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An interstate dispute in New York over attorneys’ fees has caused a New York firm and its Washington, D.C., co-counsel to file a breach of contract and slander suit against a Missouri firm and two Illinois lawyers who claim they were shortchanged for work in a class action against an electronics manufacturer. The suit was filed Tuesday in the Southern District of New York by Manhattan-based Shalov Stone & Bonner and Washington, D.C-based Cohen, Milstein, Hausfeld & Toll, which maintains an office in Manhattan. The firms served as co-lead counsel in a 1998 lawsuit brought in Indiana against Thomson Consumer Electronics Inc., regarding allegedly defective television sets manufactured by the Lancaster, Pa.-based company. In July 2000, the firms expanded their litigation by filing class actions in five other states, including Illinois, where they chose Carey & Danis, a St. Louis firm, to serve as local counsel. The case eventually reached a settlement in which Shalov Stone and Cohen Milstein received $22 million in attorneys’ fees and expenses they advanced on behalf of the class, which consisted of 10 million people. The class received varying relief ranging from dollar-for-dollar refunds for repairs to coupons ranging from $25 to $50, depending on their ability to show they suffered damages. According to the Southern District complaint, the firms allocated $500,000 to Carey & Danis. Illinois attorney Andrea Lamere, who also worked on the case and is named as a defendant, was allocated $6,000 for her work. The two Manhattan firms claim they expected another Illinois attorney, David Nester, to be paid by Carey & Danis. “Carey & Danis specifically agreed with [Shalov Stone] and Cohen Milstein that any fee to be paid to Carey & Danis in connection with the Thomson litigation would be left to the complete discretion of [Shalov Stone] and Cohen Milstein,” the complaint stated. “Carey & Danis has breached its agreement … by asserting its right to the payment of fees well beyond those that were allocated to it … and even further beyond those to which it is entitled based upon its negligible contribution to the result reached in the Thomson litigation.” Shalov Stone and Cohen Milstein also allege that Carey & Danis made false and extortionate statements in an attempt to be paid an additional sum. Specifically, the firms said Carey & Danis claimed to have been promised $1 million, and that if Carey & Danis was not paid at least $850,000, it would interfere with the payment of attorneys’ fees by seeking a court order for 10 percent of the total fee. Apparently upping the ante, Carey & Danis later sent Shalov Stone and Cohen Milstein a letter informing them that Carey & Danis, along with Lamere and Nester, were asserting a lien on the settlement amount until they receive at least one-third of all fees paid in the case, a sum of over $6 million, the complaint alleges. “Despite the fact that Carey & Danis became involved in the case almost two years after it had been commenced, played no role whatsoever in the underlying litigation against Thomson, and did not negotiate the settlement with Thomson or its counsel, Carey & Danis has demanded millions of dollars in legal fees for itself and other attorneys that had nothing to do with the case,” said Shalov Stone partner Lee S. Shalov in an interview. “We will not countenance such tactics, and, therefore, have been forced to bring this action.” Carey & Danis partner John Carey, when asked about his firm’s position regarding the fees, disputed the complaint’s allegation that his firm’s work on the case was “negligible.” He claimed Shalov Stone and Cohen Milstein severely undervalued Carey & Danis’ contribution to the case. “The Illinois co-counsel worked diligently on behalf of the class and achieved an outstanding result in the Circuit Court of Madison County,” Carey said in an interview. “We were shocked and dismayed when our co-counsel … put their own interests first, despite our stellar work on behalf of the class, by arbitrarily granting themselves millions of dollars more than they were entitled to in fees.” Cohen Milstein partner Andrew Friedman, in turn, contradicted Carey’s claim that Carey & Danis was not compensated adequately for its work on the case. “The settlement terms and the final order and judgment in the Thomson case gives complete discretion to the lead counsel to allocate the fees, and we think we’ve done so more than fairly with regard to Carey & Danis,” Friedman said. “They did put some time in the case, but they played a very small role and they were compensated very handsomely for it.” JURISDICTION QUESTIONED The complaint alleges breach of contract based on the contention that Carey & Danis broke an oral agreement that Shalov Stone and Cohen Milstein would be solely responsible for determining that allocation of funds. Additionally, Shalov Stone and Cohen Milstein claim that the lien placed upon the settlement funds by Carey & Danis amounts to slander. “By asserting the fraudulent lien described above and by making additional claims to an entitlement to be paid more in fees than the amount allocated to them … each of the Defendants has slandered the title of [Shalov Stone] and Cohen Milstein to that property.” The complaint asks for a declaratory judgment stating that the defendants are not entitled to the money they claim. It also seeks damages in an amount to be determined at trial, including interest, as well as attorneys’ fees. The Southern District’s jurisdiction over the case will be disputed, however. Carey has stated that a forum challenge will be forthcoming. “[W]e are presently seeking relief in the only legitimate forum — the Circuit Court of Madison County,” Carey said. “The lawsuit by our co-counsel is a transparent attempt to usurp the jurisdiction of the Illinois court. By the terms of the class action settlement agreement, the Illinois court has exclusive jurisdiction to resolve all issues concerning the class settlement, including the fair and equitable allocation of the attorneys’ fees.” For his part, Friedman said he believes any such jurisdictional challenge will fail. “The [Illinois] court already ruled on the fees so there isn’t anymore decision to be made in that respect,” Friedman said. “Moreover, the money that was the subject of this was wired to New York. That’s why there is an action in New York.” Shalov Stone is a four-attorney firm, concentrating in class actions and complex litigations. Cohen Milstein, with 28 attorneys, also handles class action cases. Copyright 2001 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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