Photo: Monika Kozak

Proskauer Rose has agreed to pay $63 million to resolve a lawsuit over the firm's past work for now-convicted Ponzi schemer R. Allen Stanford.

Settlement papers filed in Dallas federal court on Aug. 24 showed that Proskauer reached a deal with the court-appointed receiver in charge of winding down Stanford Financial Group—a collection of companies used by Stanford to commit a yearslong, $7 billion fraud. The settlement would also resolve claims against Proskauer from the Official Stanford Investors Committee, or OSIC, which represents the interests of people who held certificates of deposit or other investments with Stanford Financial.

The settlement is subject to court approval. If a judge ultimately signs off on the deal, it would put an end to OSIC's claims that Proskauer helped Stanford avoid regulatory scrutiny while he was in the midst of carrying out a Ponzi scheme that later led to a criminal conviction and a 110-year prison sentence.

“The $63 million payment in the Proskauer settlement is substantial,” lawyers for the investors and receiver wrote Aug. 24 in a motion to approve the settlement. “But for the Proskauer settlement, the receiver litigation would be vigorously defended by Proskauer, its prosecution would be expensive and protracted, and the ultimate outcome of such litigation would be uncertain. In light of these issues, plaintiffs believe that the Proskauer settlement reflects a fair and reasonable compromise.”

Under the settlement, Proskauer would make a payment but not admit to any wrongdoing, according to court documents.

Claims against Proskauer focused mostly on the work of former partner Thomas Sjoblom, who was at Proskauer from 2006 to 2009. Initially, Sjoblom was also a defendant in the investor committee case, but the two sides reached an agreement in late 2016 to dismiss those claims.

Proskauer, meanwhile, had argued that it should be shielded from the investor committee's claims under the attorney immunity doctrine. The firm maintained that it never represented the investor committee as a client and, as a result, should be immune from suit in light of court precedent that generally blocks claims by nonclients. That argument failed to sway U.S. District Judge David Godbey of the Northern District of Texas, who in April kept claims against Proskauer in place and set the case toward a trial starting on April 30.

After failing to defeat the case in April, Proskauer mounted a late-stage appeal to the U.S. Court of Appeals for the Fifth Circuit. But days later, the firm reached an agreement in principle to settle with OSIC and the Stanford receiver, according to the settlement papers filed Aug. 24. Proskauer had appealed to the Fifth Circuit on April 16, and settlement in principle came together on April 25. The Fifth Circuit appeal was eventually dismissed in June based on the parties' agreement.

Davis Polk & Wardwell head of litigation James Rouhandeh has served as Proskauer's lead defense counsel. He did not immediately respond to a request for comment on the settlement.

Clark Hill Strasburger's David Kitner, a lead lawyer for the investors, also did not immediately respond to a request for comment. Baker Botts, Castillo Snyder, and Neligan also represent the investor and receiver plaintiffs.

In addition to Proskauer, other large law firms faced fallout over their entanglements with Stanford's fraud. Chadbourne & Parke—where Sjoblom practiced between 2002 and 2006, before he joined Proskauer for a three-year stint—previously paid $35 million to settle claims that had been brought against it. Hunton & Williams also settled a Stanford-related suit, agreeing in September 2017 to pay $34 million.

Sjoblom now has his own securities litigation and criminal defense firm in New York. Dentons represented him in the Stanford litigation.