Builders Pulte, Lennar sue Nevada AG office

Nevada Attorney General Catherine Cortez Masto has hired some legal help in her investigation into mortgage-lending practices, and two homebuilders have filed lawsuits as a result.

Pulte Homes and Lennar Homes claim the law firm that Masto's office retained is involved with a labor union that's pressuring the two to organize. To make their case, they filed lawsuits this week in U.S. District Court in the District of Columbia asking that the court stop Nevada from retaining the firm.

The controversy started not long after Masto's office sent out requests for proposals in the fall looking for law firms to assist state officials in their investigation into the home-sales and financing practices of Pulte and Lennar. Nevada is "ground zero in the nation's foreclosure crisis," Masto's office said Friday, and some of those default trends come from "unscrupulous" lending practices. Investigating those practices involves complex legal issues and requires substantial resources. Hiring an outside counsel on contingency can limit those expenses -- an important goal given the state's budget crisis, Masto's office said.

The call for proposals attracted just one firm: Cohen Milstein Sellers & Toll of Washington, D.C. Cohen Milstein had impeccable credentials, according to Masto's office. The firm has national recognition for its ability to ethically litigate complex cases. A former District of Columbia attorney general serves on its staff, and she gives the firm knowledge in collaborating on investigations with state attorneys general. Cohen Milstein also has substantial experience representing other attorneys general in mortgage-lending investigations.

Pulte and Lennar are balking at the involvement of Cohen Milstein. They allege the firm has a questionable history in this case: Some of the firm's attorneys have professional relationships with a union waging an "aggressive" organizing campaign against the two homebuilders.

The companies say the Laborers' International Union of North America wants Pulte and Lennar to force their subcontractors to unionize, and falsely accusing the builders of bad practices in selling and financing homes is part of the pressure campaign. The laborers' union has conducted preliminary research and recruited homebuyer plaintiffs for such actions, and Cohen Milstein's attorneys "represent LIUNA in matters relating to the development of mortgage cases against Pulte and other builders," Pulte's lawsuit says. Given that relationship, the rules of professional conduct prohibit Cohen Milstein from working on the case with the Nevada attorney general's office, and allowing Cohen Milstein to serve as outside counsel to help investigate the case violates the companies' due-process rights, their lawsuits say.

Pulte's lawsuit points to an article in the Phoenix New Times reporting that the laborers' union retained a separate law firm to file mortgage-fraud lawsuits against KB Home in Arizona, where Cohen Milstein is also helping the attorney general investigate Pulte and Lennar. The article paraphrased a union communications manager, who said the union "plans similar actions against Lennar and Pulte Homes in the future." The lawsuit also notes that the Cohen Milstein attorneys helping the Nevada attorney general's office in its investigation initiated claims on behalf of the laborers' union against Pulte when they were with a different law firm.

Cohen Milstein didn't return a call seeking comment.

Law professors with the Boyd School of Law at the University of Nevada, Las Vegas didn't respond to e-mails or phone calls requesting interviews.

Masto's office maintains that Cohen Milstein isn't actively representing unions or private litigants in any case against the builders or their affiliates. The office also submitted its contract with Cohen Milstein to the Nevada State Board of Examiners for review before it granted the contract. The state's consumer advocate, who's charged with protecting the public's interests, entered into the Cohen Milstein agreement. The attorney general's office called Cohen Milstein "one of the nation's most well-respected plaintiffs' firms," and said the builders had submitted "highly inflammatory accusations" that they had no evidence to support.

Masto's office also acknowledged that Cohen Milstein's attorneys represented a union on homebuilder issues, but that representation ended before the board of examiners approved the firm's retention as outside counsel. Masto also has written confirmation that Cohen Milstein's attorneys are not developing, nor will they develop, private cases related to the builders, and no attorney at Cohen Milstein who has access to documents in the cases will represent any private litigant against the builders at any point in the future, even on unrelated matters. An independent counsel has also reviewed safeguards to make sure they conform with professional-conduct rules.

Helping attorneys general investigate deceptive lending has become a key practice area for Cohen Milstein.

A September press release from the firm said it had formed a public-client practice through which it would support state attorneys general in their efforts to protect consumers, workers and public resources. The release noted a current emphasis on representing attorneys general in investigations involving fraudulent mortgage lending, unsafe and deceptive practices in the sale of prescription drugs and misclassification of independent contractors.

The firm also helped several states in an $8.6 billion predatory-lending settlement with Countrywide Financial Corp. in 2008. Nevada was not part of the settlement.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.