A lawyer for Best Buy Co. (BBY) has acknowledged that he falsified emails and a memo before turning them over to plaintiffs in a nationwide class-action lawsuit - a development that could prompt the judge to find the company liable for tens of millions of dollars in damages.

King County Superior Court Judge Douglass A. North Jr. has previously scolded Best Buy for not being forthcoming with documents related to the case, so last month's revelations about the actions of Minneapolis attorney Timothy Block do not bode well for the company.

The lawsuit, filed in 2003, accuses Best Buy of signing up at least 100,000 customers for trial subscriptions to Microsoft Corp.'s (MSFT) MSN Internet service from 1999 to 2003, in many cases without their knowledge. Once the trial period ended, the customers began incurring credit card charges they had not approved.

Microsoft, which paid Best Buy for each customer it signed up, is accused of allowing Best Buy's practice to continue even after receiving complaints. The lawsuit aims to hold Best Buy, Microsoft or both financially liable; if the judge enters a default judgment against Best Buy, Microsoft would essentially be off the hook, said Beth Terrell, a Seattle-based attorney for the plaintiffs.

For now, the case has been stayed while Best Buy finds new outside counsel. Block's firm, the prominent Minneapolis firm of Robins, Kaplan, Miller and Ciresi, asked to withdraw after he admitted May 23 to redacting or otherwise altering the documents. A hearing on the withdrawal motion is set for June 22.

“Mr. Block confirmed that no other person at RKMC, and no person at Best Buy, were aware that he had changed documents,” the firm said in a court filing the next day. “RKMC has begun its investigation into the number of documents that were altered and is attempting to locate the original (pre-alteration) documents.”

Block reported his wrongdoing to Minnesota's Board of Professional Responsibility as well as the three other states where he is licensed to practice, and is on medical leave for stress and depression, said his attorney, Richard Thomas.

The altered documents are limited to two emails and one memo, Thomas said. The documents have not been publicly released.

Asked why Block falsified the documents, Thomas said, “I don't know that even he can tell you that. ... I don't think he is going to claim his actions were motivated by Best Buy.”

But given the extent of Best Buy's foot-dragging regarding document production in the case, Terrell and another attorney for the plaintiffs, Dan Girard of San Francisco, wondered aloud whether Block felt pressured by the company to withhold or redact documents that could prove damaging. A senior partner at Block's firm, Elliott Kaplan, is a director at Best Buy.

“Best Buy has been violating court orders willfully. This is sort of the last step,” Terrell said.

Steven Schumeister, managing partner at Robins Kaplan, said it is clearly a case of individual wrongdoing by someone going through a difficult time. The firm remains concerned for Block and his family, he said.

“We and Best Buy have acted promptly and properly to make all of the required disclosures and to work to resolve this matter,” Schumeister said.

Best Buy spokeswoman Dawn Bryant emphasized that the company “had absolutely no knowledge of the inappropriate and unethical actions the attorney took.”

At a hearing in March, the judge scolded Best Buy and its lawyers for failing to follow orders directing them to turn over documents requested by the plaintiffs, and to identify and log any documents they believed were not subject to disclosure. North said he was hoping to avoid entering a default judgment against the company, but that he would have little choice if Best Buy didn't start playing ball.

“I don't know and I don't really care at this point whether it's you, some functionary in your firm, or your legal team, but I do know that somebody in your camp is interfering with discovery in this case,” North said, according to a transcript.

In response, Block said Best Buy spent more than $250,000 to create an electronic system to search documents. He told North that he felt "great trepidation" and "almost a feeling of personal failure" that the judge still believed Best Buy was not cooperating.

Source: CNN Money.com, 6/5/07