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An attorney and a Web entrepreneur may have had a “meeting of the minds” when the client signed away 15 percent of the potential recovery in an ownership tussle over one of the hottest pieces of Internet real estate. But a San Francisco Bar Association panel of arbitrators ruled last week that the fee agreement is void because it was not clear what the 15 percent encompassed. The panel also said attorney Charles Carreon did not meet the requirements laid out for legal fee agreements in the Rules of Professional Conduct and the Business and Professions Code. The arbitration panel did award a total of $695,689 in fees and costs in the non-binding arbitration — essentially doubling Carreon’s discounted rate of $100 an hour. But the panel refused to award 15 percent of the $65 million judgment or part ownership in the popular porn portal sex.com operated by Gary Kremen. The arbitration finding is the latest twist in the ownership dispute over the porn portal. The site, which links to other online pornography operations, generates as much as $500,000 a month, according to Carreon’s lawyer, James DeSimone. Two years ago, a San Jose, Calif., federal judge stripped defendant Stephen Cohen of the site, returning the domain name to Kremen and awarding $65 million in damages — most of which is as yet unrecovered. Carreon claims the fee agreement entitled him to a portion of both the judgment and sex.com’s ongoing profits. But DeSimone said the panel ruled that Carreon did not meet the requirement set out in 3-300 of the Rules of Professional Conduct. Under 3-300, terms have to be fairly and reasonably disclosed to the client, and the client must be advised in writing of his right to seek the advice of an independent lawyer. Carreon said Thursday that he had included in two places in the agreement the advisement that Kremen could seek outside counsel. DeSimone said Carreon will reject the arbitration award and continue with a suit filed in U.S. District Court in San Jose. But he said the arbitrators’ findings could help Carreon’s case. DeSimone, quoting the report, said the panel found that Carreon diligently represented Kremen in a last-ditch effort to salvage the pending litigation from dismissal on the pleadings. “We still believe it’s a victory because of the underlying factual findings of the arbitration,” said DeSimone, a partner with Schonbrun DeSimone Seplow Harris & Hoffman in its Venice, Calif., office. “We just believe they reached the wrong legal conclusions.” But Kremen’s attorney, Richard Idell, said the contract was vague and that Carreon drafted the document and had all parties sign in the same day, not giving Kremen ample time to seek outside legal advice. “We are happy with the result. I do not know why they feel so vindicated about it. It is not a win for them at all,” Idell said. Kremen first registered the domain name in 1994 while studying at Stanford. Cohen, who has served time in prison for bankruptcy fraud, obtained the domain name in 1995 by forging documents, according to court findings. Kremen sued in 1998 to get the site back. Carreon, who is based in Medford, Ore., had said the case was on its deathbed when he took over in 1999. Carreon said his relationship with Kremen soured after the domain name was returned on summary judgment and Kremen took over operations of sex.com. Carreon, who said he was acting as sex.com’s in-house counsel, said he and Kremen clashed about the site’s content. Carreon said he wanted to remove obscenity. Carreon said Kremen initially paid him about $100,000 — his 15 percent of the first two months’ profit, but then pulled the plug on the deal. Carreon filed the fee suit against Kremen in March 2001. DeSimone said the case, currently stayed for arbitration, should now move forward. Carreon also filed suit against the attorney that is representing Kremen in the fee dispute for breach of fiduciary duty. In a suit filed in San Francisco, Carreon contends that Idell, of San Francisco’s Idell, Berman & Seitel, represented him as well as Kremen during the two-month period that Carreon was receiving sex.com profits. Carreon says Idell was paid $10,000 to handle sex.com’s corporate work. “I have never represented Charles Carreon,” Idell said April 11. “I think his case has no merit whatsoever.”

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