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Last February, a federal jury in Miami awarded only $66,106 in compensatory damages, and no punitives, to three plaintiffs in a fraud lawsuit against Prudential Insurance Co. The six other plaintiffs in the case received nothing. The attorney who represented the plaintiffs, Jack Scarola of West Palm Beach, Fla., told the Palm Beach Post after the verdict, “I was shocked. It’s probably the highest-profile defeat I’ve sustained. I don’t lose too many, and I don’t like losing at all.” But the pain was only beginning. Scarola and his firm now find themselves caught in a web of lawsuits brought both by and against former clients and co-counsel arising from the South Florida lawsuits against Prudential. The lawsuits are filled with a crossfire of allegations, including breach of duty, negligence and tortious interference. Part of what triggered the current battle was controversy over how Scarola and Searcy Denney Scarola Barnhart & Shipley handled the representation of the Prudential plaintiff with the biggest potential claim, Alyce Erickson. And partly the current lawsuits resulted from post-trial criticism of Scarola’s litigation tactics by the clients and other attorneys. Scarola, a highly regarded litigator, had taken an aggressive stance with Newark, N.J.-based Prudential during the pretrial negotiations. He had demanded payments of as much as $900 million from the insurer to settle claims that the company had engaged in fraudulent sales practices. The pro-defense verdict affected the fortunes of more than the nine plaintiffs. They were part of a larger group of 40 former Prudential policyholders who had opted out of a 1997 national class action settlement against the carrier. At Scarola’s suggestion, the 40 had agreed to pool their recoveries in several lawsuits filed in South Florida. Attorneys from other law firms worked with Scarola in representing 39 of these plaintiffs. But relations among the lawyers were strained over Erickson. Erickson joined the pool late and retained Scarola as counsel. In the aftermath of the unfavorable verdict in Miami, the united front of the plaintiffs and their team of attorneys imploded. Twenty-five clients fired Searcy Denney as their counsel, while 15 remained with Searcy Denney. Now, one year later, all plaintiffs have settled their claims against Prudential without further trial. Attorneys in the suits maintain that the Miami verdict had no effect on later settlements. But one source close to the cases estimates that Prudential’s total payout on all claims was about $25 million. Early on, Scarola had told the company he would discuss no settlement offer less than $50 million. Last month, with that residue of disappointment, one group of former plaintiffs filed suit, Harper et al. v. Searcy Denney et al., in Miami-Dade Circuit Court against Searcy Denney and other law firms and attorneys involved in the Prudential suits. Searcy Denney filed suit soon after in Palm Beach Circuit Court, in Searcy Denney et al. v. Bedzow Korn et al., against two of its former co-counsel and their firms, alleging tortious interference. Searcy Denney’s former co-counsel in the Prudential cases have filed similar claims against Searcy Denney in Miami-Dade Circuit Court. And fees in the local suits against Prudential are still under lien in Miami-Dade, Broward and Palm Beach. Andrew Berman, a member of the Florida Bar’s committee on professional ethics and a shareholder at Young, Berman, Karpf & Gonzalez in North Miami Beach, said the mess of lawsuits is not particularly surprising, given that multiparty suits like the ones filed by the plaintiffs against Prudential typically are “fraught with danger.” “They have to be handled very delicately,” he said. “As you get into the middle of the case, all sorts of problems emerge that you couldn’t possibly foresee.” The plaintiffs in the national class action alleged that Prudential lied to its customers, overcharged for coverage and misrepresented life insurance policies as investments. Prudential paid $2.3 billion to customers who purchased 10.7 million policies from 1982 through 1995. The 40 South Florida Prudential plaintiffs who opted out of the 1997 national settlement originally were represented by Houston lawyer David Sheller and Aventura, Fla., lawyers Robert B. Miller and N. Fraser Schuh. Acting individually, the plaintiffs filed suits against Prudential in 1997 in the Palm Beach, Broward and Miami-Dade circuits. Nine plaintiffs subsequently had their cases removed to federal court in Miami. In the spring of 1999, the plaintiff attorneys hired Searcy Denney as co-counsel in the South Florida cases. Scarola, the firm’s lead counsel in the suits, drafted and distributed to the plaintiffs a joint representation agreement, or JRA, binding its signers to settle their cases collectively or not at all, and to divide the future recoveries between all the plaintiffs. According to court documents, the goal was to present a united front that would prevent Prudential from settling the strongest plaintiff cases and going to trial on the weakest. The documents show Scarola said that the JRA also was intended to reduce the potential for conflict of interest among the various plaintiff lawyers. The 40 South Florida plaintiffs signed the agreement. But, according to the pending Harper lawsuit, Scarola’s firm developed a conflict of interest anyway. The suit alleges that beginning no later than March 2000, without informing the other Prudential plaintiffs, Searcy Denney began to represent Erickson. Her case involved particularly egregious allegations of deceptive sales practices by Prudential. The Harper plaintiffs claim that Searcy Denney kept Erickson out of the JRA until the firm was forced to include her in the deal in December 2000. At that point, Erickson’s case was consolidated with the other Palm Beach plaintiffs. The Harper plaintiffs contend that Scarola deliberately kept Erickson’s case separate because it appeared to be an easier case to win and promised a larger recovery, with potential punitive damages. They also claim that Searcy Denney allowed the insurance expert for the JRA parties to apportion damages among the 40 plaintiffs if there was a recovery so that the bulk of the money would go to Erickson. Searcy Denney had a larger fee interest in Erickson’s case than in the other suits — 55 percent before a jury was seated and 60 percent thereafter, compared with a straight 37.5 percent in the other cases, later revised to 42.5 percent. “The problem wasn’t with the joint agreement,” said Howard DuBosar, a partner at DuBosar & Dolnick in Boca Raton, Fla., who, along with Andrew Lavin, partner in the Fort Lauderdale, Fla., firm Navon, Kopelman & Lavin, represents attorneys Miller and Schuh, Searcy Denney’s former co-counsel. “It was with Scarola’s handling of it once he represented Erickson.” “Total bunk,” replied attorney J. Michael Burman, a partner at Burman, Critton, Luttier & Coleman in West Palm Beach who represents Scarola and his firm in the lawsuits brought by former Prudential clients. “Jack acted in the best interests of the clients at all times.” In court documents, Searcy Denney claims that Miller and Schuh objected to the handling of Erickson’s case because they were motivated by “the scent of money.” The West Palm Beach law firm alleges that when the two attorneys couldn’t get a share of the Erickson fees, they “instigated” the other Prudential plaintiffs to attack Searcy Denney. That, Searcy Denney says, led to the demise of the JRA and to the current internecine lawsuits. The attorneys on both sides dispute key facts about the handling of Erickson’s representation. Miller and Schuh say her case came to them in 1999 and they referred it to Searcy Denney. They say they didn’t learn that Searcy Denney had taken the case until late in December 2000. But Burman insists that Erickson came to Searcy Denney with no referral from Miller and Schuh. He says that the two attorneys were “fully informed” of Searcy Denney’s representation of Erickson “long before December 2000.” The dispute over the Erickson case fees began in February 2001, when Searcy Denney learned of a fee agreement between Miller and Schuh and a former partner of theirs who also had been involved in the Prudential lawsuits. That agreement included a share of the fees from Erickson’s case. Scarola wrote to Miller to object, but Miller defended his right to a share of the fees. By August 2001, with the federal trial date looming in Miami, the attorneys agreed on the division of fees in all cases but Erickson’s. They consented to leave that for later resolution. During the federal trial in Miami, Prudential’s attorneys used the existence of the JRA against the plaintiffs, arguing that the pool agreement demonstrated greed. By early 2002, Miller and Schuh, unhappy about the Miami trial outcome, took their concerns about the Erickson fees to the rest of the Prudential plaintiffs. The clients began to question Scarola’s quarterbacking. According to transcripts of meetings between the attorneys and their clients in May and June of last year, the plaintiffs expressed anger and grilled Scarola on his strategy and handling of the cases. They criticized Scarola for keeping Erickson out of the JRA. But at other points in the meeting, they criticized him for bringing her case in and allocating 35 percent of total recoveries to her. Scarola told the group that he always intended to bring Erickson into the JRA. He said he held off because to do so might prompt the judge in the other Palm Beach trials to consolidate Erickson with those cases. A separate trial for Erickson would give all the plaintiffs “another bite at the apple,” he said. Erickson’s large share of the total recovery would be balanced by the increase in payments everyone in the pool would receive from Prudential. The clients’ distrust was compounded by Miller’s attacks on several of Scarola’s actions. A number of them demanded that Scarola recalculate and reduce Erickson’s share of the recoveries, which he said he could not do. By the end of June 2002, 25 of the clients had fired Scarola as their attorney. The former clients’ and co-counsels’ current lawsuits make a variety of claims and demands. The Harper suit alleges fraud and breach of fiduciary duty and names Scarola, his firm, attorneys who worked with them other than Miller and Schuh, and those former Prudential claimants who elected to remain with Scarola as counsel. It seeks a declaratory judgment dissolving the JRA and determining what fees the Harper plaintiffs owe the defendant attorneys and how the pooled settlements should be divided. It also demands compensatory damages and legal costs from Searcy Denney. Miller and Schuh have filed suit against Scarola and his firm in Miami-Dade for breach of contract, breach of fiduciary duty and tortious interference. They seek compensatory damages and a declaratory judgment awarding them a share of fees in all the Prudential suits, including Erickson’s. Searcy Denney, in turn, has sued Miller, Schuh and their former law firms in Palm Beach Circuit Court. Searcy Denney alleges tortious interference. The suit demands compensatory damages for Searcy Denney’s loss of some of the Prudential clients and for the disruption of the firm’s contractual relations with the rest. The suit reserves the right to claim punitive damages at a later date. A group mediation of all the lawsuits is scheduled for Sunday. One participant, a Miami-Dade lawyer who is close to one of the cases but who did not want to be identified, said the legal fees in the dispute total in the range of $9 million to $10 million. In addition, Scarola’s firm has costs of more than $1.5 million. The case, the attorney said, is a prime example of “how poorly lawyers can behave.” He hopes that at the mediation, “they all start acting like gentlemen.”

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