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In a nationally televised trial in December 1999, a woman named Leslie Price accused George Shinn, owner of the NBA’s Charlotte Hornets, of sexually assaulting her. A Columbia, S.C., jury, however, ultimately believed Shinn’s defense that the sex was consensual, leaving Price with no recovery in her civil suit. That outcome did not sit well with Price’s law firm, Matthews, N.C.’s Weaver, Bennett & Bland. The verdict left the firm with nothing under its contingency agreement. In November 2000, the firm filed suit in federal court in Asheville, N.C., alleging that meddling by a Nevada litigation-finance company and its affiliates sabotaged a $1 million pretrial settlement offer, costing the firm more than $325,000. Weaver Bennett claims that even after the lead attorney on Price’s case, Michael David Bland, warned Resolution Settlement Corp. that litigation financing was of dubious legality in North Carolina and South Carolina, Resolution Settlement went behind his back and cut a secret deal with Price that left her with little choice but to reject a settlement allegedly offered by Shinn. The case, now pending before U.S. District Judge Lacy H. Thornburg of the Western District of North Carolina, sheds light on the inner workings of a fledgling industry that is growing rapidly while also sparking considerable controversy. Richard W. Painter, a University of Illinois law professor who has written about litigation finance, and Andrew T. Savage, a litigation financier who tracks developments in the field, said that this is the first case they have seen of a law firm suing a financier on its own behalf. Documents filed with the complaint show that in 1999, Price accepted a $200,000 advance in exchange for a promise to pay Resolution Settlement a minimum of $600,000 if she recovered from Shinn. A $1 million settlement would have left Price owing the company $100,000 after the law firm took its 50 percent contingency fee, according to the complaint. The firm accuses Resolution Settlement of tortious interference with a contract, fraud and unfair and deceptive trade practices. Weaver, Bennett & Bland v. Speedy Bucks, Case No. 1:00CV249-C. The year 1997 was pivotal for both Price and Perry Walton, a litigation-finance pioneer. Walton, a Nevada consumer lender, turned to litigation finance after his April 1997 conviction for extortionate collection of debt, he told the Wall Street Journal in September 2000. Walton set up companies of his own, including Future Settlement Funding Corp., one of the defendants in this case. But he also trained a host of imitators through a series of two-day seminars reportedly priced at more than $12,000. Those imitators, now in business throughout the country, often share investment opportunities with Walton’s companies. The companies named as defendants — Resolution Settlement, Future Settlement Funding and Speedy Bucks, all incorporated in Nevada — appear to be intimately connected. The complaint alleges that many of the individuals named as defendants were officers of more than one of these companies. In 1997 Shinn met Price at the clinic where she was undergoing treatment for addiction to painkillers. Price said that Shinn had promised to introduce her to a divorce lawyer at his South Carolina home on Sept. 5, but that he sexually assaulted her there. Shinn said the sex was by mutual consent. After local authorities declined to prosecute Price’s criminal complaint, she sued in South Carolina in February 1998. Days later, Shinn sued Price in North Carolina, alleging extortion and slander. In April 1999, Bland, who represented Price in North Carolina, responded to a Speedy Bucks solicitation letter. After discussing the case with Bland and Price’s private investigator, Steve Hartness, Speedy Bucks-affiliate Resolution Settlement made an initial offer of $110,000, with a $400,000 minimum return if Price recovered from Shinn. Bland protested that the proposal “would make settling the case … virtually impossible,” the complaint says. Resolution Settlement responded by lowering the minimum return to $200,000. By that time, Bland had concluded that the proposals were illegal in South Carolina and perhaps North Carolina. Even then, company officers pressed their proposal, the complaint says. ‘SECRET AGREEMENT’ ALLEGED At that point, the complaint alleges, Resolution Settlement “preyed upon Leslie Price’s extreme financial need” and “induced [her] to enter into a secret agreement without her attorneys’ knowledge,” in breach of her duties to Bland’s firm. By obligating Price to repay $600,000 on her $200,000 advance, the secret agreement hamstrung Bland during settlement negotiations, the complaint alleges. Price insisted on no less than $1.2 million, while Shinn would offer no more than $1 million, the complaint states. After Shinn prevailed at trial, Price agreed to forego an appeal and Shinn dropped his North Carolina suit. When the dust settled, the complaint says, Bland’s firm was in the hole for more than $10,000 in expenses and lost business opportunities and had missed out on a share of a substantial settlement. Price got to keep the $200,000, part of which she had used to pay Hartness, her private investigator, according to Hartness. But Resolution Settlement was also $200,000 in the hole. The complaint hints that it may not have been disappointed in that outcome and may have had connections with Shinn all along. For instance, the complaint repeatedly alleges that company officers pledged that they had no connection with Shinn, but it doesn’t explain why the subject was raised or why it might be significant. Hartness is willing to be more explicit. He said Resolution Settlement’s behavior was suspicious. For instance, he said that the two-page contract it asked him to co-sign with Price was surprisingly casual given the sums at stake, and required him to do his best to ensure that it got its share of a recovery even though that was not in his power to do. But the most damning evidence came when Price “hacked into the FedEx Web site,” Hartness said, and then Price showed Hartness a printout allegedly showing that a Resolution Settlement officer had sent a package to Roger Schweickert, a Charlotte Hornets’ vice president who helped Shinn on the case. But Hartness said that Resolution Settlement can’t be blamed for Price’s and Bland’s woes. Far from being pressured, Price was the one who “hounded” the company for money, he asserted. In his opinion, Price’s obligation to Resolution Settlement “had no bearing on her decision not to settle. She thought she could get more money.” Shinn’s attorney, Bill Diehl of Charlotte’s James, McElroy & Diehl, denied any connection between Resolution Settlement and his client. He said that Shinn learned of the deal only after trial. An investigation by the Hornets organization found no evidence of a package mailed from Resolution Settlement, he said. Schweickert also denies having received such a package. Diehl disputes one of the linchpins of Bland’s case. He claims that Shinn never made a settlement offer to Price, let alone one of $1 million. Diehl simply told Price’s attorneys that he wouldn’t even sit down to discuss a settlement until Price dropped her demands below $1 million. Mark C. Kurdys of Asheville, N.C.’s Roberts & Stevens, who represents all of the defendants, says that the allegations of a connection between Shinn and his client rest on a “witness’s forged document,” but he would not identify the document or the witness. Hartness said that it wouldn’t surprise him to learn that Price had forged the printout she showed him. Neither Bland, nor his firm’s attorney, Forrest A. Ferrell of Hickory N.C.’s Sigmon, Clark, Mackie, Hanvey & Ferrell, would comment for this article. Price could not be reached for comment. Savage, CEO of the Salem, Mass., litigation finance company LawFunds LLC, said that a return of $600,000 on a $200,000 advance was in line with industry practice, particularly in a risky “he said-she said” case. Even with large returns, most firms in the fledgling industry have yet to make a profit, he said. But his firm and others in the industry insist on dealing directly with a client’s attorney, he said. Painter, the University of Illinois professor, argued in a 1995 article that third-party financing of litigation costs would benefit plaintiffs by giving an alternative to contingency-fee arrangements. But he has reservations about the practice common in the litigation-finance industry of making advances to cover personal expenses. When the client has to pay both her attorney and a litigation financier out of any recovery, her interest in the litigation becomes increasingly attenuated, yet she still has unilateral control over the lawsuit, he said. He added that the problem can be controlled somewhat by making only small advances, an insight that will not likely be lost on the industry given Resolution Settlement’s $200,000 loss in this case. Painter believes that litigants have a duty to keep their attorneys informed and that Weaver Bennett may prevail if it can prove its allegations. The case is set for trial in May.

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