Judge allows settlement demands in law firm's trial

 Attorney accused firm of racial discrimination

By David E. Frank
The Daily Record Newswire

BOSTON — A former associate who accused the law firm Ropes & Gray of racial discrimination and unlawful retaliation was a “stickup artist,” “liar” and “extortionist” who at one point sought $40 million to settle the case, lawyers defending the Boston firm told jurors in federal court.

While settlement demands and statements made during negotiations are usually deemed off-limits by Federal Rule of Evidence 408, U.S. District Court Judge Richard G. Stearns allowed the jury in Ray v. Ropes & Gray to hear detailed accounts of the negotiation process, such as John H. Ray III’s initial demand in May 2009 that the firm pay him $8.5 million.

Ray, who is African-American, alleged that partners Randall W. Bodner and Brien T. O’Connor reneged on promises to write him letters of recommendation in 2009 after the firm informed him he would not make partner and should start looking for work elsewhere. An eighth-year associate who graduated from Harvard Law School, Ray was earning nearly $400,000 a year at the time.

After just two and a half hours of deliberations, the eight-person jury on Nov. 20 found in favor of Ray’s former employer, which was represented by Boston lawyers Michael B. Keating and Lisa G. Arrowood.

Ray’s lawyer, Latif Doman, said he was shocked the settlement discussions were allowed in by the judge.

“I think it’s incredible that a man’s attempt to engage the firm in a conversation to resolve a genuine complaint he had with them about how he was treated, and about how people who look like him were treated, be used against him in violation of the rules of evidence and our fundamental sense of fairness,” said Doman, who practices in Washington, D.C.

Doman said his client — now a solo in Boston — will appeal to the 1st Circuit as “the case law is clear that the judge simply shouldn’t have let that happen.”

Stearns explained his reasons for admitting Ray’s settlement demands in an Aug. 16 ruling that granted the firm partial summary judgment on discrimination and breach of contract claims.

“The short answer is that Rule [408] … bars the use of an offer of compromise as an admission of liability, which is not Ropes’s avowed purpose,” Stearns wrote. “Rather, Ropes characterizes the ‘offer,’ coupled as it was with the threat to file a discrimination complaint, as an attempt at extortion, relevant to the issue of bias.”

Money talks?

Bodner, a litigation partner at Ropes, told jurors that Ray’s seven-figure demand prompted him to withdraw his offer to write a reference letter for a job Ray was seeking at the U.S. Attorney’s Office in the Southern District of New York.

“John was looking to effectively hold up the firm,” Bodner testified. “I viewed it as a stickup — to have the firm, or the partners of the firm, pay him $8.5 million or otherwise he was, you know, going to make a lot of claims that frankly had no basis in reality or fact.”

Stearns also allowed jurors to hear that Ray’s settlement number spiked to $10 million in February 2011, and then to $21.5 million and $40 million over the next three months. The judge additionally admitted testimony that Ray — who joined Ropes in 2005 after practicing at Cravath, Swaine & Moore and Jenner & Block — threatened partners with criminal prosecution, bar discipline and public embarrassment if his demands were not met.

At trial, partner John D. Donovan Jr. referenced an email Ray wrote to the firm on May 3, 2011, which stated: “To quote an often used colloquialism, ‘Money talks, and bullshit walks.’”

“He was saying, ‘I’m going to sue you. I’m going to embarrass you. … I’m going to take you to the criminal authorities, Board of Bar Overseers, the New York AG, the Mass. AG, or whatever, if you don’t fork over a lot of money,’” Donovan testified. “Well, we didn’t think we did anything wrong. If we had to try it in a case, we’d try it in a case. If [Ray] thought he could embarrass us, we’d suffer the embarrassment. And in response to all that we just did nothing — you know, we’ll deal with it if it comes to court; we’ll deal with it if it gets in the press.”

Incomplete picture

While Doman defended Ray’s demands to Ropes & Gray as reasonable given the damage the firm had done to his client’s career and reputation, he said he still does not understand the judge’s reasoning for allowing the evidence in at trial.

“The judge ruled that it was coming in for some purpose other than to prove that a settlement was made,” Doman said. “The trial’s over, and to be honest with you, I still haven’t figured out what that other purpose was.”

Doman, who tried the case with Reginald J. Richter, said Stearns’ summary judgment decision meant he could present the jury with evidence of only two incidents of racial insensitivity at Ropes & Gray: Jurors heard that Ray alleged a firm partner, Robert A. Skinner, asked him to serve as the “token black associate” on a defense team in a case in which a bank was accused of discriminatory lending practices against minorities. Ray also testified Bodner told a story in his presence that included a racial slur. Skinner and Bodner denied the allegations at trial.

Doman said there were other incidents he was barred from introducing at trial, a fact he plans to raise on appeal.

“It made it appear that those complaints which the jury did hear about were trivial and untimely and that they were carefully selected to assist [Ray] in making an $8.5 million demand from a firm that pays that much for its Christmas parties,” Doman said. “I think the judge was making decisions at times he thought were fair, and at times he was doing it to try to make Ropes & Gray not be embarrassed. But ultimately it hurt my client, because jurors heard about his demands out of context; we weren’t able to give them the full picture in the courtroom.”

A Ropes & Gray spokesman declined to discuss the evidentiary issue.

Don’t show the money

Kamee B. Verdrager, an employment lawyer who is suing her former firm for discrimination in Superior Court, attended the closings in Ray. She said she, too, was surprised Stearns admitted the evidence given the undue prejudice it would have on the jury.

“I can’t get over the fact that the actual dollar amounts came in, especially when they’re so damaging,” said Verdrager, who now practices in New Hampshire. “The numbers are just incredibly high to the average person — and even to the average lawyer. There’s probably not a partner anywhere who wouldn’t gladly retire for $40 million.”

Verdrager — who reportedly turned down a $700,000 offer from Boston’s Mintz, Levin, Cohn, Ferris, Glovsky & Popeo to settle her claims — said Mintz Levin (which is represented by lawyers from Ropes & Gray) has referred to her counter offer of $1 million as “extortion” and “exorbitant.”

Verdrager said the elements of an unlawful retaliation claim do not include settlement amounts.

“You need a sincere, good-faith, objective and subjective belief that someone is being discriminated against, and then you need some protected activity along with an adverse action,” she said. “How much Mr. Ray wanted to be compensated for his damages does not shed any light on whether he truly believed he was being discriminated against.”

Restraining influence

In 1996, Boston lawyer Alan L. Cantor argued a Supreme Judicial Court case in which Justice Herbert P. Wilkins held that a defendant, in limited circumstances, may admit evidence of a prior settlement. But Cantor said public policy concerns generally require judges to keep most offers and demands away from the jury.

“The purpose of the rule is to encourage settlements, and whenever you get into the business of allowing evidence of offers or demands, you’re putting a chilling effect on a party’s willingness to settle cases,” said Cantor of Swartz & Swartz. “If the defendant makes an offer and he’s afraid it’s going to get into evidence, he might not make the offer, and the same could be said of the plaintiff making a settlement demand. So I think it’s a sticky wicket getting into the whole question of whether any of this should be admissible.”

Goodwin Procter lawyer Kenneth A. Cohen, who argued a 2003 SJC case on a related issue, said if a witness’s motives for testifying are relevant, the admission of statements made during settlement talks can be relevant fodder for cross-examination.

“My instinct would always be that the general rule remains that a settlement offer is off limits,” he said. “But the SJC has held that if it’s relevant to a legitimate credibility question, it can be fair game. So [Stearns’] decision seems consistent with what the SJC has already said.”

Boston attorney Richard M. Zielinski said FRE 408 has an exceptions clause that allows compromise offers to come in if a judge decides they are relevant to establish a witness’s prejudice, negate a contention of undue delay, or prove an effort to obstruct a criminal investigation.

“Ropes & Gray was presented with an absolutely astronomical, outrageous demand from an unreasonable plaintiff, and it considered that in deciding whether lawyers — in good conscience — could recommend him for another position,” said Zielinski, who practices at Goulston & Storrs. “Ray, and any other plaintiff in his shoes, should’ve thought about the impact it would have before he put an $8.5 million demand in writing.”

As long as the settlement statements were not considered substantively by the jury as admissions against Ray, there was nothing improper about their admission, Zielinski added.

“Unfortunately, law firms, like other large institutions, receive extortionate demands every day of the week,” he said. “I would think and hope that rulings like this could have a restraining influence on those who otherwise might be inclined to make extortionate-type demands, out of concern that it may later be deemed admissible against them for some purpose other than establishing liability.”

Ray has until mid-December to file a notice of appeal.

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