A Texas lawyer whose $4.1 million payment from Labaton Sucharow is at the heart of a special master’s inquiry has worked with the New York plaintiffs firm in at least three other high profile litigation matters, according to declarations submitted last week.
Labaton partners Christopher Keller and Eric Belfi filed the declarations in response to an Oct. 16 order by Judge Mark Wolf of the U.S. District Court for the District of Massachusetts asking for more information into the firm’s relationship with Houston lawyer Damon Chargois. Wolf is considering whether to approve a deal struck earlier this month between Labaton and special master Gerald Rosen, whose investigation into potential overbilling revealed that Labaton had failed to disclose what he called a $4.1 million referral payment to Chargois. The Houston lawyer had ties to the lead plaintiff in the State Street case, Arkansas Teacher Retirement System.
In declarations filed on Thursday, Keller and Belfi listed at least three other litigation matters in which Chargois worked with Labaton but, unlike the State Street case, actually worked on the cases—or planned to do so. In State Street, Keller wrote in his declaration, the “Chargois situation was and is an outlier.”
“Like virtually all other law firms, we have many matters derived from referrals and recommendations from peer law firms,” Labaton wrote in a statement. “Aside from the one Chargois-ATRS arrangement, none of our other referral arrangements included fees paid based solely on introductions or client referrals. In all instances where another attorney has referred a client to us, that attorney has also worked on the referred case.”
Chargois of Mashayekh & Chargois did not respond to a request for comment.
In his report, released publicly on June, Rosen found that the three plaintiffs firms—Labaton, the Thornton Law Firm in Boston and San Francisco’s Lieff Cabraser Heimann & Bernstein—had overbilled and should return more than $10 million to class members. He also found that Labaton, which failed to disclose the referral payment, should contribute as much as $8.1 million.
On Oct. 10, Labaton agreed to return more than $4.8 million in attorney fees and make several internal changes as part of its deal with Rosen.
Wolf, whose order sought to answer several questions he had about the deal, has scheduled a hearing for Nov. 7.
The judge specifically asked Keller, co-chairman of the firm, and Belfi, who serves on the executive committee, to address whether Labaton had agreements with Chargois or anyone else to share fees “solely for assistance in obtaining clients for Labaton.”
In their declarations, both lawyers clarified that Labaton had an agreement with Chargois & Herron to develop institutional clients.
“The expectation and original intent of this agreement was that Damon Chargois would provide legal assistance with those potential clients and would be involved in representing the client in the cases,” Belfi wrote in his declaration. “If Chargois was able to help jointly develop these clients, he would be entitled to receive up to 20 percent of Labaton’s fees relating to these clients, if, at least as Labaton understood the agreement, the client was the lead plaintiff or co-lead plaintiff. However, other than the Arkansas Teacher Retirement System, those efforts were unsuccessful. Chargois never developed any pension fund clients beyond ATRS.”
Labaton and Mashayekh & Chargois worked on other cases together, however. Both firms filed two individual securities cases against BP plc following the 2010 Deepwater Horizon spill, according to the declarations. Those cases are now part of multidistrict litigation in Houston. “If and when the cases settle or plaintiffs obtain a favorable judgment, Chargois will be entitled to a fee based on the work he performed as local counsel in the cases,” Keller wrote.
Labaton and Mashayekh & Chargois also jointly represented seven clients in multidistrict litigation in Miami federal court over recalled Takata airbags, but none actually filed lawsuits, so no fees were paid, according to both declarations.
Chargois also referred a client to Labaton in 2014 who filed an antitrust class action over capacitors, according to the declarations. That case became part of the related multidistrict litigation in San Francisco federal court and, when it settled, Mashayekh & Chargois got $23,655, or 10 percent of the fee awarded to Labaton in that case.
“I am unaware of any current or on-going agreements, whether written or unwritten, that Labaton has to share fees with anyone else solely for assistance in obtaining clients for Labaton, i.e., a bare referral fee,” Keller wrote. “Indeed, it was always the intention, including with Chargois, that the referring counsel would play an important role locally with the client. To my knowledge, the Chargois situation was and is an outlier.”