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Lawyers ask federal judge to step down from landmark overbilling case

US District Judge Mark L. Wolf. David L. Ryan / Globe Staff

Lawyers at one of the nation’s leading class-action law firms are calling for federal Judge Mark Wolf to step down from a lawsuit that threatens to cost them millions of dollars if the Boston judge concludes they improperly inflated their fees.

Officials at Labaton Sucharow of New York City on Friday said that Wolf has shown bias against them in the case in which they represented customers who allegedly were shortchanged by State Street Bank of Boston. Wolf appointed a retired federal judge last year to investigate whether Labaton and other law firms had inflated their $75 million in fees for the case.

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Labaton officials argued that Wolf’s comments from the bench at a May hearing reveal that he has already concluded that the firm engaged in serious misconduct, potentially including political payoffs.

“These are extraordinary circumstances and we do not take this action lightly, but we feel compelled to file this motion by the events that have unfolded in this case,” said the law firm in a press release that claimed this is the first time in 50 years the firm has challenged a judge’s impartiality.

But Ted Frank, an expert on the way attorneys’ fees are awarded in class-action lawsuits said Labaton and other law firms in the State Street case have themselves to blame for Wolf’s ire. A Globe story showed that Labaton and the other firms justified their fees by submitting separate bills to Wolf for the same lawyers. And the firms inflated the hourly rates of most of the lawyers, claiming some were paid more than 10 times their actual rate.

“A party cannot misbehave in a case, and then complain that the judge is biased because he has formed opinions that there might be misbehavior,” said Frank, a lawyer at the Competitive Enterprise Institute think tank in Washington.

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The call for Wolf to step down comes amid wrangling over whether to release the 377-page report that Wolf commissioned, requiring Labaton to foot the bill along with Thornton Law Firm of Boston and others. They’ve paid $3.8 million so far.

The report, which is expected to call for the lawyers to return some of their fees from the case, was submitted to Wolf on May 14. Since then, the firms have been fighting to keep all or part of it from public view, filing motions to redact parts or delay its release entirely.

Wolf has scheduled a closed-door hearing for June 22 on the report by retired judge Gerald Rosen. Wolf may release the report, probably in redacted form, after that, lawyers said.

Wolf appointed Rosen as a “special master” in February 2017 after the Globe reported that Thornton and its partner law firms, Labaton Sucharow and Lieff Cabraser, double-counted lawyers and claimed exorbitant costs for dozens of low-paid lawyers.

One of them, Michael Bradley, a solo practitioner who works in Quincy, was listed as earning $500 an hour. He is the brother of Thornton Law’s managing partner, former State House assistant majority leader Garrett Bradley.

Labaton officials say that Wolf, in public and private, has suggested that Labaton may have made payoffs to secure the client in the State Street case, the Arkansas Teacher Retirement System. At a May 30 hearing, Labaton said, the judge asked questions that suggested a payment may have “exchanged hands” in order for Labaton to win Arkansas as a client.

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“This suggestion is baseless, and there is no mention of any such influence payment in the special master’s exhaustive report, which remains under seal,” said Labaton’s lawyer, Joan Lukey.

But Judge Rosen’s report has raised questions about how the Arkansas Teacher Retirement System came to be a Labaton client. During his investigation, Rosen discovered that Labaton secretly paid a lawyer named Damon Chargois a “referral” fee of millions of dollars because he originally introduced Labaton lawyers to the Arkansas Teacher Retirement System, court filings say.

Wolf clearly zeroed in on Chargois. In one sidebar with lawyers, Wolf said that Chargois appeared to be eligible for up to 20 percent of Labaton’s fees in Arkansas retirement cases even though he “didn’t do any work for it.”

Wolf said “there are going to be questions about the origin of this relationship and whether all those millions of dollars stopped with Mr. Chargois,” he said, implying the fees may have been used to make payoffs to others.

Lukey, the Labaton lawyer, argued that there was nothing wrong or illegal about the fee paid to Chargois and that the firm had no duty to disclose it. It was the judge’s obligation, she argued, to ask the lawyers if they paid anyone else referral fees.

“You’re suggesting public corruption. Honestly, your honor, I am appalled that that was even said,” Lukey told the judge.

The special master’s lawyer, William Sinnott, did not respond to a request for comment. A spokesman for the Thornton Law Firm declined comment on Labaton’s motion.

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Andrea Estes can be reached at andrea.estes@globe.com.