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NEW YORK � Laura Balemian, whose husband Edward Mardovich died in the World Trade Center, received one of the largest awards paid out by the September 11th Victim Compensation Fund: $6.7 million. But she in turn paid out what is almost certainly the highest legal fee. While the vast majority of victims were represented before the fund pro bono or for a nominal fee, Balemian paid her lawyer, Thomas Troiano, a one-third contingent fee, or over $2 million. The propriety of Troiano’s fee is now before the courts. A guardian appointed by the Suffolk County Surrogate’s Court in New York, where Mardovich’s estate is in probate, last year challenged the fee as excessive and not in the best interests of Balemian’s four children. Troiano responded earlier this year by suing Balemian in Manhattan federal court for declaratory judgment approving his fees. The situation is an uncomfortable one for trial lawyers’ groups, who normally support contingent fee arrangements but went to extraordinary lengths to avoid being seen as profiting from the terrorist attacks. Kenneth Feinberg, the special master who oversaw the fund’s distribution of some $7 billion, submitted an April 21 affidavit in the federal case in which he called Troiano’s fee “shocking and unconscionable” in light of the fund’s purpose and its guidelines recommending attorney fees be kept under 5 percent. “In my experience of presiding over the processing and award determinations of some 7,400 claims, of conducting hundreds of individual hearings within the Program, and of meeting with thousands of families and victims in large and small groups, I have never learned of a legal fee even approaching the fee sought in this case,” Feinberg wrote. But Troiano, who declined to be interviewed for this article, said in court documents responding to Feinberg’s affidavit that Balemian’s large award, which was increased from an initial presumptive award of $1.1 million, justified the contingent fee. “Fund statistics show that lesser attorneys — or perhaps those who were marginally incentivized by the meager 5 percent fee recommended by the Special Master — achieved results that pale in comparison to the award [Troiano] obtained for [Balemian],” the lawyer said. “If anything is ‘shocking and unconscionable’ it is that, due to unabashed greed, Defendant now (more than two years after having ratified the Retainer Agreement) seeks disgorgement of fees earned by Plaintiff from the hard work, at significant personal sacrifice, he rendered for the benefit of Defendant and her children.” Southern District Judge Loretta Preska earlier this month declined to exercise federal jurisdiction over the case under the congressional act that created the fund. Finding that the Surrogate’s Court was a better forum to consider whether Troiano’s fees were appropriate, the judge stayed the federal suit pending the outcome of the Long Island proceedings. Troiano’s lawyer, Michael Rakower, said his client was weighing his options, including a possible appeal of Judge Preska’s decision. He declined further comment. HUSBAND LEFT NO WILL At the time of his death, Mardovich was the 42-year-old president of Euro Brokers, an interdealer brokerage that had offices on the 84th floor of the World Trade Center’s South Tower. The firm lost 61 of its 65 employees in the terrorist attack. According to his federal complaint, Troiano, 62, had never represented Mardovich or his wife before but was a longtime friend and neighbor in their North Shore Long Island community. He claims that, in the days after Sept. 11, a “frightened and confused” Balemian reached out to him and asked him to assist her with the legal issues arising from the death of her husband, who left no will. “She told him that he was the only person she trusted to handle such matters,” Troiano’s complaint states. “She told him that Edward Mardovich had told her that if anything ever happened to him, she should turn to Tom Troiano for help.” Troiano claims he took charge of all of the family’s legal affairs, including locating and consolidating money in Mardovich’s various accounts, finding a suitable financial planner and resolving the deceased’s partnership interest in several racehorses. For essentially becoming the Mardovich family lawyer, Troiano said he never asked for nor received any payment. But he did have Balemian sign a retainer agreement on Oct. 15, 2001. (She was Ms. Mardovich at the time. She married Robert Balemian in April 2002). The agreement states the one-third fee will be contingent on a recovery in possible lawsuits against, among others, the airlines, Osama bin Laden, the Taliban regime of Afghanistan, New York City as well as “any other legal, governmental, quasi-governmental or non-profit agency responsible for the September 11, 2001 crash or any recoverable claims resulting after the September 11, 2001 destruction of the World Trade Center.” Congress created the compensation fund on Sept. 22, 2001, as part of the Air Transportation Safety and Systems Stabilization Act. Feinberg was appointed special master in November 2001, and the fund’s rules were initially published in December of that year. In return for receiving compensation from the fund, claimants waived their rights to sue the airlines. Over 97 percent of affected families ultimately participated in the fund. AWARD CONTESTED Troiano claims he explored all possible avenues of recovery for Balemian, including tort litigation. He said he spent one year monitoring the fund’s activities and talked regularly to other participating lawyers in order to figure out how to maximize an award from the fund. He retained Conrad Berenson, a Baruch College economist, to draft a report on Mardovich’s future earning potential. This report was submitted to the fund with other records on March 14, 2003. Three months later, Balemian was notified she would receive a presumptive award of $1,087,420, based on estimated losses of $3,931,497 minus insurance offsets $2,844,256. She was given the option of requesting a hearing. Troiano claims he urged Balemian to contest the award, which she did. He represented her at an Aug. 13, 2003, hearing, calling as witnesses Berenson and the chief financial officer of Euro Brokers. On Sept. 30, 2003, Balemian was notified that her final award would be $6,656,151, based on estimated losses of $9,500,408 minus insurance offsets. Troiano was paid his fee in January 2004. In his court papers, Troiano called the final award an “astounding” result and stressed his skill and legal acumen. “Rather than greedily seeking disgorgement from Troiano,” one of his filings states, “[ Balemian] ought to be happily praising his extraordinary efforts, which yielded a lifetime of security for [her] and her children.” Balemian’s lawyer, Kevin Simmons of Syosset, N.Y.’s Simmons, Jannace & Stagg, said his client was not claiming that Troiano did not do a good job. “He obviously did,” said Simmons. “The question is how much is that worth.” Despite the 5 percent guideline, the fund’s rules defer to state law with regard to attorney’s fees. But in an interview with the New York Law Journal last week, Feinberg challenged the notion that skillful advocacy played a role in the size of victims’ awards. “I find it difficult to understand how any lawyer can request a 30 percent fee for simply filing a claim with the 9/11 fund,” he said. “It’s a nonadversarial process where the special master was working with families and family lawyers to find a way to legitimately give them this money.” Hearings that led to higher awards were a routine part of the process, said Feinberg. In his affidavit, he noted that 68 percent of the claims involving deaths had a hearing at which evidence was presented. Steven Lubet, a legal ethics professor at Northwestern University School of Law, said courts have been divided on what factors to consider in weighing the appropriateness of contingent-fee arrangements. He said some courts had taken a strict contract approach, going with the clear language of the retainer agreement. But Lubet said other courts have taken the view that “contingent fees need to be contingent on something.” These courts, he said, generally look at whether the lawyer taking the case is running a risk of nonrecovery. Simmons said that, given the nature of the fund, Troiano had run no risk at all. “There was absolutely no chance that it would be zero,” said Simmons. Complicating any consideration of the matter is the fact that so many other lawyers put aside their normal rates and fee arrangements in the wake of the terrorist attacks. Feinberg said that almost 2,000 families had received pro bono legal assistance in filing claims with the fund. Another 800 or so, he said, retained counsel at fees in the range of 5 to 8 percent. TRIAL LAWYERS’ VIEW By far the largest pro bono effort at the time was organized by the American Trial Lawyers Association, traditionally a strong advocate of contingent-fee arrangements. Over 1,100 lawyers provided free representation to 1,700 families as part of Trial Lawyers Care. At the time, ATLA President Leo Boyle called upon lawyers to follow the example of firefighters and relief workers and do their part to make sure the fund’s money “goes to families, not to lawyers. “This broad-based undertaking represents who we are and why we practice law: for the greater good. Enemies of the civil justice system have tried to define us as opportunistic, greedy, self-centered,” Boyle wrote in his column in the November 2001 issue of ATLA’s Trial magazine, “Sadly, a few of us have bolstered that image.” Joseph Awad, the incoming president of the New York State Trial Lawyers Association and a partner in Garden City, N.Y.’s Silberstein, Awad & Miklos, was one of the lawyers who participated in TLC. He said the group was holding a dinner on the fifth anniversary of the terrorist attacks to celebrate “the largest pro bono project in history.” But he was circumspect when asked about Troiano’s seeking a one-third contingent fee, noting that all such fees are subject to judicial review. “If the court rules are complied with, the contingency retainer is valid on its face,” he said. “The fact that there may be other clients who paid less or not at all is something of interest as a policy issue for the jurist reviewing it.” Richard Bieder of Bridgeport, Conn.’s Koskoff Koskoff & Bieder served as president of TLC. He said lawyers involved in the project generally avoided criticizing lawyers who were charging fees at the time. “Lawyers have a right to charge a fee,” he said. “The public knows there are alternatives out there.” But Bieder rejected Troiano’s connection between the size of the fee and the fund’s awards. He said TLC lawyers representing financial executives had also achieved results in the high end of the fund’s spectrum, also in many cases multiplying initial presumptive awards. “I don’t personally disapprove,” Bieder said of Troiano’s fee. “If a court rules it’s unconscionable, that wouldn’t bother me either.” Anthony Lin is a reporter with the New York Law Journal, a Recorder affiliate.

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