Liberty Mutual Insurance Co. has agreed to settle its lawsuit alleging that insurance attorney Michael Devereaux tried to secure payment of outstanding legal bills by threatening to file his own suit accusing a company executive of attempting to extort kickbacks from his firm in exchange for Liberty’s business.

Mr. Devereaux said in an interview that the company had posted a $688,893 bond to secure payment of legal fees and costs it owed his firm. He said that his firm will get a “substantial” amount of that total, while paying Liberty nothing.

However, Mr. Devereaux, the principal of the five-person insurance firm Michael J. Devereaux & Associates on lower Broadway, said he could not disclose the terms of the settlement.

“We didn’t pay anything,” he said. “We got a great result. I just can’t disclose the number.”

Liberty Mutual spokeswoman Adrianne Kaufmann said in a statement that the company was glad the case had been resolved.

“We are pleased that litigation has been resolved and that we have concluded our relationship with the Devereaux firm,” she said.

Southern District Judge Richard J. Sullivan issued a brief order on Sept. 8 dismissing the suit, saying that Liberty Mutual had informed the court that “the parties have reached an agreement to resolve these matters.”

The order also dismissed a related action filed in March by Mr. Devereaux’s firm against Liberty.

Mr. Devereaux said the lawsuit was an attack on his reputation that came after years of successfully representing the company.

“After years of success with them they have negated the good feelings that may have existed,” he said. “To be subjected to what I was subjected to is really inappropriate.”

Liberty claimed in its complaint that it filed suit because Mr. Devereaux had drafted a complaint of his own seeking $3 million for the executive’s alleged interference with his business relationship with Liberty and that he was threatening to expose the executive’s “personal misconduct” unless the firm fed him 25 or more new cases within 60 days.

Mr. Devereaux responded in an interview by calling Liberty’s lawsuit “just an astounding accusation” (NYLJ, Jan. 21, 2011).

He provided the Law Journal with a draft copy of a lawsuit in which he accused the executive of demanding a $50,000 kickback for every $1 million worth of billables obtained from Mr. Devereaux’s cases.

Mr. Devereaux alleged in the draft complaint that the executive told him, “You must pay to play.”

The draft complaint also stated that the executive had used Mr. Devereaux’s downtown Manhattan apartment for trysts with Liberty Mutual employees and prostitutes, and pressed the lawyer to pay for two prostitutes while the men were in the Dominican Republic.

Liberty’s January complaint claimed that the executive denied any wrongdoing. Mr. Devereaux said he has since been fired, a statement confirmed by the company.

The company said in its complaint that Mr. Devereaux was discharged for cause in December 2010 because of his alleged threat to “pull the trigger” on the draft complaint, his failure to keep the firm aware of critical court dates and overbilling.

It stated that the Devereaux firm was retained in 2003 as panel counsel to defend the company’s insureds for covered losses and had been paid over $7 million over a seven-year period.

The Liberty complaint also sought the return of some fees paid to the Devereaux firm and demanded the return of all client files. It said Mr. Devereaux had asserted a retaining lien on the client files as he pressured the company to pay him $325,000 in overdue fees.

The client files have now been returned to Liberty.

Following the filing of Liberty’s complaint, Mr. Devereaux said the company had offered him $100,000 in late December to settle the matter but he declined the offer.

Speaking after the settlement was reached, Mr. Devereaux said he had earlier moved successfully before Judge Sullivan to release the name of the executive he accused of extortion.

“Under the law, the judge found there was no basis for him to withhold disclosure of that name, particularly in light of the fact they had attacked me so viciously,” Mr. Devereaux said.

But Mr. Devereaux said he was declining to name the fired executive because Judge Sullivan had admonished him to avoid “mudslinging.”

Liberty Mutual was represented by William B. Pollard of Kornstein Veisz Wexler & Pollard. Mr. Pollard referred all questions to the company.

The case is Liberty Mutual Insurance Co. v. Michael J. Devereaux & Associates, 11 Civ. 0359. The law firm’s suit is Michael J. Devereaux and Associates v. Liberty Insurance Underwriters, 11 Civ. 2236.