A petition to consolidate civil class action lawsuits against Fyre Media and company co-founders Billy McFarland and Ja Rule will come before a panel of federal court judges in Los Angeles on July 27. Meanwhile, the criminal investigation continues, with grand jury subpoenas issued and involvement by U.S. attorneys in California.
Plaintiff litigators expect the Fyre defense team will, on or before that day, move to put the civil cases on hold pending the outcome of the criminal proceedings, still in the early stages but now active on both coasts, as assistant U.S. attorneys and FBI agents in New York, Florida, and California gather evidence.
In addition to the six federal and one state class action lawsuit, four individual lawsuits are also proceeding. These include complaints filed by lenders. McFarland’s attorneys agreed that by the close of business Friday they would deposit $240,000 into an escrow account on behalf of lender Oleg Itkin, who is owed $800,000. Itkin’s attorney, Caitlin Robin & Associates, has been very aggressive and is the first among 11 lawsuits filed to get a formal response from defendants McFarland and Fyre Media and force them before a judge. The matter is scheduled for hearing in a New York state court on May 31.
Meanwhile, anticipating bankruptcy or insolvency on the part of Fyre, the plaintiffs are maneuvering to keep deep-pocketed Fyre investors on the hook as defendants. Named defendants thus far include New York socialite Carola Jain and Robert Nemeth of the Connecticut-based Perkins Fund Marketing.
So far, Jain and Nemeth are named in one investor suit, although the $100 million class action suit filed April 30 by Geragos & Geragos was subsequently amended to attach them, while stopping short of formally naming them. While they are likely to be subpoenaed in the criminal investigation, it is unknown at this point whether they will be targets and whether they will be able to stay civil proceedings as a result.
As far as McFarland and Ja Rule go, the consensus is they will invoke their Fifth Amendment rights and avoid direct questioning in the civil matters pending resolution of the criminal investigation. Experts agree that while they might try, they will be unlikely to succeed in deferring the civil class action consolidation.
“When life and liberty is placed at risk, the courts put a high premium on deference to the integrity of federal criminal prosecutions,” said Ben Meiselas, an attorney with Geragos & Geragos. Meiselas said his firm’s suit, filed in U.S. District Court for the Central District of California, now has about 1,000 active plaintiff participants.
The U.S. Judicial Panel on Multidistrict Litigation has set a June 10 deadline for written response to the multi-district consolidation request, which was initiated by Levi & Korsinsky, which filed suit in New York but is managing the case out of San Francisco, where lead attorney Rosemary Rivas had no comment.
Adam Zimmerman, a Loyola Law School professor specializing in complex civil litigation, said the fact that a criminal investigation is in progress would be enough to allow the defense to move for a stay, it is not necessary that they be formally indicted. But Zimmerman said he believes it likely the judicial council will still allow the civil class actions to move forward and be consolidated. “A pending indictment wouldn’t really impact the question of whether the civil cases warrant a transfer. Once the cases are transferred to a single federal judge — and I would think the facts favor transfer — that judge could decide to stay the proceedings pending the outcome of the criminal case. That is not uncommon.”
The MDL consolidation request has prompted jockeying for position among attorneys, as the panel will have the discretion to transfer the cases to a single judge who can certify a class action or assign a lead law firm to coordinate plaintiff activities. “Attorneys who take on the coordinating roles wind up very powerful, and those are lucrative positions as well,” Zimmerman said.
The likelihood is the judicial panel will consolidate in New York, where the defendants are based, and the U.S. Department of Justice is managing the criminal investigation out of its Manhattan office. Under MDL a single court would hear all pretrial motions and manage the class action cases, which would then go back to the venue where the case was filed for its hearing.
But most civil class actions – an estimated 90 percent – settle before going to trial. In the case of Fyre, settlement may be hampered if Fyre Media principals do not have the financial resources to offer compensation. In that case, the plaintiffs will push for incarceration while still pursuing financial restitution from others who may have liability and means is the consensus among those involved with the case.
Representatives from the U.S. attorney’s office and lawyers for McFarland and Fyre Media had no comment. Nemeth and Jain did not return calls. Stacey Richman, the lawyer representing Ja Rule, whose name is Jeffrey Atkins, issued a statement that states: “Mr. Atkins would never participate in anything fraudulent, it is simply not in his DNA. He is devastated at the aftermath of what he genuinely had hoped would be an incredible event for all.”