The $65 Million Debacle - Pierce Bainbridge Meets American Greed

(This is a complex story of seeming financial chicanery; it will likely be covered as an ongoing series.)

With each passing day the ongoing saga of the law firm Pierce Bainbridge Beck Price & Hecht LLP gets crazier. The firm is already facing five lawsuits involving allegations of financial foul play. A hard look may well involve potential disciplinary and criminal issues with key questions will become who knew what, when did they know, what did they do.

From the lawsuits of ex-partner Don Lewis, who blew the whistle on financial malfeasance well over a year ago, it appears that Lewis’s former partners have taken a “I knew nothing” stance. The issues covered here make such a suggestion seem less than credible. Indeed, Lewis’ former partners, as well as the law firms of Putney Twombly Hall & Hirson LLP (Michael D. Yim) and Littler Mendelson P.C. (S. Jeanine Conley), find themselves in a now a widely considered embarrassing position as a result of hitching their wagons to Pierce Bainbridge founder, John Mark Pierce.

The title of a recent explosive investigatory report from Law360 – “Pierce Bainbridge Funder Targets Ex-Partners in Debt Chase” – suggests that Lewis is not the only one not buying what his former partners are selling; the “chasing” funder is Virage Capital Management.

According to Law360, Virage funded Pierce Bainbridge for only a year and is owed a whopping “estimated $65 million.” While we have seen a lot of “truth is stranger” than fiction covering the Lewis litigations; this may be the strangest.

What would compel Virage to provide that type of funding to the firm?

As a threshold matter on the issue of who knew what, when, Lewis former partners are each experienced attorneys with backgrounds at sophisticated law firms including: BakerHostetler, Baker & McKenzie, Browne George & Ross, Brown Rudnick, Covington & Burling, Davis Polk, Fish & Richardson, Gibson Dunn, Glaser Weil, Grais & Ellsworth, Grant & Eisenhofer, Kasowitz Benson, Kirkland & Ellis, Kaye Scholer, Kobre Kim, Margolis & Tinsman, McKool Smith, Murphy & King, Murchison & Cumming, Reid Collins & Tsai, Steptoe & Johnson, Sullivan & Worcester, Quinn Emanuel; White & Case, Wachtell Missry, Wilson Sonsini, and White & Case.

“I Don’t Think That Word Means What You Think It Means”

Virage may have been moved by the Pierce Bainbridge claim that the firm is purportedly “The Next Generation of Litigation Excellence.” This would be odd, however, as the absurdity of this representation was contradicted by public records as early as Spring 2019.

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 6

Indeed, all of the Virage $65 million was provided after the firm’s original funder Pravati Capital LLC declared a $9.1 million default: a matter of public record. Furthermore, prior to the Virage massive infusion, Pierce Bainbridge had only one trial victory in its history, an August 2018 verdict about mom & pop ice cream sandwiches that netted a $500K verdict, to be divided up three ways – litigation funder, Pierce Bainbridge, clients. This would be the only, and last, Pierce Bainbridge trial victory to date. Stated differently, Virage gave $65 million and the litigation specialized firm did not win a single trial in return.

The Outlandish Representations

Notwithstanding its barren track record, the firm has made several very public statements about its litigation capabilities. For example, an amended complaint filed by Lewis, alleging fraud on the public, contains the following statements.

“These folks are seeing that we have better cases, get better results, and have more fun than any firm on the planet.” — John Pierce, January 3, 2019

“We are building an army of killers on a highly collaborative platform. In addition, we have a culture obsessed with winning and bringing maximum value to clients.” — John Pierce, January 3, 2019

“The traditional Am Law 100 firms simply cannot compete with us in the digital age. We litigate 10 times better, 10 times faster, and at a fraction of the cost. It is not a linear difference-it is exponential.” — John Pierce, February 3, 2019.

Similarly, in an interview with Above the Law, ex-New York Office Managing Partner shared:

“John set forth 10 ‘commandments’ for the firm that reflect his core values. . .[Commandment #2]: “‘We don’t try cases, we win them.’” – David Hecht January 8, 2019

Despite all of this, even today, the firm continues to make public representations that can be seen as stretching their credibility. A screenshot from the firm webpage, with underlines added, is below:

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 7

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 8

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 9

“Ignorance is bliss. I wish I still had some.”

Law360 focused on Virage’s potential claims of future case proceeds from matters involving ex-Pierce Bainbridge partners; it would appear potential targets may be at Armstrong Teasedale, Braunhagey & Borden, Hecht Partners, Khan Law USA, Warren Terzian and Withers Bergman. One wonders if the seemingly litigious (lawsuit, lawsuit, lawsuit) Texas-based litigation financier may eventually pursue claims for fraud.

Interestingly, Law360 suggests Douglas Curran (BraunHagey & Borden) – former Pierce Bainbridge United States Managing Partner – was involved in critical conversations related to Virage; Pierce presumably played a key role as well.

Curran and Pierce appear to be at the center of another odd financial issue; it involves a litigation fund named “Talon LF,” which appears very closely tied to Pierce Bainbridge. Leaked Talon solicitation materials list Pierce as the Talon “Chief Investment Officer,” Curran as “a member of the Talon underwriting team,” and ex-partner Thomas Warren as having “joined Talon.” Puzzlingly, the Talon solicitation materials appear to have misleading representations about the litigation track record of the firm. In addition, Pierce reportedly represented months ago that the fund had raised several hundred thousand dollars.

There are other factors which support the notion that Lewis’s former partners were not in the dark. For example, a May 6, 2019 report in the American Lawyer by Meghan Tribe – “Expanding Pierce Bainbridge Adds CFO From Orrick” – contains a false statement in the by-line that: “Orrick and BakerHostetler alum Kevin Cash will be the 2-year-old litigation firm’s first CFO.”

To the contrary, Pierce Bainbridge’s own December 2018 newsletter evidence this to be incorrect. John Polizzotto was hired as CFO months earlier and reportedly served for at least four months. A screenshot from the newsletter:

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 10

In addition, back in 2018, ex-partner Christopher LaVigne (Withers Bergman LLP) accused Pierce of misappropriating Pravati funds and painted a macabre picture of the firm’s financial condition:

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 11

Lewis says that several months later LaVigne “lied under oath to smear me and cover-up for illicit financial activity at the firm.”

“If You Don’t Know, Now You Know”

As we have reported, Lewis provided his 96-page complaint to all of his former partners on March 26, 2019, before Virage had provided a single penny to Pierce Bainbridge. The Lewis complaint alone, undermines any notion that Lewis’s partners were not on notice of the severe financial issues at the firm. Forbes added:

“A recent suit filed by Don Lewis, a former partner, levies explosive and detailed allegations of serious financial improprieties. Lewis alleges Pierce inflated case values, engaged in self-dealing, failed to pay debts as they became due, and manipulated clients with gifts.” ~ Forbes, August 2, 2019

In yet another example of his “Truth-Telling” Lewis was quoted: “If used responsibly, which was not the case at my former firm, litigation financing is a fantastic tool to increase access to justice.”

Just around two months after the Forbes article was published, and before the second massive infusion from Virage, six of the most seasoned partners quit. Each of them had only been at the firm a few months. Of the six, five had experience in white collar crime, and one worked closely with Irving Picard in unwinding the massive fraud of Bernie Madoff. The obvious question becomes:

A key question must be whether these departed six partners see something that Lewis’s former partners, all of whom started before them, chose to overlook while collecting their paychecks and reaping financial benefits of around $65 million from Virage?

The “Fake Pravati News” Coming from Pierce Bainbridge

In addition, after Lewis’s complaint was filed in May 2019, John Pierce mischaracterized the firm’s relationship with Pravati in an apparent effort to undermine Lewis’s apparently truthful allegations. A Pierce LinkedIn post days after the filing, attacked, Meghan Tribe, a Bloomberg Big Business Law reporter, and characterized Tribe’s report – “Lit Funder Pravati and Pierce Bainbridge End Partnership” – as “fake news.”

Pierce’s post also claimed: “[The Pravati] investment was closed out in the ordinary course of business.” Recall, Pravati declared a $9,100,000 default, and the Talon materials indicate that Pravati’s “Funder Investment” was approximately $8,250,000.

Evidencing the corrosive nature of Pierce Bainbridge operations, then New York Office Managing Partner David Hecht continued the attack on Tribe by sharing Pierce’s post and adding: “Fake news. Some journalists will do anything for a click.”

Lewis’s former partner Michael Pomerantz also endorsed Pierce’s post, as did ex-partner Jonathan Kortmansky (BraunHagey & Borden) and Thomas Warren (Warren Terzian), all named as defendants in a proposed amended defamation complaint Lewis filed in October.

Both Pomerantz and Hecht and a slew of Lewis’s former partners, appear two months earlier (March 2019) on UCC filings as “liable” as “individuals,” for the $9.1 Million default. To be clear, the filings each state:

“Debtor [each ‘individual’ partner] is now liable for the full balance due to Pravati in the amount of $9,157,072.95, for defaulting on the funding agreement between Pierce Bainbridge Beck Price & Hecht LLP and Pravati Capital.”

A photo of current and former partners for whom LawFuel has located such March 8, 2019 filings is below.

The $65 Million Debacle - Pierce Bainbridge Meets American Greed 12

“The Circus Comes to Lit Financing Town”

The on-goings at Pierce Bainbridge invoke images of part law-firm, part circus. Tales of lies, deceit, misogyny, substance abuse, and a promotional rap video Hecht pushed on his LinkedIn page.

A law firm racking up a $65 million debt in a year and seemingly having nothing to show for it raises serious questions. Was Virage Capital Management bamboozled or is there another explanation for this $65 Million Pierce Bainbridge debacle? We imagine much of this Virage story is yet to be told.