Sixth Circuit affirms division of proceeds among relators' firms in GE case

by Ben Vernia | September 10th, 2010

In an August 30 unpublished decision in U.S. ex rel. Lefan v. General Elec. Co., the Sixth Circuit Court of Appeals addressed how to divide a relator’s fee among the three firms which worked on the case. The underlying case related to defective jet engine components, and ended with GE paying an $11.5 million settlement (plus attorney’s fees, which were not at issue in the case). The relator’s share was $2.5 million.

The relators initially retained Kentucky’s Priddy, Cutler, Miller & Meade, on a 40% contingency basis. During the course of the case, the Priddy firm engaged Helmer , Martins, Rice & Popham, and its partner, Frederick Morgan, Jr.; the two firms entered into a contract splitting the contingent share equally. Morgan led the case for the Helmer firm, but left to join the Volkema Thomas firm. The relators wanted him to continue, and the firms all agreed. After the settlement, a dispute arose over how to divide the contingent share.

The district court adopted a magistrate’s ruling splitting the 50% share to which the Helmer firm originally agreed evenly between the Helmer and Volkema firms. The Helmer firm appealed.

The Sixth Circuit affirmed, concluding that in the absence of a term in the contract addressing the situation, parole evidence that the parties understood that the original 50/50 division between the first two firms would be unaffected by Morgan’s departure:

Here, the record supports the magistrate judge’s detailed findings that when Morgan left the Helmer firm, the Relators clearly expressed their desire that he remain in charge of their representation; that it was only at the Priddy firm’s urging that Relators agreed that the Helmer firm would continue as a counsel of record, but would do so only on a limited basis; that the Volkema firm was, in effect, the successor to the Helmer firm in its role as primary representative of the Relators; and that the parties’ conduct and negotiations at the time make clear that none of the firms took the position that paragraph 3 of the Agreement applied, and all assumed that whatever the resolution between the Helmer firm and the Volkema firm, the Priddy firm’s share would not be affected.

The court likewise rejected the Helmer firm’s argument that professional responsibility rules dictated a different result.

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