By Ruth Marcus
A federal appeals court handed Starr a 3-0 win in a high-dollar but arcane legal dispute between Meineke Discount Muffler Shops Starr's client and a group of its franchisees, who claim the company defrauded them of millions of dollars that was supposed to go to advertising.
In a 38-page ruling by Judge J. Harvie Wilkinson III, the 4th U.S. Circuit Court of Appeals in Richmond threw out a nearly $400 million judgment against the company, saying the lawsuit was improperly allowed to go forward as a class action and that Meineke was deprived of a fair trial in the case.
The decision had legal significance for a wide array of businesses that operate with franchises, as well as enormous practical implications for Meineke, which had said the judgment award would be ruinous for the company. But it attracted national attention largely because of controversy over Starr's continuation of his private law practice at Kirkland & Ellis at a time when his investigation of the president was intensifying.
Even some of his allies had urged Starr to step aside from arguing the complex case before the appeals court, saying that the preparation time was too great and that it appeared the independent counsel was not devoting full attention to the Clinton investigation.
And critics seized on his involvement in the case to criticize Starr, who has reported earning more than $1 million annually from his private practice while also serving as independent counsel an activity that is allowed under the independent counsel law.
But Starr, who had agreed months earlier to represent Meineke, decided to proceed and argued the case May 5. Last month, saying the probe had reached a "critical" stage, he announced his decision to take an unpaid leave of absence from the law firm until his duties as independent counsel are completed.
The court, in overturning the damage award, said the sprawling lawsuit should not have been allowed to proceed as a massive class action that lumped all the franchisees together and made it more difficult for Meineke to defend itself.
"In various ways this lawsuit managed to wander way beyond its legitimate origins, and at the end it spun completely out of control," Wilkinson wrote. "In fact, this lawsuit came close to visiting corporate ruin on Meineke over what is a vigorous but straightforward contract dispute, totally losing sight of the basic principle that in size and in nature a legal remedy must bear some degree of proportion to the extent of the legal wrong actually committed."
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