We'll See You In Court -- Betts Patterson Duo Seems To Thrive On Challenges Of Shareholder Lawsuits

Steve Berman and James Solimano were out for a run downtown when they spotted another jogger, Nordstrom co-chairman John Nordstrom.

"Look, there's Nordstrom," Berman said. "Let's pass him."

They gained speed and slipped past.

"I took great pleasure in it," Berman said later.

The two lawyers had just obtained a $7.5 million settlement agreement in a shareholders' suit filed against the Seattle-based retailer. The jog past Nordstrom was like a final victory lap for the two attorneys from the Seattle law firm of Betts Patterson & Mines.

Solimano, 33, and Berman, 36, have gained a national reputation for going up against local public companies on behalf of shareholders.

With today's volatile stock market, the joke going around Seattle's corporate community is that when bad news strikes and a stock falls, the first call is from a reporter. The second call is from Betts Patterson announcing a lawsuit.

Locally, through settlements of lawsuits, Betts Patterson has collected $2.9 million from Egghead Discount Software, $1.5 million from Microsoft Corp., $4.5 million from Pay'n Save and $13.6 million from Seafirst Bank. Settlements are paid by the companies themselves or by their insurers.

Intermec has been the target of two suits in two years, once involving allegations of failure to disclose financial information (case pending) and later to block the proposed merger with Litton. The merger went through but claims for damages are still pending.

The firm also has cases in court against Micron Technologies, Sequent Computer, Oracle and US West New Vector.

Berman figures that he has collected $50 million to $60 million, counting all his cases over five years against public companies . Shareholders received about 40 percent of that money ; the rest paid for hiring experts, administering the payout to shareholders and legal fees.

One reason such cases are increasing is that shareholders nationwide have become more willing to sue when they perceive wrongdoing. The number of class actions filed in federal courts involving securities and commodities jumped from 118 last year to 315 this year, according to the Administrative Office of the U.S. Courts.

Clients come as referrals by lawyers here or elsewhere. Some clients just call directly, having heard of Betts Patterson or read about the firm in the newspaper. One New Yorker objecting to the Intermec merger, for example, was referred to Betts Patterson by a New York law firm that was co-counsel in the case.

Berman, who is as competitive in court as he is on the running path, views himself as a private attorney general looking out for the little guy.

"What we're doing should be done by the SEC (Securities and Exchange Commission), but the government doesn't have the resources or the inclination to do this," says Berman. "So I get to be a prosecutor."

Corporate executives frequently have another label for lawyers practicing in the field: blackmail artists.

Few executives returned calls to discuss Berman and Solimano. Frequently, cases end with an agreement that neither side will publicly discuss the case. Some executives complain privately that plaintiffs' lawyers bring nuisance suits that generate big legal fees and little for investors. (Typically, lawyers get 20 percent to 30 percent of the settlement, or less in huge cases. The amount must be approved by the court.)

Jim Robart, a Seattle lawyer who defended Nordstrom in the case filed by Berman, declined to comment on any specific case but said the lawsuits typically get a strong reaction from executives.

The suit against Nordstrom Inc. by three investors alleged that the company and its five top executives misled the press and investors about its labor problems in order to inflate the company's stock price. The settlement awaits court approval.

"The normal reaction of corporate executives is to feel that their company and their executives have been wrongly accused in a process designed to enrich the lawyers rather than benefit the shareholders," Robart says.

Nordstrom says it expects insurance to pick up most of the settlement costs. Betts and five other law firms involved in the case plan to seek about 25 percent of the settlement.

Solimano and Berman are regarded as skillful lawyers with opposite personalities.

Steve Berman is given to tough, colorful talk. Jim Solimano is quiet, less likely to shoot from the lip.

"Jim is the more analytical of the two. Steve is more of a bulldog," says Carl Hagens, chairman of the litigation group at Betts Patterson. "It's a good match. You have the analytical guy holding back the bulldog."

Their practice is not limited to suing public companies. In one case, Berman is representing investors in a New York real estate syndicate that includes movie producer George Lucas, the late U.S. Sen. John Heinz, Woody Allen and the late Jim Henson. The suit accuses the syndicate managers of self-dealing in a partnership where investors may lose 55 percent of their money, according to Forbes magazine.

Berman's work is praised by Richard Greenfield, a Philadelphia-based lawyer whose 40-member law firm exclusively handles shareholder suits. He calls Berman "a super lawyer" in a field with some bad lawyers or, as Greenfield puts it, "outright whores." Greenfield also praises Betts Patterson for handling cases that risk alienating corporate clients. About 10 percent or less of Betts Patterson's revenues come from shareholder suits.

Berman was born in a Chicago suburb and attended law school at the University of Chicago. Berman previously worked in securities law in the Seattle office ofBernstein, Litowitz, Berger & Grossman, a New York firm.

Solimano came by way of Brooklyn and the law school at George Washington University in Washington, D.C. His first job out of law school was with Betts.

Berman lives on Mercer Island. Solimano lives in Mount Baker. The two worked, but for different plaintiffs, on the biggest securities case in state history: the default by the Washington Public Power Supply System, which generated $800 million for injured investors.

Ironically, Berman came to Seattle to work for a law firm, where the recruiter, William Neukom, later became Microsoft's general counsel. Berman's 1989 case against Microsoft is the only one of its kind filed against the software giant. The suit claimed that Microsoft should have disclosed problems it was having in getting a word processing program released.

Neukom declined to comment on the case, but said the suit did not damage their longtime friendship.

"He's a pretty complicated personality," Neukom said of Berman. "Basically, I think he's a smart, thoughtful, generally pleasant sort of person to be with."

"We try to put personal things aside from business things," Berman says of his relationship with Neukom.

Not all cases resolve so pleasantly. With "a lot of lawyers you're enemies in court and you're enemies forever. There's no real civilness," says Berman.

Berman acknowledges there is bad blood between his law firm and another Seattle lawyer, Evan Schwab, a partner in Bogle & Gates.

In the Seafirst case, says Berman, Schwab represented Seafirst in a suit by investors represented by three law firms, including Betts Patterson. Carl Hagens of the Betts firm, not Berman, handled that case.

After the case was settled in 1986, Schwab did something unusual. Because Schwab represented Seafirst, which had beneficiaries involved in the class, Schwab was able to oppose the legal fees sought by the plaintiffs' law firms.

In the case involving Egghead, Schwab asked a judge to levy fines against Betts Patterson and two other law firms when one of the plaintiffs refused a judge's order to answer questions (against Berman's advice, says Berman). The matter ended with Betts not having to pay a fine.

"The problem with litigating against a guy like Evan is we look forward to fighting again with Evan with relish," says Berman. "If Evan is going to be on the other side in a case, his client's going to pay more money because it's personal."

But Schwab says his move in the Seafirst case helped increase the amount of money that went to shareholders because less went to lawyers.

In the Egghead case, Schwab says he sought sanctions because the law firms told the court they had made the decision for the client to defy the order. (Berman says only one of the firms said that, not Betts Patterson.)

Berman admits his work is stressful. Jogging six to eight miles nearly every day helps ease the tension, he says. The same could be said for John Nordstrom and several Egghead executives, who also jog and change clothes at the Washington Athletic Club downtown.

With the warring in court, says Berman, the club serves a neutral zone.

"I haven't gotten any heat balm in my jock or anything like that," he says.