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Fee Allocation Dispute in Personal Injury Settlement in Texas

February 16, 2016 | Posted in : Contingency Fees / POF, Ethics & Professional Responsibility, Fee Agreement, Fee Allocation / Fee Apportionment, Fee Dispute, Quantum Meruit

A recent Texas Lawyer story, “Attorney Fee Fight Over Hefty Personal Injury Settlement,” reports that U.S. Magistrate Judge David Horan recently dealt with a fierce dispute over fee sharing among attorneys who represented a plaintiff in a personal injury case that concluded with a significant settlement with Fluor Intercontinental.

In the lawsuit, David Dawson, a civilian contractor, sued Fluor, an Irving,Texas-based construction company with energy-related projects all over the world, for severe burns he sustained in 2007 while working in Iraq.  Dawson accused Fluor of causing his serious injuries as a result of Fluor's negligent operations.

In 2012, a Dallas jury rendered a verdict in the amount of $18.78 million on behalf of Dawson.  Then, in November 2014, while the judgment was on appeal, Dawson settled his claims against Fluor for a confidential amount.

Judge Horan, the presiding judge in the U.S. District Court for the Northern District of Texas, Dallas Division, recently dismissed an argument by the Dallas attorney who was terminated from the Dawson case in 2011, but contended that he and his firm should be allowed to collect 15 percent of contingency fees.  Back in October 2010, James E. Girards and The Girards Law Firm, a Dallas firm, had been chosen by the Boulder, Colorado, firm Klein Frank, to serve as local counsel for Dawson in the case.  Klein Frank then terminated Girards from the case on Sept. 11, 2011.

In the appellate case heard by Judge Horan, Girards argued that he and his firm (Plaintiffs James E. Girards and James E. Girards P.C. d/b/a The Girards Law Firm, known collectively as Girards) should be allowed to collect contingency fees based on the work he had done in the case.

In his recent opinion, Judge Horan stated the court finds that Klein Frank had the right to terminate Girards, was justified in terminating him and did sofor cause based on Girards' "unauthorized disclosure of confidential information."  However, Judge Horan did find in favor of the Girards Law Firm in relation to their alternative request for a recovery under quantum meruit and awarded them $5,000.

"I am, of course, disappointed with the ruling on this dispute," Girards said.  "The testimony at trial was that my firm did everything it was asked to do during the litigation and it was only when the substantial settlement value of the case became obvious that the out-of-state firm sought to back out of the agreement—and only when the case was scheduled for mediation.  My firm takes seriously its obligations when acting as local counsel for out-of-state lawyers.

"Local counsel can be in a particularly vulnerable position when an unscrupulous out-of-state firm takes advantage of the local firm's resources with no intent to honor its local counsel agreement.  Here, it was revealed that this defendant-firm hired then fired multiple local firms for specious reasons in the underlying case, which strongly suggested it never intended to honor the agreements in the first place," Girards stated.

Girards explained that it is "common practice" on the plaintiffs' side of the bar for lawyers to discuss the potential value of cases amongst friends and colleagues in order to refine one's approach to the ultimate resolution of a lawsuit.

"This type of discussion has never in the past been considered an 'unauthorized disclosure of confidential information.'  For these reasons, we are examining the opinion closely in anticipation of making final decisions about how to proceed," Girards said.

James Mitchell, a founding partner with the Dallas firm PayneMitchell Law Group, is representing Girards in the appeal before Judge Horan.  William Cobb Jr. and Carrie Johnson Phaneuf are both members with the Dallas firm of Cobb Martinez Woodward, which is representing Klein Frank in the appeal before Judge Horan.

"The court made a sound, thoughtful decision—one that firmly reinforces what most lawyers already know," Cobb said.  "A lawyer who discloses client confidences, breaks the disciplinary rules and breaches his fiduciary duty to the client is justifiably terminated for cause."

Cobb also discussed the court's decision to award the Girards firm a recovery of $5,000 under quantum meruit.

"As Beth Klein testified at trial, Klein Frank has always thought it would be fair to compensate the Girards firm for the actual value of its work, and is delighted to pay the $5,000 the court found the Girards firm's legal services were worth," Cobb said.

In addition, Cobb commented on the firm that replaced the Girards firm after it was terminated from the case by Klein Frank.

"Klein Frank expresses its gratitude to Marquette Wolf and the Law Offices of Ted Lyon, who stepped in and delivered tremendous legal representation for the client after the Girards firm was discharged." Cobb said.