FORT LAUDERDALE, Fla. (Legal Newsline) - Last month, a Florida-based e-cigarette maker filed a lawsuit against a New Jersey law firm, alleging attorneys charged the company “astronomical” fees for “unnecessary” legal services and mishandled a patent infringement case against it.
Vapor Corp., located in Dania Beach, Florida, filed its lawsuit against Morristown-based Porzio Bromberg & Newman PC in a Broward County, Florida, circuit court in late December.
Vapor, known for its Krave brand of e-cigarettes, had retained attorneys Kevin Bell, Richard Oparil and Scott Chambers to represent the company in patent litigation against Ruyan Investment Limited in 2011. At the time, Bell, Oparil and Chambers were working for D.C. law firm Patton Boggs LLP.
Then, Harlen Press, on behalf of Vapor, retained the team of Bell, Oparil and Chambers to represent it in a patent infringement lawsuit filed against it, and other defendants, by Fontem in 2014. The attorneys joined Porzio in August 2014.
In both instances, Vapor alleges the attorneys charged “staggering” legal fees and failed to provide sufficient disclosure regarding the work to be performed.
But the trouble really began, Vapor alleges, when the company underwent a merger in March with Vaporin Inc., another e-cigarette public company.
“Conveniently, and almost immediately after public announcement of the merger and the influx of capital, Porzio’s billing to Vapor on the Fotem litigation increased exponentially and became predatory,” Vapor attorneys Kluger Kaplan Silverman Katzen & Levine PL wrote in the Dec. 30 complaint.
Average monthly billings pre-merger were $34,887.19.
In the eight-month period post-merger, the average monthly invoice was $238,611.33 -- an increase of seven times the pre-merger monthly.
“Porzio immediately after the merger, and smelling new funding, took advantage of the corporate transition at Vapor and unilaterally engaged in a ‘leave no stone unturned’ litigation strategy -- or at least billed Vapor in line with that -- without the input or informed consent of Vapor,” attorneys for the company wrote in the 19-page complaint.
“Most troubling,” Vapor alleges, is that every single attorney in Porzio’s D.C. office -- eight in total -- worked at the same time on the Fontem litigation and billed the company.
On top of that, the firm billed Vapor monthly for a non-attorney IP specialist and non-attorney financial analyst, the company alleges.
“With no explanation or authorization, Porzio placed its entire Washington D.C. office on the case, leaving Vapor to blindly foot the astronomical monthly bills,” Vapor’s attorneys wrote.
“Porzio turned a blind eye to the best interest of its client, and instead seeing a pot of gold post-merger, unilaterally decided to proceed forward with aggressive litigation attempting to swindle Vapor out of millions of dollars through unnecessary legal services allegedly rendered.”
The company contends the firm failed not only to advise Vapor of anticipated significant increases in fees but also “entirely ignored” Vapor’s consent before such significant fees were incurred, and has yet to provide the company with an updated and detailed budget.
“Needless to say, Porzio and the Bell Team failed to act in the best interest of the client, Vapor, and instead flagrantly embarked on predatory billing practices designed to reap the benefit of the $40 million capital raise,” Vapor’s attorneys wrote.
Vapor, in particular, questions the firm’s strategy in the Fontem litigation, saying Porzio “failed to aggressively attempt to settle the case” and instead pushed forward with expensive complex litigation, discovery and motion practice.
“Porzio should have realized Fontem’s end goals of obtaining lucrative licensing deals and immediately engaged in settlement discussions when the case was filed, or at bare minimum explored these concepts with Vapor,” the company wrote. “Porzio, at best, made half-hearted attempts at settlement -- likely in fear of cutting off the billing mill it had created.”
The firm’s actions forced Vapor in October to retain outside intellectual property counsel, Geoffrey Lottenberg, to oversee the Fontem litigation.
Last month, Vapor and Fontem agreed to a settlement, with Fontem granting Vapor a non-exclusive royalty-bearing global license.
Vapor is suing Porzio for breach of contract, unjust enrichment, legal malpractice and negligence, among other things. The company demands a jury trial.
Bell, one of the Porzio attorneys, could not immediately be reached for comment on the allegations.
Electronic cigarettes, often referred to as e-cigarettes, are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash or carbon monoxide. The health risks associated with the e-cigarettes are uncertain; however, there is some evidence they can help people quit smoking. State attorneys general, in recent years, have called for federal regulation of the industry.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.