MIAMI (Legal Newsline) - A Miami-based law firm that typically specializes in asbestos litigation has filed a lawsuit against a former client and his South Carolina attorney for allegedly interfering with a business relationship in an effort to keep the firm’s fees to themselves.

The Ferraro Law Firm PA, which according to its website handles a broad range of injury cases including those involving asbestos exposure and environmental toxic tort lawsuits, filed its lawsuit in the U.S. District Court for the Southern District of Florida, Miami Division, Feb. 17.

The named defendants are attorney Timothy D. Scrantom, Scrantom Dulles International PLLC, Ten State International Law PLLC and Kenneth Platt Elder.

Ferraro points to a “crippling” litigation finance arrangement -- with a current balance of $21 million -- as the reason behind Scrantom and former client Elder’s alleged tortious interference.

“Even though Defendant Elder has no enforceable right or standing to interfere with the attorney-client relationship between TARS and The Ferraro Law Firm PA, he, along with Defendant Scrantom, because of the undue financial pressure they have created on themselves by being a party to the usurious loan have chosen to tortuously interfere with the hope that they can shift The Ferraro Law Firm PA’s rightfully earned contingent attorney’s fees to themselves,” the firm wrote in its 25-page complaint.

The firm contends Scrantom and Elder’s alleged interference has inhibited its ability to represent Total Asset Recovery Services LLC, or TARS, in a life insurance escheatment qui tam whistleblower action and the firm’s work in other matters because Ferraro has had to dedicate a “significant amount of time and resources” to defend itself in a “frivolous” arbitration matter brought by Scrantom and Elder and filed in Florida.

According to Ferraro’s complaint and demand for declaratory judgment, Scrantom, who is licensed to practice in South Carolina, engaged in the unlicensed practice of law by appearing as lead counsel for Elder, a non-Florida resident.

In addition, Scrantom’s firms, Scrantom Dulles and Ten State, both based in South Carolina, were not authorized to conduct business or render legal services in Florida, according to Ferraro’s lawsuit.

Ferraro alleges that on or about July 2008 Elder contacted it to represent him in a tax whistleblower claim in order to assist the Internal Revenue Service in the collection of outstanding federal tax obligations due by taxpayers from unclaimed fund accounts.

Elder and Ferraro then entered into a contract, on July 28, 2008, relating to his IRS tax whistleblower claim. However, in September 2011, the IRS rejected Elder’s claim.

In July 2012, Elder decided to abandon a resubmission of his claim, so Ferraro’s representation of him ceased.

During this time, in September 2009, TARS was formed. Also about this time, in August 2009, G3 Analytics LLC was created.

Elder is the president and sole member of G3 Analytics, according to the firm’s suit.

In September 2009, TARS and G3 Analytics entered into a business relationship and began to work together on a treasury bond project designed to find and recover unclaimed savings bonds for owners. However, the project was ultimately unsuccessful.

Nearly a year later, in August 2010, Elder, by and through G3 Analytics, entered into a consulting agreement with TARS for a separate project.

The Q1 Project, according to Ferraro’s complaint, was designed in part to help state governments identify life insurance companies that failed to escheat abandoned death benefits to the state when the beneficiary of the death benefit could not be located within a statutorily prescribed period of time.

The project includes qui tam life insurance whistleblower claims, but it does not include tax whistleblower claims alleging violations of IRS laws.

In September 2010, Ferraro was retained by TARS to represent it in connection with the pursuit of a life insurance escheatment qui tam whistleblower action, which still remains pending.

Then, in 2014, Elder retained Scrantom as a litigation funding consultant and was subsequently retained as general counsel for all of Elder’s companies, including G3 Analytics.

Ferraro alleges that from December 2015 and on, Scrantom and Elder have tortuously interfered with Ferraro and TARS’ attorney-client relationship.

“Upon information and belief, Defendant Scrantom was the architect of a scheme devised to collude with Defendant Elder in a concerted effort to deprive The Ferraro Law Firm PA of its contingent fee for legal services rendered to TARS in connection with TARS’s life insurance escheatment qui tam whistleblower action,” according to the firm’s complaint. “Specifically, Defendants Scrantom and Elder have intentionally asserted false and patently misleading claims of ethical violations, professional negligence and breach of fiduciary claims against The Ferraro Law Firm PA.

“Defendants Scrantom and Elder’s intentional and tortious conduct amounts to a deliberate attempt to have TARS terminate the legal representation agreement it has with The Ferraro Law Firm PA and to further deprive The Ferraro Law Firm PA of its contingent attorney’s fee.”

According to Ferraro’s suit, Scrantom and Elder have filed a frivolous demand for arbitration “under the guise” of Elder’s 2008 tax whistleblower contract with Ferraro.

Ferraro contends Scrantom and Elder have no legal standing to challenge its legal representation of TARS in the life insurance escheatment qui tam whistleblower action.

The firm argues that Scrantom and Elder’s objective in the Florida arbitration matter is to take over the ownership of the life insurance escheatment qui tam whistleblower action so they can terminate Ferraro and avoid paying the firm its fees.

“The reason that Defendant Elder, and his counsel, Defendant Scrantom, are interfering with the attorney-client relationship between TARS and The Ferraro Law Firm PA is because Defendant Scrantom setup a usurious and crippling litigation finance arrangement whereby Elder and the members of TARS borrowed $6,000,000.00 at an interest rate of 100 percent per year,” according to the firm’s complaint.

“The usurious loan was entered into on November 21, 2014, and now has a balance of approximately $21,000,000.00.”

The firm contends the loan has created “undue financial pressure” on Elder.

“TARS does not and has never had any interest in terminating its attorney-client relationship with The Ferraro Law Firm PA,” Ferraro noted in its suit. “At no time did TARS solicit or request any advice from Defendants Scrantom and Elder regarding its ongoing attorney-client relationship with The Ferraro Law Firm PA.”

The firm seeks a declaration that Elder has no enforceable contractual rights and lacks standing to bring any claims, and judgment in excess of $75,000 against Scrantom, Scrantom Dulles, Ten State and Elder.

Judge Ursula Ungaro has been assigned to the case.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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