An inventory at Berman DeValerio & Pease in the summer of 1982 wouldn’t have taken very long. There were a couple of electric typewriters, a few desks, a copier and some hand-me-down telephones. There was a secretary. And there were three young lawyers who were ready to work for themselves.
Oh, yes. There were files from a handful of clients who believed the new firm would last long enough to win their cases. It turned out to be a pretty good bet.
Twenty-five years later, Berman DeValerio is a national leader in securities and antitrust class actions. Its 78 employees include 35 lawyers in Boston, San Francisco and West Palm Beach. Its clients now number more than 60 public and Taft Hartley pension funds.
And the three Boston lawyers who set up shop in 1982 – Norman Berman, Glen DeValerio and Peter Pease – are still active litigators.
“If you had asked us back then, ‘Do you think we would be together in 25 years?’ the answer would have been, ‘Yes, probably,'” Berman said. “We all shared the same enthusiasms and the same values and we each cared passionately about doing our jobs well. We just never imagined that we would be particularly successful. I think what we dreamt about then was solvency.”
And with good reason. Just days after quitting their jobs as associates at the one-partner Boston firm where they first met, DeValerio and Pease flew to Cincinnati to woo a group of print shop owners in the midst of a bitter contractual dispute with their national franchise.
Getting the printers to sign on as the fledgling firm’s first clients was by no means a given.
“They thought they were going to retain a high-powered Boston lawyer with a national reputation in franchise law and they ended up with these 32-year-old kids,” DeValerio said.
The printers’ $10,000 retainer check, coupled with a trio of bank loans totaling $30,000 and a steady stream of $15-an-hour consultation referrals, carried them through that first year.
“We were everything – we were our own associates, our own paralegals, our own copy boys,” Pease said, recalling the briefs typed out on IBM Selectrics and the dashes to the courthouse to meet filing deadlines.
About six months into their endeavor, they realized their enterprise lacked one key ingredient: gray hair. So they signed on Harry A. (Gus) Garfield II, the 50-something son of a founding partner of an old-line Boston law firm and a descendant of the nation’s 20th president.
“There was a degree of culture shock for poor Gus,” DeValerio said. “We were kind of rough and ready, and he was used to a more genteel style of practice. It took him a while to get acclimated.”
Berman DeValerio & Pease began filing more and more securities cases, a natural crossover from franchise law. At that time, an individual investor with just 100 shares in a company could be lead plaintiff in a securities case – as long as he showed up at the courthouse first.
As the years passed, the firm earned a reputation for strong performance, which, in turn, was rewarded with more prominent litigation positions. First came document reviews, then plaintiffs’ executive committee positions and, with increasing frequency, lead counsel appointments.
At the start of the fifth year, the firm jettisoned its last hourly-rate client to focus exclusively on complex securities and antitrust class action cases, which could take years to resolve. “The potential return for the securities work was higher, but it was much riskier,” Pease said. “You didn’t get paid until you were done with the case and you had to pay hundreds of thousands of dollars of expenses. It was a scary proposition to devote ourselves more fully to it.”
Gradually, as the caseload grew, the firm added staff. There were many weeks when they could pay their employees, but not themselves. There was one entire year when the three partners didn’t collect a single paycheck.
And then there was the year when, in a Dickensian move just days before Christmas, the Bank of New England pulled the firm’s line of credit.
“We were dressed and on our way to our Christmas party when this guy from the bank calls to say the line of credit is cancelled and they’re not going to honor any checks we have written,” Berman said. “They eventually changed their minds when we told them we would put them out of business.”
(Talk about just deserts. Years later, the firm ran a securities fraud case against the bank, which did, in fact, go under.)
For the lawyers of Berman DeValerio & Pease, securities law offered a chance to help investors who had little recourse against corporations that had done wrong. And in the 1980s, no one else was doing such work in Boston.
“There was a period of time when there were a lot of securities cases being filed against Massachusetts companies, but the securities bar was controlled by firms out of New York and Philadelphia,” Pease said. “There was an opening for us to come in and take a significant role.”
The New England banking crisis of the late 1980s further cemented the firm’s reputation as a leader in securities cases and a number of successful settlements followed.
But the political winds shifted in the mid-1990s, when the Republicans, led by Newt Gingrich, took control of the House of Representatives and fixed plaintiffs’ attorneys squarely in their sights. Over the veto of President Clinton, Congress passed the Private Securities Litigation Reform Act of 1995 (PSLRA), raising the bar for securities class action pleadings and making corporate fraud cases considerably harder to prosecute.
The lawyers of Berman DeValerio & Pease envisioned disaster.
Normal pleading rules required plaintiffs to put defendants on notice of the claims. Now plaintiffs would be forced to describe their claims and plead evidence to support them – a level of detail not required in any other form of litigation. At the same time, in a vicious Catch-22, the PSLRA stayed discovery until after the motion to dismiss, leaving plaintiffs with no legal means to obtain the evidence they needed for their pleadings.
And, just as significantly, the law changed the lead plaintiff appointment procedure. No longer would it matter who filed first. What mattered was the size of an investor’s losses.
“Congress was thinking that by getting institutional funds to take over the cases that these funds would never hire the plaintiffs’ bar and many cases would probably be dismissed,” Pease said. “But unfortunately for them, they woke up the sleeping giants. The pension funds were the major losers in these corporate frauds – much more so than any individual investor.”
The PSLRA did, in fact, severely damage many plaintiffs’ class action firms. With higher pleading standards and no discovery powers, old fashioned lawyering no longer worked. Only the resourceful survived.
Plaintiffs and their counsel were now forced to determine intimate details about corporate frauds before the complaint was filed. That meant hiring investigators to interview former employees and enlisting forensic accountants to analyze financial statements. (Today, Berman DeValerio uses two full-time forensic accountants and a team of investigators.)
Smaller plaintiffs’ firms already knew the importance of working together effectively in order to compete against the enormous legal teams marshaled by corporate defendants. Berman, DeValerio and Pease often found themselves collaborating with three highly skilled attorneys in particular: Joseph J. Tabacco, Jr., first of New York and later of California; and C. Oliver Burt III and Michael J. Pucillo, who started their own class action firm in Florida.
Pooling resources made sense. In 1999, Tabacco, a former trial attorney with the U.S. Department of Justice, opened Berman DeValerio’s California office. Two years later, the lawyers in Massachusetts, Florida and California formed Berman DeValerio Pease Tabacco Burt & Pucillo.
“We all realized, especially after the PSLRA was passed, that having as large a firm and as great a geographic reach as possible was important in terms of the client base,” Berman said. “Together, as a group, we made ourselves that much more attractive to our clients.”
Berman DeValerio was competing against larger law firms for institutional investors, but its case selectivity and strong record of successful prosecutions made it particularly attractive to public fund clients. Today, the firm’s lengthy client list includes public employee retirement systems in 21 states, three of the top four public pension funds in the country and 11 of the top 25. In all, Berman DeValerio represents more than a quarter of all U.S. public funds with more than $5 billion in assets under management.
Some of the country’s bigger pension funds took to their new post-PSLRA activist roles very quickly; others took a more guarded wait-and-see approach. Then everything changed again after the massive frauds at Enron and WorldCom.
Instantly, the public had a better appreciation for the importance of the firm’s work. Securities fraud was now front page news, and everyone began to realize that it affected firefighters and police officers and teachers – ordinary individuals whose retirement funds were eviscerated by corporate wrongdoing.
“It made it real – and it suddenly made us popular and appreciated,” Pease said.
But the shelf life of collective national outrage is apparently finite, and firms like Berman DeValerio are finding themselves in the political crosshairs yet again.
“There seems to be this sense that with Enron and WorldCom behind us, that everyone has cleaned up their acts and that lawsuits are an unwarranted irritant,” Berman said.
In fact, restatements for large companies are at their lowest level in years and securities cases are being filed at nearly half the usual rate. But large-scale fraud cases are continuing to wend their way through the courts. Berman DeValerio, for example, is co-lead counsel on behalf of shareholders in major fraud cases against Fannie Mae and Xerox. And other brazen examples of wrongdoing continue to make headlines, such as the stock options backdating scandals of the last year.
For the attorneys at Berman DeValerio, fighting securities fraud provides an opportunity to practice in a demanding and complex area of the law in prominent cases. Yet there’s more to it than just the pleasure of interesting work.
“We believe in the fundamental rightness of what we’re trying to do – to secure a recovery on behalf of people who have been lied to and who lost money as a result,” Berman said. “It’s an honor and a privilege to stand up for folks who otherwise would have absolutely no remedy to get their money back, and help insure the integrity of our capital markets.”
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.