Federal judge tosses lawyers from case after concluding they failed to diligently represent shareholders

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Trials & Litigation Federal judge tosses lawyers from case after concluding they failed to diligently represent shareholders

By Debra Cassens Weiss

July 14, 2022, 3:40 pm CDT

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U.S. District Judge John Adams of Akron, Ohio, is looking for new lawyers to represent a utility company’s shareholders after tossing current counsel from the case.

In a July 13 order, Adams said the parties appeared to be evading his review by filing a second lawsuit in the Southern District of Ohio and seeking a settlement there. Adams sits in the Northern District of Ohio.

“Consistent with the court’s authority to oversee this derivative action to its conclusion, the court will appoint counsel that will be willing to diligently prosecute this matter and seek approval from this court of any potential resolution, if one is reached,” Adams wrote.

Cleveland.com and the Ohio Capital Journal have coverage.

Adams ruled in a derivative lawsuit filed against FirstEnergy Corp. following accusations that the company was involved in a bribery scheme, Bloomberg Law reports in a prior story on the case. The suit claimed the company had paid millions of dollars in bribes in hopes of securing passage of favorable legislation that would give the company a “billion-dollar bailout.”

A judge in the Southern District of Ohio preliminarily approved a $180 million settlement on May 9, according to the Bloomberg story. Adams valued the settlement at about $150 million in a July 5 order that denied a request by the parties to dismiss the case before him.

In the July 5 order, Adams said the settlement “pales in comparison to the losses caused by the bribery scheme at issue.” He notes a professor’s testimony that the scheme led to a $230 million fine and an estimated loss of more than $1 billion in shareholder value.

Adams concluded that the parties appeared to be engaging in forum shopping. His candor about the need for additional discovery apparently caused the parties to seek approval of the settlement in the other district, he said.

Adams also said dismissal would violate a “first-to-file-rule.” It provides that when two lawsuits are filed involving nearly identical parties and issues, the court in which the first suit was filed should generally proceed to judgment.

The case is Miller v. Anderson.

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