public.
Also, when I was in law school, I used to work out at the same gym as [former] California Supreme Court Justice Matthew Tobriner. At first, I didn’t know who he was. I was a boxer, he was a boxer. We’d take turns hitting the punching bag. What was so enlightening was here was a man at the highest level of his profession, yet he didn’t wear it on his sleeve. He hit a boxing bag with me for months. And then I realized he’s just like everyone else. He was an amazing person.