Torres v. SGE Mgmt., LLC
| Decision Date | 16 July 2021 |
| Docket Number | Civil Action No. 4:09-cv-02056 |
| Parties | Juan Ramon TORRES, et al., Plaintiffs, v. SGE MANAGEMENT, LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Jason J. Thompson, Andrew Jack Kochanowski, Tiffany R. Ellis, Lance C. Young, Sommers Schwartz PC, Southfield, MI, Scott Monroe Clearman, The Clearman Law Firm, PLLC, Brent Taylor Caldwell, Matthew John Prebeg, Prebeg Faucett & Abbott, PLLC, Houston, TX, Eric Franklin Citron, Goldstein & Russell, PC, Bethesda, MD, Jeffrey West Burnett, Jeffrey W. Burnett PLLC, Humble, TX, for Plaintiff Juan Ramon Torres.
Andrew Jack Kochanowski, Sommers Schwartz PC, Southfield, MI, Eric Franklin Citron, Goldstein & Russell, PC, Bethesda, MD, Jeffrey West Burnett, Jeffrey W. Burnett PLLC, Humble, TX, Scott Monroe Clearman, The Clearman Law Firm, PLLC, Brent Taylor Caldwell, Prebeg Faucett & Abbott, PLLC, Houston, TX, for Plaintiff Christopher Robison.
Andrew Jack Kochanowski, Sommers Schwartz PC, Southfield, MI, Eric Franklin Citron, Goldstein & Russell, PC, Bethesda, MD, Jeffrey West Burnett, Jeffrey W. Burnett PLLC, Humble, TX, Brent Taylor Caldwell, Prebeg Faucett & Abbott, PLLC, Houston, TX, for Plaintiff Lucas Thomas.
Michael McClure Wilson, Wilson Kelly LLC, Scott Monroe Clearman, The Clearman Law Firm, PLLC, Houston, TX, for Defendant Scott M. Clearman.
Brent Taylor Caldwell, Prebeg Faucett & Abbott, PLLC, Houston, TX, for Defendants Andrew Kochanowski, Matthew Prebeg.
Cody W. Stafford, Dobrowski Larkin Johnson LLP, Houston, TX, for Defendants Jeffrey Burnett, Jeffrey W. Burnett, PLLC.
Andrew Patrick LeGrand, Robert C. Walters, Gibson Dunn Crutcher LLP, Brett Stephen Rosenthal, Reese Marketos LLP, Dallas, TX, for Defendants SGE Management LLC, Stream Gas & Electric LTD, Stream SPE GP LLC, Stream SPE LTD, Ignite Holdings LTD, Chris Domhoff, Rob Snyder, Pierre Koshakji, Douglas Witt, Steve Flores, Michael Tacker, Donny Anderson, Trey Dyer, Steve Fisher, Randy Hedge, Brian Lucia, Logan Stout, Presley Swagerty, SGE Energy Management, Ltd., SGE IP Holdco, LLC, SGE Georgia Holdco, LLC, SGE Serviceco, LLC, SGE Consultants, LLC, Stream Georgia Gas SPE, LLC, Stream Texas Serviceco, LLC, SGE Ignite GP Holdco, LLC, SGE Texas Holdco, LLC, SGE North America Serviceco, LLC, PointHigh Partners, LP, PointHigh Management Company, LLC, Darryl Smith, Mark Dean, La Dohn Dean, "Trey" Dyer, A.E., III, Sally Kay Dyer, Dyer Energy, Inc., Diane Fisher, Kingdom Brokerage, Inc., Fisher Energy, LLC, Susan Fisher, Mark Florez, The Randy Hedge Companies, Inc., Murlle, LLC, Robert L. Ledbetter, Greg McCord, Heather McCord, Rose Energy Group, Inc., Timothy W. Rose, Shannon Rose, LHS, Inc., Haley Stout, Property Line Management, LLC, Property Line LP, Swagerty Management, LLC, Swagerty Energy, Ltd., Swagerty Enterprises, LP, Swagerty Enterprises, Inc., Swagerty, Inc., Swagerty Power, Ltd., Jeannie E. Swagerty, Sache, Inc., Terry Yancy, Paul Thies.
Sommers Schwartz, P.C., Pro Se.
Thomas Goldstein, Pro Se.
Eric Citron, Pro Se.
Goldstein & Russell, P.C., Pro Se.
Prebeg Faucett Abbott PLLC, Pro Se.
Charles Eskridge, United States District Judge Judge Kenneth Hoyt previously awarded attorney fees and expenses to the various counsel for Plaintiffs and their respective law firms upon their successful settlement in this case. Counsel appealed that award, and the Fifth Circuit has remanded for further elaboration. Judge Hoyt subsequently recused, with the matter transferred to this Court.
All materials before Judge Hoyt when making his original award have now been independently reviewed, and the attorney-fee award has itself been considered in light of the familiar and controlling factors outlined in Johnson v. Georgia Highway Express, Inc. , 488 F.2d 714 (5th Cir. 1974). Based on such review, the Court awards $3,010,428.00 in fees and $187,557.00 in expenses to Matthew John Prebeg of Prebeg Faucett Abbott PLLC; $1,766,994.00 in fees to and $184,347.00 in expenses to Andrew Jack Kochanowski of Sommers Schwartz PC; $1,963,327.00 in fees and $975.00 in expenses to Jeffrey West Burnett of Jeffrey W. Burnett PLLC; $1,570,661.00 in fees and $5,183.00 in expenses to Eric Franklin Citron of Goldstein & Russell, PC; and $1,505,223.00 in fees and $80,305.00 in expenses to Scott Monroe Clearman of The Clearman Law Firm, PLLC.
This is a fee dispute between the counsel who brought and litigated this action. They ultimately obtained good results for their clients through a settlement reached in October 2018. Dkt 317. The dispute over fees has toiled on, being now on remand from the Fifth Circuit for a closer review of factors as directed in Torres v. SGE Management, L.L.C. , 945 F.3d 347 (5th Cir. 2019). The following facts are generally undisputed and drawn from the unanimous panel opinion by Judge Patrick Higginbotham as docketed at Dkt 387.
Plaintiffs initially retained Jeffrey Burnett and the eponymous firm of Jeffery W. Burnett, PLLC to bring claims against Defendants for creating a multi-level marketing program that they alleged was a fraudulent pyramid scheme. Burnett in turn hired Scott Clearman and his eponymous firm of The Clearman Law Firm LLP to initiate a class action against Defendants pursuant to the Racketeer Influenced and Corrupt Organizations Act. They agreed to split any fees, with Burnett receiving 25 percent and Clearman receiving 75 percent.
Clearman later formed Clearman Prebeg LLP with Matthew Prebeg and thereafter assigned his former firm's fee interest to his new firm. Andrew Kochanowski of Sommers Schwartz, PC also eventually joined the case as class counsel. All counsel then entered into a new fee agreement under which Clearman Prebeg would receive 60 percent of any fees (to be split among its four partners) while Burnett and Sommers Schwartz would each receive 20 percent. Dkt 387 at 3.
Clearman unfortunately began to experience issues associated with substance abuse at some point in 2011. The various counsel dispute the extent of his involvement in the case thereafter. But it's apparent that the relationship between Clearman and fellow counsel (including his law partner, Prebeg) fractured and remains in a state of disrepair. Ibid.
Three partners eventually left Clearman Prebeg to form Prebeg, Faucett & Abbott, PLLC in January 2014. That same month Judge Kenneth Hoyt certified the class and named Clearman, Kochanowski, and Prebeg as co-class counsel. The latter two engaged Goldstein & Russell to defend the class certification on appeal. The various counsel (excluding Clearman) then entered into a further amended fee arrangement in June 2014 under which Goldstein & Russell would receive between 16 percent and 18 percent of the total fee award (depending on the size) and Burnett would receive another 17 percent of the total. The remainder of any fee award was to be divided amongst Prebeg, Faucett & Abbott (51.99 percent), Sommers Schwartz (30.67 percent), and Clearman (17.34 percent). Id at 4.
The class action eventually settled, with class members able to choose between two options as consideration for releasing their claims. Dkt 289-1 (settlement agreement). One was a cash option , by which class members could receive 20 percent of the difference between the amount they paid to Defendants and the amount that Defendants paid them. The other was a benefits option , by which class members could receive a number of benefits relating to () referral payments, conference admissions, and reinstatement into Defendants’ sales program. Id at 15–16.
Judge Hoyt also ultimately awarded $9,816,633.00 in fees to counsel for Plaintiffs collectively, subject to allocation. Dkts 317, 336. Clearman sought to recover fully one-half of this award. Dkt 321 at 4. Judge Hoyt instead allocated him $1,505,223.00 in fees in a November 2018 order. Dkt 336. Clearman moved for reconsideration several weeks later, which Judge Hoyt denied the same day. Dkts 337, 339.
Clearman filed a notice of appeal in December 2018 as to the fee allocation. Dkt 342. Plaintiffs, Kochanowski and Prebeg (along with their respective firms), Burnett, and Thomas Goldstein and Eric Citron (along with their firm) filed a cross-appeal, urging that the allocation was appropriate and that the appeal should be dismissed. They argued in the alternative that Clearman shouldn't be allocated any fees, but that if he received any, he should receive "no more than $840,000 in fees and costs." Dkt 348 at 3.
The Fifth Circuit vacated the award and remanded "for elaboration of the trial court's reasoning under the Johnson framework." Dkt 387 at 2, citing Johnson , 488 F.2d at 717–19. Clearman moved to recuse Judge Hoyt from the proceedings on remand, who did so on March 6, 2020. Dkts 403, 413. The action was then reassigned to this Court. Dkt 414.
Various counsel immediately filed voluminous post-remand motions regarding the dispute over attorney fees. See Dkts 388, 398, 410, 412, 419, 420. But remand in no way required a new record. Instead, each class member and associated class counsel were ordered to file a brief addressing their positions under the Johnson framework as to the material originally filed before Judge Hoyt. Dkt 421. The pending motions were all denied as moot.
Clearman filed a brief arguing that he should receive between 35 and 50 percent of the fee. Dkt 422. Citron and Burnett filed a brief arguing that the latter and his firm should receive 17 percent of the fee (totaling $1,662,724.72 in fees and expenses) while the former and his firm should receive 18 percent of the first $5 million, 17 percent of the next $3 million, and 16 percent of the remainder (totaling $1,703,182.65 in fees and expenses). Dkt 423 at 7–8. And Kochanowski and Prebeg filed a brief arguing that the former and his firm should be awarded $2,532,151.80 in fees and $184,347.26 in expenses while the latter and his firm should be awarded $3,164,170.00 in fees and $187,557.38 in...
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