Railroad company losing money on fraud case

John O'Brien Feb. 1, 2011, 2:43pm

Daniel Mulholland, of Forman Perry Watkins Krutz & Tardy, litigated the fraud case against the two asbestos attorneys.

NATCHEZ, Miss. (Legal Newsline) - The company that successfully fought against alleged fraud on the part of two asbestos lawyers is financially in the red on the case.

Illinois Central Railroad decided to sue two Mississippi lawyers who allegedly defrauded the company out of $210,000 in settlements. In doing so, the company racked up nearly $1 million in attorneys fees.

On Jan. 25, U.S. District Judge David Bramlette awarded $547,500 in attorneys fees to Illinois Central, which says it spent $1,075,869.80 in fees, court costs and online research. Illinois Central recovered $588,822.96 in the Jan. 25 order, as well as $420,000 from a jury award last year.

"Illinois Central's 5,731 attorney hours and nearly $1 million in legal fees is extraordinarily high," Bramlette wrote. "First, Illinois Central knew at the outset of this case that its maximum compensatory damages were $210,000.

"Even given the very real possibility of recovering punitive damages, attorneys fees that are nearly five times the maximum compensatory damages recoverable are not reasonable."

Illinois Central's complaints alleged the company would not have been obligated to pay $210,000 in settlements had it known that Willie Harried joined a mass action, titled Cosey, in 1995 and Warren Turner in 1996.

Harried and Turner both filed suit against Illinois Central in 2001. The complaints say the attorneys - William Guy and Thomas Brock -- knew their clients had taken part in the mass action and failed to disclose it.

Bramlette wrote that Illinois Central used the fraud lawsuit to investigate any other potential wrongdoing by Guy and Brock. He added that even though the litigation was somewhat complicated, the attorneys fees did not reflect the complexity of the case.

"Fraud and breach of the duty of good faith and fair dealing are not inherently complicated claims," Bramlette wrote. "This case was tried in five days and the parties took 14 depositions, neither of which indicates an extraordinarily complex subject-matter.

"This Court recognizes that this case was made somewhat more complicated by the fact that Guy and Brock are attorneys and there were significant disputes amongst the parties during discovery about the attorney-client privilege.

"But that complicating factor did not transform this run-of-the-mill state law case into, for example, an antitrust case which requires specialized legal and technical knowledge and extensive discovery."

Illinois Central hired Forman Perry Watkins Krutz & Tardy of Jackson, Miss., to pursue the case. The firm, as of an accounting filed in November, spent 5,731 hours on the case and charged an average of $167 per hour.

By comparison, the defendants were charged $713,549 by their attorneys at Corlew Munford & Smith, according to the accounting they filed. The firm billed 2,532 hours for an average per-hour fee of $282.

Illinois Central's financial bottom line is a negative balance of $67,046.84. Guy and Brock have appealed the judgment and will be assessed interest at a rate of 0.41 percent beginning from March 24,2010.

Meanwhile, the company is asking Bramlette to issue a permanent injunction against a lawsuit filed by Harried in Hinds County Circuit Court. Harried's lawsuit alleges Illinois Central knew its claims were time-barred and should not have pursued it in federal court.

The company says that allegation, that it lied about when it knew of Harried's participation in the mass action, is frivolous and unsupported by any facts.

The company claims the suit attempts to relitigate the jury verdict and to have a state court judge second-guess Bramlette's rulings while it imposes additional costs on Illinois Central.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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