A lawsuit filed in federal court in Camden offers a lesson for plaintiff lawyers in the difficulty of crafting an agreement governing fee allocations in class action cases.
A former associate of Kline & Specter in Philadelphia claims the firm reneged on agreements that gave him the right to fees and expenses reimbursements on work in progress, some of which he took with him when he left to join his own firm.
But Donald Haviland Jr.’s complaint suffers from a key frailty: He can only presume what fees Kline & Specter realized fees in those cases and so cannot reckon how much, if any, he is due.
In fact, part of the allegations he makes in Haviland v. Specter, 12-cv-5580, concern concealment of funds.
Kline & Specter, for its part, says the federal suit is merely an attempt to rehash a private arbitration last year in which Haviland was ordered to pay $5.7 million for violations of his employment contract in a non-class action case.
According to his complaint, filed Sept. 7, Haviland was hired in October 2001 to start a class action department at Kline & Specter, which is based in Philadelphia and has an office in Cherry Hill. The following month, he signed an employment contract with the firm.
In September 2006 he left to start his own class action boutique in Philadelphia, now known as Haviland Hughes. Upon his departure, Haviland and Kline & Specter amended his employment contract with an agreement concerning issues related to his departure.
In exchange for a promise to continue litigating six pending drug class actions, and a class action by 50 businesses destroyed in a 2001 fire at an industrial complex in Bridgeport, Pa., the agreement gave Haviland 12.5 percent of all net fees realized by Kline & Specter on those cases. But Kline & Specter has not carried out its obligation to Haviland’s firm under that agreement, the suit claims.
The Bridgeport fire case settled for $35 million, plus $13 million in legal fees and expenses, in 2008. Kline & Specter was class counsel, and Haviland was personal counsel to most of the class representatives.
Haviland’s suit brings counts for breach of contract, breach of implied covenant of good faith and fair dealing and tortious interference with plaintiff’s business interests and economic advantage against the firm. He also brings counts for conspiracy, unjust enrichment and violation of the violation of the Racketeer Influenced and Corrupt Organizations Act against the firm and its principals, Thomas Kline and Shanin Specter.
Although Haviland is a Pennsylvania resident and Kline & Specter’s main office is in that state, the case was brought in New Jersey because several of the class actions that are discussed in the suit were filed in New Jersey courts; the firm has a Cherry Hill office; and defendants Kline and Specter both have homes on Long Beach Island, the complaint says.
Haviland’s suit is “meritless and sad,” Specter, speaking for the firm and Kline, said in a statement. “Mr. Haviland paid Kline & Specter, P.C. $5,739,490.15 last year pursuant to an arbitration award against Haviland for multiple violations of his employment contract with Kline & Specter, P.C. This federal lawsuit seeks to relitigate those same issues.”
The $5.7 million private arbitration award stems from allegations that Haviland violated a portion of his November 2001 employment contract, requiring that if Haviland left the firm and took non-class action cases with him, he would give Kline & Specter one-third of the fee.
Haviland’s lawyer, Mark Rhoades of Haviland Hughes, says the parties agreed to exclude from the arbitration issues related to the agreement on class actions that the parties reached at the time the plaintiff left Kline & Specter in 2006. The suit is an attempt to resolve a dispute over the 2006 agreement on class action fees and costs, says Rhoades.
“The arbitration is one side of the story. This [the suit] is another side of the story,” Rhoades says.
Besides his share of class action fees, plaintiff Haviland seeks to recoup funds he paid out in political contributions, allegedly upon orders from his superiors, while working at Kline & Specter.
The firm says the accusation about political contributions is false.
Charles Toutant is a reporter for the New Jersey Law Journal, a Legal affiliate.