A Florida lawyer has filed a class-action suit attacking two other class-action suits _ all of them on behalf of investors who lost millions of dollars on limited partnerships.
West Palm Beach lawyer Thomas Hoadley filed his suit against PaineWebber Inc. last week in U.S. District Court for the Southern District of Florida.
He accuses the New York-based brokerage firm of cheating investors by failing to reveal that it has worked out a secret _ and chintzy _ settlement in two other class-action suits in New York and Texas.
"There is no basis to that whatsoever," said Lisa Rodriguez, a lawyer with Chimicles, Jacobsen & Tikellis of Haverford, Pa., one of the law firms representing investors in the New York case. "We are in active litigation and document discovery."
Hoadley's suit says only that his claims are based on "reliable and unbiased information and belief." He did not return calls; neither did PaineWebber.
All the suits claim to be on behalf of investors, about 20,000 of whom purchased $2-billion worth of partnerships from PaineWebber between 1980 and 1992. They must decide by July 21 if they want to be excluded from the New York or Texas cases. Those who do nothing are automatically included, losing their right to sue on their own.
Class-action lawsuits on behalf of investors are controversial because they tend to be much more lucrative for lawyers than for investors. However, they typically are the only hope of recovery for investors who are unwilling or unable to file suits of their own.
Hoadley said PaineWebber has worked out a settlement that will pay the lawyers $30-million but leave investors with only 1 to 7 percent of their out-of-pocket costs (initial investment minus distributions received). Investors, he said, will be required to surrender their partnership units, some of which are worth more than the proposed settlement. Hoadley said those bringing their own cases would do much better _ that PaineWebber has paid 140 to 160 percent of investors' out-of-pocket costs to settle.