Barely 20 minutes into a hearing last month, Judge Phillip Kardis signed off on another class-action lawsuit.
Nothing new about that here in Downstate Madison County, where a friendly approach to these mass civil cases has turned a small-town court system into a hotbed of megabuck litigation.
Yet this case, supposedly aimed at helping the victims of an illegal telemarketing ring, has an unusually disturbing history.
To critics, it is class action run amok, stretching on even after a federal jury in Chicago slammed its plaintiffs' attorneys with a rare $36 million judgment for selling out their clients.
It's a case that raises doubts about the ability of state courts to deal fairly with class actions--doubts at the heart of legislation pending before Congress aimed at addressing abuses of the system.
The lawyer who chose to file the case in Madison County claimed the proceedings here could be manipulated to his advantage, according to court testimony.
Four years later, a notorious Canadian criminal targeted in the lawsuit still controls millions of dollars he was accused of stashing in investment trusts and foreign bank accounts around the world.
At the same time, the chances of a recovery for his estimated 700,000 victims are slipping away. Many, like Irene Taylor, were elderly when they lost money almost a decade ago.
"Several of them have passed on," said Taylor, a 76-year-old Texan. "It seems that something's the matter with our law that it would drag on like that. It was a bad deal."
Nagged as often as twice a day in the mid-1990s to invest in foreign lotteries, Taylor handed over at least $15,000 to the operation masterminded by James Blair Down.
By selling pools of lottery tickets, puzzle contests and lucky number offerings, Down pulled in more than $100 million before a grand jury in Seattle indicted him in 1997 on 145 criminal counts of interstate gambling, conspiracy and money laundering.
He fought extradition from his home in Vancouver and after protracted negotiations pleaded guilty to a single felony. Down served a 6-month prison sentence and surrendered $12 million he had deposited in a U.S. account.
In 1998, an FBI agent who had heard about Down phoned an unusual company in Ireland run by Martin Kenney, a pro hockey goalie turned international lawyer.
Kenney's Interclaim specialized in recovering money from white-collar criminals, returning a portion to victims while keeping a hefty finder's fee for itself.
A federal prosecutor in Seattle followed up the FBI agent's call by giving Interclaim a memo identifying some of Down's foreign assets and introducing victims to the company.
Interclaim purchased unpaid debts from Down's telemarketing operation and obtained the rights to seek a recovery on behalf of 29 of Down's targets. The Irish firm planned to force him into bankruptcy and seize his assets.
But first it had to find the loot, and, in the months that followed, Interclaim's pursuit of Down's millions unfolded like a spy novel.
Pursuit of assets
Just a week before Down reported for his six-month stretch at a federal prison, Interclaim operatives followed him on a business trip to Papua New Guinea.
The undercover agents checked into the same hotel, tracked his travels by helicopter across the Pacific island's rugged countryside and traced the identity of those he met.
Putting the clues together led Interclaim to a timber deal worth as much as $50 million.
Later, Interclaim agents tailed Down's brother and sister-in-law on a luxurious holiday cruise along the coast of South America. The undercover team even dined with the unsuspecting couple, asking obliquely about laundering money and gathering more clues about possible hidden assets.
In January 1999, the sleuths sprang their trap in Canada. Through a bankruptcy proceeding, they obtained simultaneous court rulings in 15 jurisdictions around the world that froze approximately $60 million.
Down's lawyers fought back, accusing Interclaim of abusing the bankruptcy process to launch its sting. In a seesaw battle through the Canadian courts, Down started to win the upper hand against a firm his lawyers describe as opportunistic.
"They're not out for the interests of the poor victims," said Robert Millar, a Canadian attorney who represents Down. "They're just trying to capitalize on somebody else's loss."
Indeed, after sinking $7 million into the investigation, Interclaim was at risk of collecting nothing.
So Kenney decided to pursue a class-action judgment in the U.S. on behalf of Down's victims for the Canadian courts to enforce. That, he believed, would clear the legal path to the telemarketer's millions.
Kenney turned to Blair Hahn of Ness Motley, a law firm in South Carolina that had scored big in some of the landmark mass cases of the past decade.
Hahn had heard about Down from a "60 Minutes" TV expose, and he sounded confident. "He was very positive," recalled James McGunn, an ex-Secret Service agent who worked for the Irish firm. "Just full of vinegar, you might say."
Hahn told his clients he knew exactly where to find the class-action judgment they needed: in Madison County, across the Mississippi River from St. Louis.
In testimony later, Interclaim's McGunn said Hahn assured them he could "manipulate" the court, and that "his wishes would be granted."
"The reason that they selected Madison County was because the judge there looked very kindly on Ness Motley and would be very favorably impressed with whatever they said," McGunn recalled Hahn telling him. "They would have no problem in Madison County."
Hahn declined to comment for this story, though in court testimony he maintained that his conduct in the case was appropriate.
The suit is filed
On March 10, 2000, Ness Motley filed the lawsuit in Edwardsville, the seat of Madison County.
Within a few months, as a Canadian court prepared to free Down's assets, Madison County Circuit Judge Nicholas Byron issued a temporary restraining order that kept the money locked up.
Lawyers from South Carolina had scored a legal coup against a Canadian at the behest of an Irish firm in rural Illinois.
Having lost Round 1 in Madison County, Down's lawyers proposed a deal.
During a break in the negotiations, Hahn gathered his clients in a room at Chicago's Palmer House Hilton. Wolfing down a salad from room service, Hahn told the Interclaim officials to expect nothing from any settlement.
"I've got to finish packing and get back to the meeting," he told them. Then he cut them out of the deal.
In exchange, Down agreed to support an award of $2 million in legal fees for Ness Motley, representing a rich profit: Since it used Interclaim's information as the basis for the class-action lawsuit, the firm had spent less than $75,000 from its own pockets, according to court testimony.
As for Down's victims, some $6 million would be set aside to pay claims, but only if they could meet conditions that were, as U.S. District Judge Rebecca Pallmeyer ruled two years later in upholding a Chicago jury verdict against Ness Motley, "not in the best interest of the class."
Victims would be told they needed proof of payment, claims would be invalidated for minor errors in filling out the complicated forms, and signatures would need to be notarized. Although Down's attorneys say those and other conditions are customary to prevent fraudulent claims, Pallmeyer later determined that the arrangement substantially limited Down's financial exposure.
In addition, any money left over from that $6 million fund would revert to Down if no one succeeded in claiming it.
Lawyers: Victims lose
The process was "expressly designed to minimize the number of claimants," Interclaim's lawyers charged. Under those terms, they said, Ness Motley would get paid, along with a few victims determined enough to complete the claims process, while the criminal would keep most of the money.
Ness Motley won preliminary approval for the settlement from Byron in June 2001 and again for slightly revised terms in November 2001. It looked like the deal was done.
Predictably, few of Down's victims succeeded in tapping into the settlement. In a period of months after Byron gave preliminary approval, the actual value of accepted claims was a little more than $85,000, according to court records and Hahn's testimony.
The low response rate merely shows that Down's customers "got exactly what they paid for" in the illicit gambling program and felt no need to recover their losses, said Howard Suskin, Down's Chicago lawyer. "I don't think there is any evidence people were misled. Everybody knows when you buy a lottery ticket, it's not a sure thing."
Those who tracked Down's criminal enterprise scoff at the notion that his victims were content--court papers refer to him as "an incorrigible con artist." And the terms of the settlement attracted unexpected attention.
Lester Brickman, a Cardozo School of Law professor in New York, published a scathing review, pronouncing it "a prime candidate for the most abusive class action of the decade, if not the century."
Although Down's attorneys denounced Brickman for having served Interclaim as a paid expert before writing the report, his detailed analysis raised the case's profile.
Media reports followed, and a New York attorney, Joseph D. Pope, lodged a formal objection on behalf of class members dissatisfied with the settlement.
Under pressure, Byron delayed his final approval. Even as the class action halted indefinitely, however, a separate lawsuit against Ness Motley steamed toward a reckoning in Chicago's federal court.
During a trial last summer, the South Carolina law firm, which by then had split up, defended its conduct.
When Down's attorneys refused to include Interclaim in any deal, the best way to salvage a recovery for the telemarketer's victims was through a quick settlement leaving out the Irish firm, Hahn testified. That was especially true because the litigation against Down in Canada was going badly, raising the prospect of no recovery for anyone.
Ness Motley obtained two ethics opinions clearing the way for withdrawing as Interclaim's counsel, but the experts were not apprised of the relevant facts, Pallmeyer determined.
Federal jurors sided with Interclaim against Ness Motley, awarding $8.3 million in damages to compensate for its expenses in the case and $27.7 million in punitive damages. Ness Motley is appealing.
Judge under pressure
The outcome put more heat on Madison County's Byron. On Oct. 1, he gathered the players at the imposing marble courthouse in Edwardsville.
The "undue publicity" surrounding the matter has "painted a horrible picture of this courtroom," he told the attorneys assembled before him. "It is my intention to resolve this quickly."
Sitting low behind the blond wood of the bench, Byron reminded the defense lawyers that settling the case could work to their advantage.
"If this thing goes to trial, the judgment may be many times the settlement," Byron told them.
He also warned them to improve on the deal he had granted preliminary approval twice before. In the absence of an acceptable settlement, jury selection would begin in the dead of winter, he promised.
"It will be cold, might even be a blizzard," the judge told the out-of-town lawyers. "It will be a nice time to try this case."
Steven Katz, a Belleville-based plaintiff's attorney who has become a veteran of Madison County class actions, hastened to reassure the agitated jurist. A sweet deal is almost in the bag, he told the judge. "I believe this is one you're going to approve, and the world is going to be happy with."
"If I'm not happy with it," Byron shot back, "it will not be approved."
Byron would never make that determination.
Through a series of legal maneuvers, lawyers in the case moved it to federal court. In a matter of weeks, a federal judge sent it back to Edwardsville, but Byron disqualified himself. He declined to comment for this story.
The case moved again, to nearby Granite City, also in Madison County, where Judge Kardis held his brief hearing and granted preliminary approval of a similar settlement on Feb. 18. With his assent, the process of notifying Down's victims about the latest twist in the case is ready to begin again.
"It's not over," vowed Pope, the lawyer who represents those objecting to the deal. "That whole proceeding puts the case back three years."
Down's attorneys say class members would have had their money a long time ago if not for such "unwarranted" interference. As Suskin put it, "I don't know how anyone can claim this is not fair."
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