June 13, 2019 / 8:36 PM / 3 days ago

New malpractice suit highlights mass tort referrals, fee splitting

(Reuters) - In a class action complaint filed this week, the plaintiffs’ firm Mazie Slater Katz & Freeman alleges that several New Jersey and Texas law firms committed procedural violations and overcharged clients in about 1,450 mesh cases brought in New Jersey state courts. According to the complaint, the law firms – including Nagel Rice, the Potts Law Firm, Bailey Cowan Heckaman, Annie McAdams and Junell & Associates – failed to sign clients to retainer agreements or purported to bind clients to contracts that don’t comply with New Jersey laws and ethics rules. The complaint, filed in Superior Court in Bergen County, New Jersey, asserts claims for malpractice, breach of fiduciary duty and unjust enrichment.

Bruce Nagel of Nagel Rice, who is also named individually as a defendant, said in an email that the new suit is retaliation for an unrelated malpractice suit he brought against a Mazie Slater name partner. He also pointed to Mazie Slater’s ongoing efforts to recoup a bigger share of fees from the pelvic mesh multidistrict litigation in federal court in Charleston, West Virginia. Mazie Slater, is “whining about being shorted the fee split in the mesh MDL and are suing other firms too,” Nagel wrote. “What a pathetic shame.”

None of the other firms named as defendants responded to my queries about the allegations.

Mazie Slater partner Adam Slater, who signed the class action complaint, declined to provide me with a statement about the new suit. He told the New Jersey Law Journal, in response to Nagel’s assertion that the class action is retaliatory, that the new case has nothing to do with previous litigation.

What intrigued me about the complaint is its implication that the firms named as defendants made up a network that collected and referred mesh cases as the mass tort was developing. The complaint does not document the involvement of all of the firms named as defendants in the mesh case brought in New Jersey state court by the named plaintiff, Debbie Gore, but suggests that “some or all” of the defendant law firms shared in the fees from Gore’s settlement.

The complaint alleges that Gore signed a retainer agreement in 2013 with an unspecified firm that was allegedly invalid under New Jersey law. Among other alleged problems, the contract included a 40% contingency fee – New Jersey caps such fees at 33% – allowed the fee to be deducted off the top of the settlement and failed to disclose all of the firms that would be splitting the fee. Even though Gore did not have a valid retainer agreement with Nagel Rice or the Potts Law Firm, the complaint said, those firms signed a mesh lawsuit on her behalf in New Jersey state court – just as Nagel and Potts allegedly did in 1,450 other suits, “all with similarly noncompliant or nonexisting retainer agreements,” the complaint said.

Gore’s case, and allegedly those of the other mesh plaintiffs whose suits were filed by Nagel and Potts, settled in September 2016. According to the complaint, the law firm defendants split the “substantial attorneys’ fees and expenses” they extracted from these settlements, even though Gore had never agreed to the fee-sharing arrangement and “the sharing of fees was not based on actual work performed on the … cases.” The complaint’s implication is that the Nagel and Potts firms had some sort of referral agreement with the unspecified firm that Gore originally signed up with.

The suit demands documents from the law firm defendants, so we may learn a lot more about the referral relationships among them. As you know, the commodification of mass torts reached previously unscaled peaks in the pelvic mesh litigation, with legal marketers – some of them law firms, some not – running television and social media ads and conducting telephone campaigns to find and screen clients, then referring cases to litigating firms. Hundreds or even thousands of cases might be transferred at a time, and sometimes suits changed hands several times along the way. A few years back, when I was investigating the origins of mesh suits, I talked to dozens of plaintiffs whose cases had been transferred from firm to firm, often without their consent or even knowledge. In many instances, women complained that they didn’t know who to talk to about the status of their suits.

Law professor Elizabeth Burch of the University of Georgia is looking more systemically at how women fare as mass torts plaintiffs. I asked her to take a look at the new complaint. Burch told me that she’s heard similar stories from many of the women she has spoken to. (She has received survey responses from 350 women and has talked to about 25.) With the caveat that her sample may skew toward disgruntled plaintiffs, Burch said many of the women she’s talked to feel frustrated about their cases being handed off from lawyer to lawyer.

“Most of them don’t have any idea where their case was filed,” Burch said. “They have no idea who signed their complaint.”

Burch said the referral phenomenon in mass torts raises both practical and moral issues. Which state bar regulates referral relationships that cross state lines, for instance? The new suit by Mazie Slater, for instance, asserts allegations against New Jersey and Texas law firms. Do New Jersey rules on contingency fees and fee-splitting apply to the Texas firms? Does Texas’ client-friendly precedent on fee forfeiture apply in a case filed in state court in New Jersey? And can the class action even remain in state court or will defendants remove it to federal court?

And then there are the big questions, Burch said, about relationships between lawyers and the human beings they represent. The business of personal injury litigation has changed irrevocably. Mass torts marketing means that more people are aware of their potential legal claims – but it also means client relationships are attenuated and plaintiffs feel neglected.

The new lawsuit attempts to transform that feeling of neglect into causes of action. If it succeeds – admittedly, a big if at this early stage – I suspect there will be plenty more to come.

(This story has been updated to include comment from defendant Bruce Nagel.)

About the Author

Reporting by Alison Frankel

The views expressed in this article are not those of Reuters News.

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