Firm Not Entitled to $2 Mil. in Attorney Fees

, The Legal Intelligencer


U.S. District Judge Joel H. Slomsky

An Eastern District of Pennsylvania federal judge has found that Philadelphia-based Mitts Law is not entitled to nearly $2 million in attorney fees it is seeking from former clients it represented in a RICO class action against IBM.

The court previously found that the firm, which already received a $4 million flat fee for its work on the case, was not entitled to additional fees because it breached its fee agreement with its former clients when it failed to pay third-party vendors.

In his Dec. 20 ruling in Devon IT v. IBM, U.S. District Judge Joel H. Slomsky of the Eastern District of Pennsylvania denied the Mitts firm's motion for a stay of his Nov. 21 order barring the firm from asserting an attorney charging lien for additional fees from its former clients—Devon IT Inc., Devon Ad Tech Inc. and Devon (Europe), collectively referred to as "Devon" in the opinion—in the IBM litigation.

In denying the firm's motion for a stay, Slomsky ordered $4.1 million in settlement proceeds that had been held in escrow pending the resolution of the attorney charging lien to be distributed to Devon, as well as to three third-party legal services vendors who intervened in the case after claiming that they hadn't been paid.

Slomsky said in a Nov. 21 opinion that the Mitts firm breached its fee agreement with Devon when it kept a $250,000 advance that was earmarked to pay Kroll Ontrack, the company that performed document review in the IBM case.

Slomsky said the firm also breached the agreement by failing to pay three other outside vendors from the $4 million flat fee it received.

The Mitts firm argued following the Nov. 21 ruling that Devon had attempted to dupe the court by arguing in the Eastern District litigation that the Mitts firm should have paid Kroll while arguing in separate litigation against Kroll in Minnesota federal court that the document review company was not entitled to any money because it provided poor quality service.

Slomsky, however, said in his Dec. 20 opinion that Devon's arguments in the two cases were not inconsistent and noted that the Mitts firm had a clear obligation under the fee agreement to forward the money given to it by Devon to pay Kroll.

"When a client advances funds to a law firm for a specific purpose and the law firm agrees to use the money for that purpose, the law firm has an obligation to follow the instructions to the letter," Slomsky said in the Dec. 20 opinion.

In Devon IT, according to Slomsky's Nov. 21 opinion, Devon sued IBM over unpaid royalty payments and the parties settled for $13.5 million.

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