Firm Not Entitled to $2 Mil. in Attorney Fees
Upon learning that Devon intended to use a portion of that money to pay its creditors, rather than the Mitts firm or its third-party vendors, a fee dispute arose between the firm and Devon, according to Slomsky.
That fee dispute led the court to place in escrow $4.1 million of the settlement proceeds Devon was to receive, according to Slomsky.
The Mitts firm and three intervening third-party vendors—EconLit, ParenteBeard and FranklyLegal—asserted a charging lien against the funds, but Slomsky ruled Nov. 21 that a charging lien would not be applied.
Slomsky did, however, find that EconLit, ParenteBeard and FranklyLegal were all entitled to be paid under the law of equitable estoppel for work they performed between certain dates.
Following that order, EconLit and Devon stipulated that EconLit was owed about $340,000; FranklyLegal and Devon stipulated that FranklyLegal was owed about $277,500; and ParenteBeard and Devon stipulated that ParenteBeard was owed about $450,000, Slomsky said.
Per Slomsky's Dec. 20 order, the remaining approximately $3 million will be distributed to Devon Ad Tech.
The Mitts firm, meanwhile, had argued that it was entitled under its fee agreement to nearly $2 million in attorney fees from Devon, including more than $1 million in outstanding hourly fees, along with $675,000 in contingency fees from the $13.5 million settlement proceeds and more than $240,600 in contingency fees from the royalty payments IBM made to Devon. Slomsky, however, said in his Nov. 21 opinion that the firm was not entitled to any of that money because it had breached its fee agreement with Devon by failing not only to pay Kroll the $250,000 but also to pay EconLit, ParenteBeard and FranklyLegal from the $4 million flat fee.
According to Slomsky's Nov. 21 opinion, the Mitts firm had received the $4 million pursuant to the fee agreement to handle several cases, including the IBM litigation, and was supposed to pay all litigation expenses using that money.
The fee agreement also provided for a 5 percent "bonus" contingency fee from any recovery in the IBM litigation, Slomsky said.
Instead, Slomsky said in the Nov. 21 opinion, the firm used the $4 million to pay its own invoices rather than the outside vendors and, despite also keeping $720,000 of that money as fees earned, represented to Devon that it had exhausted the entire $4 million on litigations costs.