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Federal Judge Calls Halt to Ugly Fee Dispute
The Legal Intelligencer
July 24, 2008
In a nasty dispute that erupted between two lawyers over how to divvy up more than $60 million in attorney fees stemming from a massive class action over alleged price fixing in the market for corrugated paper products, a federal judge has ordered both lawyers to stop their fighting because the dispute was settled nearly four years ago.
In a pair of lengthy opinions handed down last week, Senior U.S. District Judge Jan E. DuBois found that attorney John F. Peoples had settled his dispute in 2004 with attorney Howard Langer of Langer Grogan & Diver for about $2.9 million after negotiations before U.S. Magistrate Judge Thomas J. Rueter.
But the litigation continued long after the settlement when Langer accused Peoples of making a series of threatening phone calls and Peoples continued to argue that he was being cheated out of his fair share of the fee award.
The depth of the bad feeling between the two lawyers was laid bare in a May 2007 hearing when Peoples testified that he was "going to try" not to violate a court order that barred him from telephoning Langer, but said "it's still very difficult because of the hatred that I have for [Langer], it's very difficult."
Now, more than a year after that hearing, DuBois has denied all pending motions in the case, rejecting Peoples' motion that DuBois recuse himself due to an alleged improper relationship with Langer and rejecting Langer's motions that Peoples be held in contempt and referred to the chief judge for possible sanctions.
"This drawn-out personal quarrel between Langer and Peoples must end -- it warrants no further imposition upon the judicial system," DuBois wrote.
Langer served as the lead plaintiffs lawyer in a multidistrict class action captioned In re Linerboard Antitrust Litigation that generated more than $202 million in settlements.
After approving the settlements, DuBois awarded 30 percent of the fund to a team of plaintiffs lawyers from more than 30 firms, and ordered that Langer, as liaison counsel, would be solely responsible for deciding how the $60.7 million in fees should be allocated.
According to court records, Langer awarded $2 million to Peoples.
But Peoples was unhappy with his share and filed suit in state court demanding that Langer honor an agreement in which Peoples claimed he was promised a referral fee of 10 percent for a significant portion of the case relating to purchasers of corrugated boxes.
In the suit, Peoples claimed he was entitled to $4 million in attorney fees from the settlement of the box class action component of the case as well as punitive damages and demanded that Langer be ordered to escrow $6 million "pending the final outcome of the litigation."
Langer responded by removing the suit to federal court and seeking an injunction that would bar Peoples from litigating before any judge other than DuBois.
In a July 2004 order, DuBois sided with Langer and issued an injunction under the All Writs Act that barred Peoples and any other lawyer from litigating any issue relating to the Linerboard fees in any forum other than the Eastern District of Pennsylvania federal court.
The order said the injunction was "necessary to preserve the court's jurisdiction over all matters relating to the award and allocation of counsel fees."
Soon after, Peoples moved to have his suit remanded and to dissolve the injunction.
But those motions were never decided, according to court records, because both sides agreed to go to a mediation before Rueter.
After several settlement conferences, Langer and Peoples struck a settlement in December 2004 in which Peoples' share was increased to $2.94 million. Under the terms of the settlement, Peoples also promised not to pursue any disciplinary complaint against Langer, saying he "neither has nor knows of any grounds for such a complaint."
But Langer later returned to court seeking another injunction against Peoples for allegedly making a series of threatening phone calls during and after the time his settled case was pending.
Langer included transcripts of messages left by Peoples, including several calls that occurred after the settlement was struck.
According to court papers, Peoples acknowledged in the hearing that he had left the messages in which he told Langer that Peoples was sending a letter to the disciplinary board, and that Langer's former partner was "gonna find out" how much Langer had earned in the Linerboard case.
In one message, Peoples said: "I hope you enjoy the newspaper coverage that's -- that's uhh, coming up right after we settle." In two others, Peoples said, "I haven't forgotten."
Peoples testified that he left the messages "to just express my anger and also to let [Langer] know that [he] better never ask me for another case."
DuBois issued a temporary restraining order in May 2005 in which he enjoined Peoples from "having any contact or other communication, or leaving any messages" for Langer, and from "making any defamatory statements regarding Howard Langer, and from undertaking any other action of any kind, directly or indirectly, having the intended or the necessary effect of harming Howard Langer or his family in any fashion."
But DuBois also ordered that his injunction be held "in strict confidence" and that it "shall not be filed of record unless there is a reported violation."
In June 2006, Peoples left another telephone message on Langer's voice mail, saying: "I didn't forget you." Peoples later acknowledged in a hearing that he had left the message but denied that it was threatening. When questioned why he left it, Peoples said: "It's just almost every night I think about this case, and I just bubble over with anger and it's -- you can't make it go away."
Langer sought an order holding Peoples in contempt and asked DuBois to impose a "prospective coercive civil contempt remedy" in the form of fines that Peoples be ordered to pay for any future violations.
DuBois held a contempt hearing in May 2007 but has now ruled that Peoples should not be held in contempt because he has not left another message since June 2006.
"The court has already determined that the telephone messages on Langer's voice mail were largely a consequence of Peoples' severe mental and physical afflictions, and that Peoples has sought psychiatric help since the June 29, 2006 telephone message that gave rise to the instant dispute," DuBois wrote.
DuBois also refused to impose any sanctions on Peoples or refer the matter to Chief U.S. District Judge Harvey Bartle III for possible disciplinary action.
Instead, DuBois repeated his plea that both lawyers bring an end to their dispute.
"The myriad of motions [before the court] relate to a fee dispute between Peoples and Langer that was settled almost four years ago. This drawn out personal quarrel between the two of them must end. It warrants no further imposition on the judicial system," DuBois wrote.
In his recusal motion, Peoples argued that Langer and DuBois share a "close," "special" and "unacceptable" relationship, and accused DuBois of conducting ex parte meetings with Langer.
"That is absolutely false," DuBois wrote, noting that all of the court's meetings with Langer also included defense liaison counsel and any other lawyer on the case who wanted to participate.
DuBois also flatly rejected Peoples' claim that the court showed favoritism for Langer.
"This court's actions have not displayed any favoritism toward Langer or antagonism toward Peoples," DuBois wrote.
"Peoples does not present any evidence that the court prejudged his claims or made statements indicating prejudgment, because there is no such evidence. And, in appointing Langer as liaison counsel, the court did not 'align' itself with any party. That appointment of Langer and that 'relationship' to him provides absolutely no basis for recusal," DuBois wrote.
In an interview, Peoples vowed to continue his court battles with Langer, noting that he has instituted suit in the Delaware County Court of Common Pleas in which he intends to pursue what he views as his rightful share of the Linerboard fees.
"This was supposed to be the happiest day of my life ... and instead it turned into a nightmare," Peoples said.
Peoples said he settled the dispute "with a gun to my head," but that he believes the settlement was legally invalid because the federal courts never had jurisdiction over his dispute with Langer.
Because the dispute centers on a referral fee, Peoples said, DuBois had no jurisdiction and should have remanded the case to state court. Peoples said he never entered his appearance in the Linerboard case and that courts have held that in such circumstances, the judge presiding over the case has no jurisdiction to resolve referral fee disputes.
Under the referral fee agreement, Peoples said, he is entitled to 10 percent of the fees that were generated as a result of the client he referred to Langer and the successful legal theory that Peoples proposed for expanding the Linerboard case to include a class of purchasers of corrugated cardboard boxes.
Langer declined to be interviewed. But in court papers filed this week, Langer and his lawyer, Robert J. LaRocca of Kohn Swift & Graf, urged DuBois to reconsider a portion of his July 15 order in which he dissolved the injunctions against Peoples.
In the motion, LaRocca argues that Peoples is continuing to litigate the issue by filing a writ of summons in Delaware County.
"The court should not fold the umbrella and withdraw after the rain has begun," LaRocca wrote, adding that, in addition to reinstating the original injunction under the All Writs Act, the court "should also enter a separate injunction under the relitigation exception, barring Mr. Peoples, once and for all, from raising the issue of the fees related to the Linerboard litigation in any forum."
