By Katrina Dewey | November 21, 2019 | Lawyer Limelights
From left to right: Eric Madden, Lisa Tsai, Bill Reid, Nate Palmer, Jason Collins, Joshua Bruckerhoff, Rachel Fleishman and Craig Boneau. Photography by Laura Crosta.
A ticket, a chance.
It was very early in the morning and a Judge Garza was on the line asking Bill Reid to fly down to the Texas border for an interview. Reid, a 2L at St. John’s, had sent resumes to a couple hundred judges, including two Garzas, Emilio and Reynaldo, both of the 5th Circuit.
Yeah, sure, he said, before rolling over and going back to sleep; he woke a few hours later, wondering if it was a dream. So, he called Judge Reynaldo Garza’s chambers and confirmed his weekend with the Judge. This was not like any other student’s clerkship interview, most of which lasted half an hour. But Garza wasn’t any other judge. He was one of the first Hispanic students to graduate from the University of Texas Law School and the first Mexican-American federal judge, a man with political connections and a personality as big as the region he served.
The next challenge was getting to Brownsville, Texas. Reid had applied for an American Express card earlier that year, and with it came two $99 airline tickets. He used one of his tickets to get to the land far from home. The judge rolled up in his 1983 Jeep Wagoneer. Reid had told the judge he’d be wearing a black leather jacket, but showed up in a suit.
“Brown noser,” the Judge said, then drove Reid to his home. There was whisky and a Bishop’s room, a job offer and a friendship ignited.
A window opened on a world of possibilities in the law, in Texas, and in life.
No Guts, No Glory
Reid Collins has become a financial litigation force in rapid fashion. It’s celebrating its 10th anniversary this year by posting out-of-the park grand-slam results, generating average profits per partner that would make many New York firms take notice. It has a docket estimated to generate several hundred million dollars in fees. Among its recent successes are several confidential settlements with top law firms, including Reed Smith in a $500M claim; a Delaware trial decision dissolving Inspirion Delivery Sciences, freeing its priceless anti-opioid technology; and the first plaintiffs’ victory in 30 years defining the safe harbor area of bankruptcy law from the U.S. Supreme Court in Merit Management v. FTI.
“Early on, our willingness to bet on ourselves in success-fee plaintiff’s work, even in cases that we would quickly reject today, gained us national recognition,” says Reid. “Now after ten years, the cases that we are taking are bigger and better, the team is even stronger and the path ahead has never been brighter.”
It’s Fast and Furious meets Young Guns, with great trial lawyers practicing at a very high creative level to find – and win – claims almost always based in financial chicanery. The firm found its niche working with trustees, liquidators, corporations, hedge funds and others from the Cayman Islands to New York and well beyond, who are appreciative of the craft Reid Collins puts into mining busted companies and other investment vehicles to return something to stakeholders. Often as not, they find mismanagement, overinflated projections and every insider financial practice between.
Reid Collins’ secret? The art of creative necessity, a hard-won sixth sense for finding claims other lawyers wouldn’t, and an urgent will to win. The firm’s founding partners left their prior firm because they wanted to pursue contingent-fee cases exclusively, walking out with no idea if they had a chance. But they had each other, tenacity, and a desire to build a different type of firm that could slag for valuable claims other litigators wouldn’t touch. Their timing, in the throes of the financial collapse, could not have been better.
The bonds formed in the battle for the future are strong, among the firm’s founders, partners and their clients – those who trusted the fledgling firm with their precious claims.
“Sitting here at the 10-year mark, I would say I'm just extraordinarily thankful for the way that things have turned out,” says Jason Collins, a humble accountant by training, whose father and grandfather were lawyers. “Our achievements have exceeded all expectations from my vantage point.”
Lisa Tsai is methodical, unflappable and deadly, trained at Latham before joining Reid in Austin. “It's funny to just think about how much we've done in those ten years. I guess you could always say that about life, but I never would have dreamed about what we have been able to do actually. It's incredible,” she says. Tsai hoped success would mean “If we could make enough to pay our bills and have offices with a long-term lease instead of a sub-lease. With a normal conference table, that seemed successful to me at the time.”
They started out with desks built of boxes and doors. And while they now have a real conference table, their financial rewards go into the pockets of the lawyers and staff in a unique compensation structure that rewards teamwork while forgoing debt and paying for risk, hard work and brilliance.
Diamonds in the Rough
Founder William T. Reid IV is a bit of a Bugatti trapped in a human’s body. His only speed is fast and his chosen path head on. He loves winning cases others won’t touch and taking on institutional defendants that often cow others. Born and raised in New York to a Marine who became a Trappist Monk before marrying a former Nun, Reid has a full-impact take on life and its possibilities.
Reid started his career as an accountant before enrolling at St. John’s law school in Queens. He hated his second-year clerkship at Rogers & Wells in New York. “I didn’t want to be a bag carrier and do work that someone else would take credit for. I wanted to do it myself,” he says. His focus clarified in Texas, with Judge Garza and his corps of former clerks. “I realized that there was a whole other world out there beyond New York. In many ways I credit Judge Garza with totally changing my life. I had never been anywhere in the South and I thought I was going to ride around on a horse all weekend. And wear cowboy hats and do whatever nonsense you thought Texans did. And when I realized that there was a whole different approach to everything, it changed my life.”
Like thousands of lawyers who fundamentally loathe Big Law, it took a minute to find his path and gather the team and expertise to walk away. He’s a planner, this one. Reid joined the U.S. Attorney’s office in the Western District of Texas in 1997, after a couple years at Hughes & Luce, winning 24 trials and losing one during a three-year stint. He took those talents to Diamond McCarthy, a firm founded by former Hughes & Luce partners. In a decade, Reid rose to being the second-highest revenue generator; tasted his first real success in plaintiff litigation; laid the foundation for Reid Collins’ Cayman Islands practice; and amassed the team that today is the heart and soul of Reid Collins, including Collins, Tsai, Eric Madden, Joshua Bruckerhoff, Craig Boneau, Nate Palmer and Rachel Fleishman.
Reid joined Diamond McCarthy on June 1, 2000, and that afternoon punched another ticket, this one for the Cayman Islands, finding a jurisdiction that would propel his practice. While today he calls the Caymans practice perhaps more glamour than lucre, the perch he and Collins gained in the world’s fifth-largest financial center and with its powerful liquidators is estimable. As Reid was building a plaintiff financial practice packed with cases involving offshore duplicity, Madden began assembling an onshore practice through a network of national bankruptcy trustees.
Offshore or on, they were learning the legal equivalent of deep mining, going beyond the standard assessment of a case as taught in big firms everywhere, where the calculation is what can be lost – not what can be won. They flipped that equation. Case in point, Reid, Tsai and Madden’s unlikely 2005 victory on behalf of a diffident Harvard-educated lawyer named Bruce Bakerman against Sidney Frank Importing Co., which with its wholly owned subsidiary, Grey Goose Bottling, controlled all rights to the Goose. Bakerman was assistant general counsel for Sidney Frank, and held 10 percent equity in Grey Goose but none in Sidney Frank. Sidney Frank’s CEO negotiated a $2.5B sale to Bacardi, but decided to allocate all but $19M to Sidney Frank and kept Bakerman in the dark to render worthless his 10 percent ownership.
Eventually, Frank’s CEO came clean to Bakerman, who inquired how the $2.5 billion in proceeds would be divided between the two Grey Goose arms. Bakerman was given three options: One, a million dollars and you sign the consent; two, $700K and you sign the consent and keep your $300K-a-year job; or three, if you refuse to sign the consent, then disbarment, imprisonment and no money. In the 30 minutes he was given to decide, Bakerman chose door number two, knowing his responsibilities to his elderly mother. He cashed the $700K check.
Bakerman knew lots of lawyers, all of whom turned down his claim because he cashed the check and signed the consent. But then he was referred to Reid. The team vetted the case for two weeks to find an escape from the release. Madden uncovered the Delaware doctrine of “entire fairness”: even if a consenting shareholder has consented to a transaction and received the benefits of it, if objectively it’s not entirely fair – in both process and substance – then the beneficiary of the unfair transaction can be held liable for breach of fiduciary duty.
Delaware Chancellor William Chandler found there had been no process and the allocation of $19M in equity in a $2.5B deal to Grey Goose – which owned, among other things, the recipe and primary manufacturing facility in France – to be ludicrous. Reid and Madden forged a settlement that allowed Bakerman to never work again. The Reid Collins’ cut? Substantial. Very substantial.
“Entire fairness is one of our many roads to riches,” says Reid. “We changed Bruce Bakerman’s life. For us personally, it was very rewarding because we were the young equity partners and it was a big fee.”
Getting the Plane Off the Ground
Great cases aside, in late 2009 Reid and his team were frustrated with the way the top-heavy Diamond McCarthy was managed, including that it financed its operations with debt. “When he asked me to increase the line of credit, I basically refused. And he said, ‘Well, then you can leave.’ Which I didn’t love,” Reid recalls.
“If you find a lawyer who in their 30s generates work on any meaningful level, half a million a year or whatever, and has clients that come to that lawyer, wants to hire them in their 30s, you can bank on the fact that they are worth their weight in gold,” says Reid. “I saw that gold in Collins, Tsai, and Madden.”
The reality of starting your own law firm is ugly. It’s only that staying at a firm where you see no future is worse. Reid, Collins and Tsai linked arms and jumped.
“There was just that huge leap of faith, stepping off into the unknown,” says Collins. Where will the clients come from, will they respond to our inquiries, will they continue on with the relationship with us independent of our prior group, and then will we be able to sustain that moving forward? “I am extraordinarily thankful for the way that things unfolded, and I think there were a number of people along the way that put their trust and confidence in us who were game changers for us.”
And, trust us, for folks who put it all on the line, there is no loyalty quite like that forged in the crucible of fear and belief. Early help keeping the lights on came from Ron Glass of Glass Rattner, who was trustee for a bankrupt enterprise that had persuaded investors to invest in the rehabilitation and construction of churches. In fact, the principals used the money for their own unholy private real estate development projects. Glass hired the fledging firm, which formulated claims against the former directors and officers of Cornerstone, drafting complaints, engaging in pre-suit negotiation with the former officers, the accountants, the lawyers, and resolving those cases. “The success that we had in that case was a huge shot in the arm in terms of launching us, not only financially giving us what we needed in those early days, along with other cases,” says Collins.
It also provided a valuable calling card that maybe this Reid Collins firm might be on to something.
The early days were the Wild Wild West, with the firm’s junior partners – Bruckerhoff, Palmer, Greg Schwegmann and Craig Boneau – spending hours digging through claims to find something – anything – they could settle for $10, they recall.
“The reality is that we weren’t sorting the good cases from bad,” says Bruckerhoff. “There were no good cases.” But they would spend day after day applying their training and skill sifting for what other lawyers had missed. “The way the firm got started, to get off the ground in the very beginning, was to take a really bad case and turn it into money.”
They muscled through claims of inflated appraisals of bad watercolor paintings and Winnie the Pooh memorabilia while flying back and forth to meet with Colombian Governors. But none ever questioned the risk. “Being tied to Lisa and Bill and Jason didn’t seem risky to me,” says Boneau. “As long as you’re attached to that ship that ship is always going to launch.”
Reid himself was going through the worst two years of his life while trying to “get the plane off the ground.” His dad and sister died, his nanny was assassinated and he and his wife had three kids in diapers
And a new law firm. And no hourly cases.
But within 90 days, an unlikely angel in the burly form of Scott Ellington appeared, tracking down Reid and Collins in Dubai in the middle of the night. Start-up life, they were sharing a room. Ellington’s client, Highland Capital, had a huge claim for the failed Lake Las Vegas development and wanted to give it to Reid Collins.
The future opened wide.
The Lake Las Vegas case is consummate Reid Collins. Anchored by Reid and Tsai, the firm found claims against Credit Suisse for vastly overinflating the land valuation and appraisal for the luxury development outside Las Vegas – the only one of 31 investors in the project to do so. In June 2007, Highland funds lent $250M to the $540M project based on an independent appraisal by CBRE valuing the property at $891M. When the project collapsed in a smoldering bankrupt heap a year later, it was assessed at $23M.
Reid and Tsai knew their client had been done wrong, but pinning it to Credit Suisse was another matter. They first filed suit against CBRE for its appraisal of the land, settling that and gaining valuable discovery, revealing Credit Suisse’s improper interaction with the appraiser.
When the Reid Collins team took Credit Suisse to court, they won an astonishing $287M judgment. In the years since then, Credit Suisse has fought like the dickens, and will get yet another review in early January. The total tally with interest is more than $390M. Reid Collins has a substantial success fee.
The Credit Suisse win bolstered the firm’s belief in itself and its position in the marketplace. It also underscored an approach the firm’s lawyers – most of whom sit together in offices in hills outside Austin – have used again and again. Sit down and find claims others missed, bring them at an arrangement that is lucrative for the firm – and win.
The firm has dozens of cases that exemplify the Reid Collins philosophy, none perhaps as high-profile as their U.S. Supreme Court victory in Merit, limiting the safe harbor in bankruptcy, and opening up recovery for investors. True to form, in 2011 Reid, Bruckerhoff and Schwegmann were handed a pile of documents detailing the last harness-racing license in Pennsylvania and a wire transfer from Credit Suisse in the Caymans and told to write a memo on whether they could bring fraudulent transfer claims on behalf of a litigation trustee of a bankrupt racetrack. They had just two weeks because so many other firms had passed.
And on their rickety desks, they found the theory to restrict the safe harbor that no other lawyers had. “Not to toot our own horn, but we were like fourth-year attorneys and we just solved what no one else had solved for 25 years,” says Bruckerhoff.
That ruling is a platinum calling card for the firm, and Madden, in particular, who leads the firm’s bankruptcy litigation practice. A far cry from the firm’s early days, Madden is known nationwide by trustees and frequently is one of the first lawyers called when things go South. And given high expectations that the economy is going South, there are likely boom times ahead for Reid Collins, which is already sitting on a small mountain of fraudulent transfer claims.
Also underscoring the firm’s philosophy is another lesson from Judge Garza: always look for the equities. To Reid, he was a mentor, a grandfather. “And he taught me that what mattered more to judges were the equities,” he says. While many judges are rigid on the law, most are still persuaded by equities. “We here focus on the equities. We try to play them up. And we don’t generally take cases where we don’t like the equities.”
That resonates with Tsai and the other partners. “It's really easy, depending on where you land, to forget what is at the core of this profession. Think about what a privilege it is to represent somebody else and be their advocate on something that matters to them,” she says.
It’s also easy to forget in a time of 10,000-lawyer “partnerships” that some real ones still exist. That there are lawyers out there – sitting in offices around the corner – who think about clients and innovative legal theories at 10 p.m. and text their partner and find a way to get justice for their client.
“You cannot replace a relationship that grows from our more innocent phase in our careers. You'll see, and this is sort of the sadder more tragic part of law practice, the partners starting to have conflicts. A lot of times the friction develops because you really are just in a business partnership,” says Tsai. “And here, there's a sweeter nature to our relationship. It grew from when Jason and I were just some of the youngest tenured associates, and Bill was our mentor, to then becoming partners together at a later stage, and then building something together.”
Together, Reid, Collins and Tsai are like the three bears. Except, of course, they are not bears. Collins, the pragmatist, will feel down about a case, and spend an hour with Reid and become a believer again. Tsai is the balance, using skills enhanced only by being a mother of four boys to keep everyone focused on the next step. There are at least two remarkable things about the crew: They fight like family and make money like partners. Their blow-ups are intimate and in your face because the bond of trust is made of steel. As important, that same level of engagement is felt by the next group of already quite accomplished partners who worry about letting the founders down if they fail to find that gold in the river.
Or on that island, Grand Cayman, to be specific.
It’s a balmy day as Reid lands on Grand Cayman to take an expected victory lap against a competitor, Reed Smith, in court the next morning. But first there are friends to see. So many friends over drinks and dinner, including one of the Cayman legends of the early days, when planes would fly overhead or boats would come near shore, toss bags of money on the sand and accountants would scurry out to retrieve – and invest – the lucre. It’s a big business with quite the furry underbelly.
Late last year, Reid and Bruckerhoff filed a $500M malpractice suit against Reed Smith on behalf of Cayman Islands liquidators of the Bear Stearns funds for blowing a statute of limitations on filing claims against underwriters and ratings agencies related to reverse mortgage-backed securities. According to the complaint, Reed Smith sat on the claims for two years before the statute ran, recognizing in an internal email “the limitations will have run by the time we file this complaint in July 2013.”
“Reed Smith’s haphazard representation of the Bear Stearns Funds caused the funds to lose claims worth over a billion dollars – claims against defendants who unquestionably committed the fraud that gave rise to those claims and had the financial wherewithal to pay the full amount of the judgment the Bear Stearns Funds would have obtained,” Reid wrote in the complaint.
The settlement amount is confidential, but Reid and crew had some excellent wine over lunch with friends before boarding the next plane out. It was a good day, and Reid is reflective about the firm he and his partners founded, starting with eight lawyers, which today number 34.
“In the next 10 weeks, I have three dispositive hearings and the Credit Suisse appeal, which total over $3.7 billion in damages sought. In addition, we have a docket of several billion dollars more,” he says. “There is no end in sight.”
It’s really just the beginning for Reid Collins, but such a long way from that first leap of faith that landed Reid his clerkship with Judge Garza. For all the firm’s success – financially and in taking on claims others wouldn’t – it may be most striking that what the firm’s attorneys most cherish is their relationships.
“It is really rewarding to come to work every day to work with an incredible team of people who I respect and love with the knowledge that we are building something truly remarkable – a partnership of some of the best plaintiffs’ lawyers in the country who I can also count as my closest friends,” says Reid.
About the Author: Katrina Dewey (email@example.com) is the founder and CEO of Lawdragon, which she and her partners created as the new media company for the world’s lawyers. She has written about lawyers and legal affairs for 30 years, and is a noted legal editor, creator of numerous lawyer recognition guides and expert on lawyer branding. She is based in Venice, Calif., and New York. She is also the founder of Lawdragon Campus, which covers law students and law schools.