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When attorneys agreed to champion the causes of American victims of terrorism in the Middle East, it wasn’t supposed to be about the money. But the prospect of multimillion-dollar fees in what once seemed to be long-shot litigation against Iran has left lawyers fighting over fees in federal court in Washington, D.C. High principles of international law and justice aren’t at stake. It’s simply a matter of who gets paid. On March 7, D.C.’s Jackson & Campbell sued John McDermott, a former nonequity partner at the firm, in U.S. District Court over a $3 million fee growing out of McDermott’s representation of Robin Higgins in a federal trial last year. Higgins is the widow of Marine Col. Rich Higgins, who was tortured and killed in 1989 by Hezbollah terrorists in Lebanon. She won a default verdict of more than $55 million in compensatory damages and $300 million in punitives. In a separate case, Steven Perles, a D.C. sole practitioner, in January sued Anne-Marie Kagy, a lawyer who used to work for him on terrorism cases. Perles brought two suits, including one on behalf of the family of Alisa Flatow, an American student killed in 1995 by Arab terrorists in Gaza. Flatow’s family won a $247.5 million verdict. Kagy claims she is entitled to one-third of Perles’ contingent fees, or just under $3 million, for the cases. Perles says he’s willing to pay Kagy the reasonable value of her time, or about $75,000. The fee fights began brewing after former President Bill Clinton signed a bill just before Election Day 2000, freeing up $400 million in a frozen Iranian bank account in the United States for victims who had won judgments against Iran. The fund covered only compensatory damages, not punitives. The new law transformed cases that had once seemed quixotic. During the litigation, Iran’s representatives had not shown up in a U.S. court, and without the legislation, there was no apparent way of collecting a dime. Now lawyers representing Higgins, Flatow, and other victims who had already won their cases applied to the U.S. Treasury for their share of the funds. FEE FOR ALL The Higgins complaint was filed in 1999 by McDermott, who joined Jackson & Campbell in August 1997. It went to trial before U.S. District Judge Colleen Kollar-Kotelly on July 10, 2000. Since Iran did not defend itself, McDermott’s efforts required only one very successful day of trial. On Sept. 18, 2000, McDermott left the firm to become a partner at the D.C. office of Tulsa’s Hall Estill Hardwick Gable Golden & Nelson. Three days later, Judge Kollar-Kotelly handed down her default judgment in favor of Robin Higgins and her estate, a month or so before Clinton would sign the anti-terrorism bill into law. Jackson & Campbell’s fee agreement with Higgins gave the firm 20 percent of whatever money Higgins received. Based on compensatory damages alone, that computed to more than $11 million. But by agreement the firm’s fee was capped at $3 million. After McDermott left, Jackson & Campbell sued to block him from taking the lion’s share of the fee. The firm hired high-stakes litigator Michael Nussbaum of the D.C. office of Boston’s Ropes & Gray to fire the first shot. But in his court papers, McDermott argues that he is entitled to nearly all of the money. He explains that when he was hired by Jackson & Campbell, he signed an agreement that covered exactly this event. If McDermott were to leave the firm and take a contingency case with him, the firm would be entitled only to receive twice its normal billing rate for its work on the case, the agreement reads. McDermott says that amount in Higgins’ case is about $217,500. Jackson & Campbell responds that this agreement expired on Dec. 31, 1998, and that there was no specific understanding between McDermott and the firm after that. Therefore, in 2000, says the firm, the “bylaws and practices of Jackson & Campbell governed the terms of McDermott’s employment.” The firm says McDermott is entitled only to his salary during the course of his litigation efforts, not to a chunk of the Higgins contingent fee. He already received his salary, the firm notes. Says Nussbaum, who often represents attorneys or firms embroiled in disputes with one-time allies: “We’ve placed this matter before the courts for resolution. We’ve asked the courts to declare the rights of the parties.” Attorneys close to the litigation say that several efforts to settle have failed and that the sides remain far apart on the key contract issue. “My position is that Jackson & Campbell and I should share in the fee, and their position is that they should get it all,” says McDermott. “But most cases settle, and I hope this one will settle too.” McDermott’s lawyer, D.C. sole practitioner Paul Knight, declines comment. For 46-lawyer Jackson & Campbell, which has suffered recent defections in both partner and associate ranks, the $3 million would be a significant amount of cash, sources close to the case say. David Cox, the chairman of Jackson & Campbell, was on vacation and unavailable for comment last week. John Brennan III, a member of the firm’s executive committee, says, “We are actively hiring lawyers. Although we regret to see any lawyers leave, that has had no impact on our financial success. And however the [Higgins fee] matter ends up, it will be of no consequence to the financial future of the firm.” Robin Higgins, a well-connected Republican who is now the executive director of the veterans affairs department of Florida, was nominated March 30 by President George W. Bush to be undersecretary of veterans affairs, though she is still awaiting confirmation. She did not respond to telephone calls seeking comment. For a few days last month, the Higgins litigation threatened to become even uglier, as legal papers flew in a dispute over the entire $55 million, plus interest. Nussbaum said he would seek a court order against a Great Neck, N.Y., law firm that had once advised Robin Higgins. He said that firm had wrongfully convinced Treasury to turn over to it the entire amount of the Higgins judgment and had deposited the money in an escrow account in a Long Island bank. Both Nussbaum and J.L. Novak, a lawyer representing Christine Higgins, the stepdaughter of Robin Higgins, wrote stern letters to the bank asking it not to disburse any of the funds. “Please be advised that any disbursement of these monies is unlawful,” Novak wrote on March 21, saying that his client’s wishes were not being heeded. But Novak, a partner in the Tysons Corner, Va., office of McGuireWoods, says that this aspect of the dispute has been concluded on an amicable basis and that both Robin and Christine Higgins have received their shares of the judgment, which have not been disclosed. The $3 million has been set aside until McDermott and Jackson & Campbell resolve their dispute. The case has been assigned to U.S. District Judge Henry Kennedy Jr. CLERK OR CO-COUNSEL? Meanwhile, Judge Thomas Penfield Jackson is handling the second dispute to grow out of the anti-terrorist cases. Anne-Marie Kagy, a 1995 graduate of the George Mason School of Law, had worked for Perles while she was in law school on the path-breaking Hugo Princz litigation. In that case, an American Jew detained in Nazi Germany lost his appeal in federal court but eventually shared with 10 other Holocaust victims in a $2.1 million settlement from the German government. After Kagy graduated, Perles hired her as a part-time law clerk at a rate of up to $50 an hour. Kagy worked extensively with Perles on the Alisa Flatow case, in which Iran also did not present a defense. On March 11, 1998, Judge Royce Lamberth awarded the girl’s parents a judgment of $247.5 million, including $22.5 million in compensatory damages. Kagy also worked briefly with Perles on behalf of Matthew Eisenfeld and Sara Duker, young Americans who were also killed by Arab terrorists in Israel. The total amount of compensatory damages awarded in those cases was about $54 million. Kagy and Perles eventually had a falling-out, and Kagy resigned in the fall of 1999. Perles had a one-third contingency arrangement with the victims’ families, and he agreed to split that evenly with Thomas Fortune Fay, a D.C. sole practitioner who was his co-counsel. That left him with $9 million. Kagy is alleging that she had an oral agreement with Perles for one-third of his fee, or about $3 million. “The agreement was not reduced to writing because Mr. Perles refused to memorialize this agreement or any other with Ms. Kagy,” Kagy wrote in court papers. “Notwithstanding his many promises to Ms. Kagy throughout their relationship of a pay day so large ‘he would make her the richest graduate of her law school class,’ Mr. Perles is in breach of his agreement.” Steven Schneebaum, a partner in D.C.’s Patton Boggs who represents Perles, says there simply was no contract of this type between Perles and a lawyer just a couple of years out of law school. “There was no written contract, clearly. She says there was an oral contract, but there was no oral contract. End of story. We are willing to pay her what her time was worth, the reasonable value of her time,” says Schneebaum. Schneebaum says efforts to settle the dispute have been unsuccessful. He has moved to dismiss much of her complaint on the basis of the statute of frauds, a legal doctrine that bars the enforcement of oral contracts under many circumstances. Kagy’s lawyer, David Sher of Arlington, Va.’s Sher & Cummings, did not return a call. WHAT LEGACY? Stuart Newberger is a partner at Crowell & Moring, a D.C. firm that lobbied Congress and the Clinton administration to make the funds available. Crowell, with Newberger at the lead, has filed several lawsuits on behalf of victims of Iran-sponsored terrorism. He says he is concerned about the effects of litigation of this type on the cause. “When Congress passed the anti-terrorism law four years ago, and when it amended it last year, the idea was to make terrorism expensive and to punish Iran and other sponsors of terrorism, not simply to hand the victims massive amounts of money,” says Newberger, who emphasizes that he is not commenting on specific disputes arising from victim awards. “Sooner or later, we will probably have to go back to Congress and the president and seek more funds on behalf of those who were not covered by this legislation,” says Newberger. “Regardless of what any individual victim is awarded, we want to keep these cases on a high moral ground.”

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