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An Illinois state court has ruled that a New York law firm and its Washington, D.C., co-counsel shortchanged a Missouri firm and two Illinois lawyers $4.5 million for their work on a class action lawsuit against an electronics manufacturer. Madison County Circuit Judge A. Andreas Matoesian on Feb. 2 ordered Manhattan-based Shalov Stone & Bonner, and Washington, D.C.-based Cohen, Milstein, Hausfeld & Toll, which maintains an office in Manhattan, to pay $5 million to St. Louis-based Carey & Danis and Illinois attorneys Andrea Lamere and David Nester. The New York and Washington firms had originally allocated only $500,000 for the work done by the St. Louis and Illinois attorneys in the class action. “[I]t is appropriate to allocate fees among plaintiffs counsel based on equitable principles and value added,” wrote Matoesian in his order. “The Court finds that the roles of the two lead counsel (Cohen, Milstein, Hausfeld & Toll and Shalov Stone & Bonner) and Carey & Danis were substantially similar in that the three firms expended efforts and brought value to the class members in approximately equal proportions.” Lee S. Shalov, a partner at Shalov Stone, said “The court’s decision was an abuse of discretion, was contrary to the facts, and will be reversed on appeal.” The fee dispute stemmed from a 1998 lawsuit brought in Indiana against Thomson Consumer Electronics Inc. concerning allegedly defective television sets manufactured by the company. In July 2000, Shalov Stone and Cohen Milstein expanded the litigation by filing class action suits in five other states. The firms chose Carey & Danis and the two Illinois lawyers as local counsel in Illinois. Upon settlement of the lawsuit, Shalov Stone and Cohen Milstein received $22 million in attorney fees and expenses they advanced on behalf of the 10 million-member class. The class members, depending on their ability to prove damages, received relief ranging from dollar-for-dollar refunds for repairs to coupons ranging from $25 to $50. “The Illinois co-counsel worked diligently on behalf of the class and achieved an outstanding result in the Circuit Court of Madison County,” Carey & Danis partner John J. Carey said about the case last year. “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.” Carey & Danis’ dissatisfaction with the fees it received for its work on the case led to a heated dispute in which Shalov Stone and Cohen Milstein filed a breach of contract and slander suit against the Missouri firm last year in the Southern District of New York. SLANDER CLAIM According to the two East Coast firms, Carey & Danis broke an oral agreement that Shalov Stone and Cohen Milstein would be solely responsible for determining the allocations of funds from the case. The two firms also alleged in their complaint that a lien placed upon the settlement funds by Carey & Danis slandered the title of Shalov Stone and Cohen Milstein to that property. That case is pending, according to Shalov. “The defendants have moved to dismiss [the breach of contract and slander case] for lack of personal jurisdiction, which we will oppose,” Shalov said. “We will be pursuing discovery and filing our opposition papers after discovery has completed.” As far as Judge Matoesian was concerned, the Illinois Circuit Court retained jurisdiction over all of the terms of the class action settlement agreement, including attorney fees. “Regardless of whether or not ‘lead counsel’ retained discretion, this Court, in the event of a dispute, is the final arbiter of attorney fee disputes and expressly exercises jurisdiction over this dispute,” Matoesian wrote. Carey & Danis partner T. Evan Schaeffer reiterated his firm’s position that the Southern District case will not survive a jurisdictional challenge. “The order speaks for itself,” Schaeffer said. “I think we’re vindicated in our belief that the Circuit Court in Madison County is the only forum for resolution of the fee dispute.” Matoesian’s order requires Shalov Stone and Cohen Milstein to submit payment of the $5 million to Carey & Danis, Lamere and Nestor by Friday. When asked about the deadline, Shalov would say only that the firm is evaluating the order. Carey & Danis is represented in the Southern District by Konrad F. Payne in the Manhattan office of Rochester, N.Y.-based Harris Beach. That case is before U.S. District Judge George B. Daniels.

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