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Richard Scrushy seems to spar with his own lawyers almost as much as he brawls with the government. Earlier this year, his one-time counsel Jones Day threw its own haymaker at the founder and former CEO of HealthSouth Corp., filing a $3.4 million lawsuit in the U.S. District Court for the District of Columbia for unpaid legal bills. The fees, the firm said in court filings, dated back to an eight-month period beginning in March 2003 when the firm, led by partner Jonathan Rose, worked to help Scrushy unfreeze assets seized by the government. But Scrushy dropped Jones Day from his legal team shortly after the Justice Department unsealed a multicount indictment against him on charges of securities fraud. Scrushy didn’t take lightly to Jones Day’s accusations, firing back with a detailed brief and copies of the fee agreement. He not only disputed the amount claimed but further alleged that the firm was “wrongfully holding in excess of one million dollars of unearned fees.” According to a contract written by Scrushy’s lead lawyer, Donald Watkins, Scrushy agreed to pay Jones Day a flat $5 million retainer as soon as his assets were unfrozen, against which Jones Day would bill (at $500 to $800 an hour) for the Securities and Exchange Commission case and related criminal investigation. The firm also expected a fixed fee of $5 million for work on other legal matters. (Additionally, the contract details agreements with other firms. Chadbourne & Parke, which was later fired, was to receive a similar $5 million retainer, as was the Alabama firm of Thomas, Means, Gillis & Seay, which billed at a slightly lower rate of $300 to $500 an hour. Watkins expected a flat $10 million, half paid up front.) After a grueling fight, a judge freed Scrushy’s assets. In court documents, Scrushy claimed that he paid Jones Day the agreed-upon $5 million. Jones Day says it was fully paid for that work, but the firm says that it only received $2 million for later work, about half of which was still held in a trust. Scrushy contends Jones Day never even billed the full amount covered by the retainer. Whatever the case, on June 19 Jones Day withdrew its case with prejudice, an indication that a settlement might be in the offing. But neither side, not even the media-friendly Scrushy, would comment. Emma Schwartz can be contacted at [email protected]

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