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Greenberg Traurig Immune in Stanford Ponzi Scheme Class Action, 5th Circuit Rules

Greenberg Traurig

Greenberg Traurig. (Photo: J. Albert Diaz/ALM)

Greenberg Traurig cannot be held liable for its former attorney's work on behalf of convicted Ponzi schemer R. Allen Stanford in a putative class action suit, a federal appeals court ruled Thursday.

Investors who lost billions of dollars after purchasing certificates of deposit issued by Stanford International Bank Ltd. had sought to hold Greenberg Traurig responsible for Carlos Loumiet's work as primary outside counsel for Stanford until the U.S. Securities and Exchange Commission shut operations down in 2009. Loumiet no longer practices at Greenberg Traurig.

But the U.S. Court of Appeals for the Fifth Circuit affirmed a lower court decision that said the investors were stymied by a doctrine of attorney immunity in Texas law.

"This appeal concerns three purported exceptions to that doctrine," Judge Leslie Southwick said in the 10-page opinion. "The district court held that none of them exists."

Fort Lauderdale-based Boies Schiller Flexner partner Stuart Singer argued the appeal for Greenberg Traurig. Singer praised the appeals court and Judge David Godbey of the U.S. District Court for the Northern District of Texas, in a statement.

"The district court and now the court of appeals properly recognized that the attorney immunity doctrine is important protection for attorneys to represent their clients without legal claims from other parties, and we are pleased that the court found that Texas law did not contain exceptions to that doctrine," he said.

Dallas-based Clark Hill Strasburger partner P. Michael Jung, who argued the appeal for the investors, did not respond to a request for comment.

The appeal is just one of the many threads of litigation stemming from Stanford's scheme, which led to a criminal conviction and a 110-year prison sentence.

The Stanford investors behind the class action had argued that Loumiet, a Miami banking attorney, was a "knowing and active" participant in Stanford's fraud while a partner at Hunton & Williams and later at Greenberg Traurig. Loumiet, who was not a defendant in the case, is currently a partner at Nelson Mullins Riley & Scarborough.

Hunton & Williams also was named in the lawsuit, but the firm ended its participation with a $34 million settlement in 2017.

In a 2012 complaint that unfolded over 172 pages, the investors alleged that Loumiet helped Stanford structure his bank in Antigua without any U.S. government oversight while he marketed it as a U.S.-based investment bank and aided Stanford in a takeover of the entire Antigua government while abetting other deceptions.

But the claims remained active against Greenberg Traurig as well as Miami attorney Yolanda Suarez, whom the complaint referred to as Stanford's "chief of staff."

After a Texas federal judge ruled in December 2017 that Greenberg Traurig was immune to the claims in the lawsuit, the investors appealed, alleging that Texas law allowed three exceptions to attorney civil immunity: conduct outside of litigation, criminal conduct and violations of the Texas Securities Act.

The investors sought to have the appeals court certify the case to the Texas Supreme Court, noting that the state's high court had not set any precedent on these questions. But the Fifth Circuit panel concluded that appellate courts had handled enough related issues to give guidance on the matter.

The panel then referenced a 2015 ruling from the Texas Supreme Court, Cantey Hanger v. Byrd, which found that fraud is not an exception to attorney immunity as long as the attorney is acting within the scope of his or her representation of a client. While a dissent in that case advocated limiting attorney immunity “to statements or conduct in litigation," the panel noted that immediate appeals courts in the state had on multiple occasions immunized attorneys who had been sued for nonlitigation conduct.

The Fifth Circuit had previously cited the Cantey Hanger case in a 2016 ruling, in which the court said Proskauer Rose and Chadbourne & Parke were immune in another class action brought by Stanford investors over the work of another lawyer for Stanford, Thomas Sjoblom.

Prior to that ruling, Chadbourne had agreed to a $35 million settlement to resolve that matter and a parallel set of investor claims. Proskauer Rose, slated to face a trial over those parallel claims, reached a $63 million settlement with the court-appointed receiver in charge of winding down Stanford Financial Group and the Official Stanford Investors Committee in August.