Judge Absolves Firm of Fabricating Claims in Securities Litigation

Hunton & Williams’s bid to discredit plaintiffs firm Cohen Milstein Sellers & Toll and win the dismissal of a securities fraud case against Dynex may have backfired. Hunton had accused Cohen Milstein of committing a fraud on the court by fabricating allegations attributed to confidential witnesses in a complaint against Dynex. But a Southern District magistrate judge who looked into the controversy wrote in an April report that there were plausible reasons why the witnesses, who were former employees of Dynex, might back away from their testimony after their identities were revealed.

On Monday, Southern District Judge Harold Baer Jr. adopted Magistrate Judge Debra Freeman’s recommendation and refused to dismiss In re Dynex Capital Inc. 05 Civ. 1897. Moreover, not only did Judge Baer find that the defense lawyers had failed to meet their burden of showing fraud on the court, but he expressed annoyance at their criticism of Magistrate Judge Freeman’s work. He faulted them for “quibbling” over facts, and took a jab at their “attention grabbing contention” that the magistrate judge applied the wrong legal standard.