NYU Lawyers Entitled To Compensation For Merkin Suit

Mar 1 2010 | 9:30am ET

It was New York University that first went to court in an effort to save what was left of a Bernard Madoff feeder fund. But the school, which dropped its suit at the behest of the New York State Attorney General’s office, shouldn’t have to bear the financial burden, a judge has ruled.

Sweeping aside an objection from the attorney general’s office, New York State Judge Richard Lowe said NYU is entitled to recover its legal fees from its once-lonely battle with J. Ezra Merkin and his fund of hedge funds, the Ariel Fund. The judge explained that the restraining order he issued at NYU’s behest in December of 2008—just weeks after the Madoff scandal broke—could have saved investors in Merkin’s funds hundreds of millions of dollars.

“It took the [attorney general], whom investors relied upon, approximately five months” to sue Merkin, Lowe wrote. “It took NYU less than two weeks.”

NYU’s move—which included its putting up a $10 million bond to obtain the restraining order—conferred “a substantial benefit” on Merkin’s investors, the judge said.

Lowe charged a special referee with deciding how much NYU’s lawyers, from the law firm of Scott & Scott, should be paid. The school is asking for $1 million.

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