Huber v. Taylor
| Decision Date | 27 April 2007 |
| Docket Number | No. 02cv304.,02cv304. |
| Citation | 519 F.Supp.2d 542 |
| Parties | Ronald L. HUBER, William J. Airgood, Anthony Defabbo, John Dinio, Ernest Gishnock, John Bidlencsik, Hilma Mullins and William Deem, individually and on behalf of those similarly situated, Plaintiffs v. Robert G. TAYLOR, II, Robert G. Taylor, II, P.C., Cletus P. Ernster, III, George E. Cire, Jr., Taylor & Cire, Taylor & Ernster, P.C., Robert A. Pritchard, Christopher Fitzgerald, Law Offices of Robert A. Pritchard, Pritchard Law Firm, PLLC, Joseph B. Cox, Jr., Joseph B. Cox, Jr., P.C., Cox and Cox, L.L.P., J. Robert Davis, Jr., and Taylor, Davis & Ernster, P.C., Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
Alisa N. Carr, Leech, Tishman, Fuscaldo & Lampl, Pittsburgh, PA, Carol A. Mager, Marjory P. Albee, Mager, White & Goldstein, Jenkintown, PA, Joseph D. Pope, Nicole Tuman, Samantha L. Southall, Kronish, Lieb, Weiner & Hellman, Joseph D. Pope, Cohen Pope, New York, NY, for Plaintiffs.
Howard M. Klein, Jeannette M. Brian, William J. O'Brien, Robert A. Klein, Conrad, O'Brien, Gellman & Rohn, Thomas C. Delorenzo, Marshall, Dennehey, Warner, Coleman & Goggin, Anita B. Weinstein, Cozen & O'Connor, Philadelphia, PA, J. Alexander Hershey, William M. Wycoff, Thorp, Reed & Armstrong, LLP, Kevin L. Colosimo, Houston Harbaugh, Willard R. Burns, Pepper Hamilton, James A. McGovern, Marshall, Dennehey, Warner, Coleman & Goggin, Charles W. Kenrick, Meyers, Kenrick & Giuffre, Pittsburgh, PA, for Defendants.
This breach of fiduciary duty case, which has a protracted procedural and factual history,1 centers around allegations by plaintiffs, who were asbestos litigants from Pennsylvania, Indiana and Ohio, who received settlements in class action litigation pending in Mississippi. All eight plaintiffs were exposed to asbestos during their work, but none have developed malignant asbestos-related disease.
Plaintiffs signed contingent fee agreements with several non-party local attorneys from their respective home states, who had previously entered into a co-counsel agreements with Robert G. Taylor, II, a Texas attorney, who, in turn, entered into "upstream co-counsel arrangements" with several attorneys, the other defendants, who were lead counsel in asbestos class action litigation primarily pending in Texas and Mississippi (collectively referred to as "Lead Counsel" or simply "defendants"). Plaintiffs currently allege that Lead Counsel breached fiduciary duties owed to them by, among other things, the failure of the non-party local attorneys to adequately disclose certain information surrounding settlement of their asbestos claims. All contact with plaintiffs concerning the litigation and settlements were by the local attorneys and ParaPro, a paralegal business affiliated with Taylor's law firm. Significantly, neither defendant Taylor (lead Texas counsel) nor any of his co-defendants had retainer agreements with plaintiffs; rather, while Lead Counsel litigated the claims and negotiated the settlements with the asbestos companies, Local Counsel maintained the traditional attorney-client relationship with the plaintiffs, with whom they had executed contingent fee agreements.
As the United States Court of Appeals for the Third Circuit elucidated in its October 31, 2006 opinion, "Taylor's fee arrangement," i.e., the arrangement between him and other lead counsel ("Lead Counsel" or simply "defendants") and non-party Local Counsel (or simply "Local Counsel"), "is the key to understanding Plaintiffs' case." Huber v. Taylor, 469 F.3d 67, 70 (3d Cir. 2006). It is against this backdrop that this Court will consider the current pending motions.
Plaintiffs, Ronald Huber, William J. Airgood, Anthony Defabbo, John Dinio, and Ernest Gishnock, are former steelworkers from Western Pennsylvania who signed retainer agreements with current non-party Attorney William Mitchell, of Washington, Pennsylvania in 1999. John Bidlencsik, is a former steelworker from Cleveland, Ohio, who signed a retainer agreement with current non-party Attorney James Tavens, also of Ohio, in 1999. William Deem and Hilma Mullins are former steelworkers from Indiana who signed retainer agreements with the current non-party law firm of Gikas & Sams, also of Indiana, in 1996 and 1997, respectively.
All eight plaintiffs were exposed to asbestos during their work, but none have developed malignant asbestos-related disease. All plaintiffs, other than Huber, are or were smokers. All plaintiffs retained the above mentioned non-party Local Counsel in their home states to prosecute their asbestos claims for a 40% retainer fee.
Rather than reiterate all of the facts from this Court's prior Memorandum Opinion on summary judgment, this Court will quote the following facts (some of which are highlighted for reasons which will be explained later in this opinion), which were aptly summarized by the United States Court of Appeals for the Third Circuit in its recent Opinion:2
Local Counsel had previously entered into co-counsel agreements with Robert G. Taylor II, a Texas attorney involved in Cosey. Taylor had his own client base in Texas but was looking to expand his asbestos client "inventory." Taylor contracted with Local Counsel to serve as co-counsel for any future asbestos plaintiffs that Local Counsel would represent in exchange for Taylor receiving between 95% and 97.5% of Local Counsel's fees if suit were brought outside of Local Counsel's home state, and a smaller amount if suit were brought in the home state. The agreements between Taylor and Local Counsel provided that, if the asbestos suits were filed in a state other than Local Counsel's home states, Texas law would govern the contingent fee contract.
Taylor's fee arrangement is key for understanding Plaintiff's case. First, it meant that employment as Local Counsel could only be profitable as volume, rote work because Local Counsel would keep only one to two percent of any particular case. Since many recoveries were in the range of a few thousand dollars, Local Counsel collected very little from any particular representation. Second, the fee arrangement meant that, all things being equal, co-counsel representations were less profitable to Taylor than representations of direct clients because of the fee-splitting involved. Third, the arrangement meant that the one to two percent local counsel cut, when aggregated among all Local Counsel, as it was from Taylor's perspective, represented a sizeable amount given the hundreds of millions of dollars of recoveries.
Taylor himself had entered into upstream co-counsel agreements with Fitzgerald and Pritchard, who in turn entered into an upstream co-counsel agreement with Joseph B. Cox. Jr. to negotiate settlements, for which Cox would receive four percent of all gross settlements. Plaintiffs allege that they were never informed of the various co-counsel arrangements.
Cox negotiated settlements with asbestos defendants W.R. Grace, Owens Corning, Fiberboard, and the Center for Claims Resolutions (CCR), an organization created, by 19 asbestos defendants to settle asbestos claims. Under the terms of all the settlements, the payout varied both by level of injury and by the home state of the claimants. In all the settlements negotiated by Cox, Northerners received payouts that were between 2.5 and 18 times lower than those received by plaintiffs from Mississippi and Texas (Southerners). Northerners, who joined in the Mississippi actions nonetheless received a larger settlement than similar asbestos plaintiffs from Pennsylvania, Ohio, and Indiana usually receive in their home state courts. Defendants, in settling these cases for Southerners, did not have to share their fees with Local Counsel, as they had to do with Northerners. Plaintiffs allege that the difference in the settlement payouts to Northerners is attributable to this incentive of Defendants to allocate a greater percentage of aggregate settlements to Southerners in order to minimize Local Counsel's percentages. This marginal percentage difference becomes significant in light of the scale of the settlements. The record contains the approximate or maximum values of eleven of the nineteen settlement agreements negotiated by Defendants. We calculate these eleven settlement agreements to total some $400 million. Therefore, on just this portion of the total settlements, Defendants stood to gain up to $10 million (2.5% of $400 million) at the expense of Northerners (and Local Counsel), depending on how the settlements were allocated between Northerners and Southerners.
Defendants reply to this allegations by asserting that the settlements were not aggregate settlements that' they then allocated as they saw fit. Instead, Defendants claims that the plaintiffs in the settled cases were presented with offers that varied for different individuals based on factors such as the type of injury or asbestos exposure, lifestyle habits like smoking, and geographic origin. Defendants claim that geographic origin is an appropriate factor in determining settlement value because jury verdicts in northern states are traditionally lower than in southern states and because, in southern courts, jury verdicts for Northerners are typically lower than for Southerners in their home state. For purposes of this appeal, we need not resolve whether these settlements were aggregated, but we note that there is language in some of the settlement agreements that strongly supports the contention that they were aggregate settlements. Moreover, the very documents Defendants cite in their brief refer to settlements as aggregates. After each of the settlement agreements was negotiated, the Northerners received various disclosures. These disclosures were made by Local Counsel and Parapro Enterprises, Inc., a...
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...tolling would be available when the original class action was filed in a district court in Pennsylvania. Huber v. Taylor, 519 F. Supp. 2d 542, 572-73 (W.D. Pa. 2007), rev'd on other grounds, 532 F.3d 237 (3d Cir. 2008). As noted in both cases, Pennsylvania law allows an individual to re-fil......
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