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Attorneys Seek $2.5M in Fees in Legal Malpractice Case

February 1, 2021 | Posted in : Contingency Fees / POF, Fee Agreement, Fee Dispute, Fee Entitlement / Recoverability, Fee Fund, Fee Request, Fee Splitting / Sharing, Hourly Billing, Legal Malpractice, Settlement Data / Terms

A recent Law 360 story by Nathan Hale, “Attys Seek $2.5M Fees For Jay Peak-Linked Malpractice Case”, reports that attorneys who helped investors land an $8 million settlement in a malpractice suit against their former counsel in litigation over the failed Jay Peak EB-5 immigrant investor project have asked a Florida federal court to approve distribution of $2.45 million in attorney fees.

In their motion, the law firms Cheffy Passidomo PA, Hanley Law and the Barr Law Group specified how they would divide the attorneys' fund established in the deal between the 25 investors and lawyers Edward J. Carroll and Mark H. Scribner and their firms, seeking to demonstrate the value of their work and convince U.S. District Judge Darrin P. Gayles to approve the payments.

Judge Gayles last month granted a request for preliminary approval of the settlement filed by Michael I. Goldberg, the court-appointed receiver for about two dozen entities related to the Jay Peak ski resort in Vermont.  In his motion, Goldberg noted that the immigrant investors' action had gone into "meaningful" discovery, and early last year the parties to the private malpractice litigation asked him to get involved to help settle it.  The resulting settlement agreement was reached after a few months of negotiations, he said.

In the motion, the three firms elaborated on their work for the investors.  They said they participated in depositions of all 25 plaintiffs as well as Carroll and Scribner.  They also retained three experts who were deposed by the defendants' counsel.  Additionally, they engaged in written discovery, substantial motion practice and two mediations, they said.

"Attorneys' fees for plaintiffs' counsels' hourly fees to date and the rate of the contingency fee arrangements between plaintiffs and plaintiffs' counsel in this case both exceed the total attorneys' fees fund provided for by the settlement agreement," the firms said.

Following Judge Gayles' preliminary approval of the settlement, the three firms submitted a letter to the receiver's counsel saying they had agreed that the Barr Law Group should be paid $1.47 million, and Cheffy Passidomo and Hanley Law should each be paid $490,000.

The group of investors filed their suit, Cason et al. v. Carroll et al., in Vermont federal court in February 2018, and a slightly different group filed an amended complaint in August 2019, according to the settlement approval motion.  The investors brought claims for legal malpractice, breach of fiduciary duty, breach of contract, and breach of good faith and fair dealing, alleging that Carroll and Scribner mislead them and withheld information and were conflicted because they had represented some of the investors and Jay Peak receivership entities at the same time.

"Defendants were aware, or should have been aware, of information suggesting that Jay Peak was being severely mismanaged, including that investor funds were being misappropriated to backfill shortfalls in the projects," the investors claimed, accusing the Jay Peak-linked attorneys of "designing and executing" the very fraud that injured the investors.

Among the damages the investors sought was disgorgement of the attorney fees they paid to Carroll and Scribner's firm, according to the motion.  After the parties failed to resolve the case in mediation in April 2019, they called upon the receiver to help negotiate a settlement.

In the motion for settlement approval, the receiver told Judge Gayles that the agreement "provides outstanding recoveries for the Cason plaintiffs," noting that after payments to the plaintiffs and attorney fees, the receivership entities would still recover $5.2 million to be distributed to other investors and would obtain a "bar order" barring all nongovernmental claims that could be filed between the receiver and Carroll and Scribner's former firms.