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Firms Fight over Jurisdiction in Fee Allocation Dispute in MDL

May 22, 2017 | Posted in : Contingency Fees / POF, Fee Agreements, Fee Allocation / Splitting, Fee Clause, Fee Dispute, Fee Dispute Litigation / ADR

A recent the Law 360 story by Jess Krochtengel, “Plaintiffs Firms Duel Over Texas Jurisdiction in Fee Fight,” reports that a Rhode Island attorney who served as local counsel for a Texas firm in multidistrict litigation over hernia mesh made by C.D. Bard Inc. subsidiary Davol Inc. told a Texas appellate court he shouldn’t have to litigate a fee dispute in Texas.

Attorney John E. Deaton and his Deaton Law Firm LLC, both based in Rhode Island, say a Dallas trial judge wrongly refused to dismiss them from a dispute over a fee-sharing agreement with Texas attorney Steven M. Johnson and his firm, Steven M. Johnson PC.  Deaton has claimed Johnson failed to pay him 5 to 10 percent of fees earned as part of a global settlement Johnson negotiated for nearly 200 mesh cases the lawyers had worked on together.

Johnson argues that when Deaton signed a stipulation of nondisclosure related to the settlement amounts for his clients, Deaton became bound by the terms of underlying attorney representation agreements Johnson signed with his clients, including their provision disputes, would be arbitrated in Texas.  Deaton argues his role in the case is defined by his fee-sharing agreements with Johnson, which don’t have an arbitration clause.  The case has “far-reaching implications for any local counsel hired by a Texas lawyer,” Deaton attorney Brian H. Fant of Law Offices of Brian H. Fant PC said during oral argument before the Fifth Court of Appeals.

Fant said Deaton served as local counsel on 174 hernia mesh cases for Johnson in Rhode Island state court over a period of eight to 10 years, and worked on one case in federal court.  That case, involving Louisiana resident Rickie Patton, was initially filed in the Southern District of Texas, but transferred to Rhode Island District Court for pretrial proceedings.

The panel pressed Fant on what Johnson has argued are Deaton’s ties to Texas. Justice Elizabeth Lang-Miers said 13 of the 174 clients were Texas plaintiffs, and asked whether Deaton had developed relationships with those clients over the years.  Justice David Evans pointed out Deaton had recommended the Patton case be tried in Texas and that Deaton be the lawyer to try it.  And Justice David Bridges questioned the weight of the fact Deaton hired a Texas expert witness for the Patton case, which would have been tried in Texas had it not been for the global settlement.

Fant said Deaton had recommended the expert, but it was Johnson who actually hired and paid the expert witness, and said Deaton never visited Texas during that time.  And he said the expert witness’ Texas residency isn’t relevant to jurisdiction over Deaton.

Arguing for Johnson, Thomas R. Needham of The Law Offices of Thomas R. Needham said Deaton spent eight years working on a Texas federal case, establishing jurisdiction in Texas for the fee dispute.  Although the Patton case’s pretrial proceedings were in Rhode Island, Deaton’s pretrial work was all aimed at a trial in Texas, and he had availed himself of the protections of the state.

And Needham said Deaton waived his right to contest jurisdiction in Texas when he signed the nondisclosure stipulation referencing Johnson’s attorney representation agreements.  Johnson’s position is that Deaton is equitably estopped from denying the applicability of the ARA’s arbitration clause because he’s claiming benefits under the ARAs in the form of legal fees.

The case is Deaton et al. v. Johnson et al., case number 05-16-01221-CV, in the Texas Court of Appeals for the Fifth District.