United States v. General Electric Co.

394 F. App'x 265
Court of Appeals for the Sixth Circuit·Decided September 3, 2010·No. No. 09-5379·Published

Opinion

HELENE N. WHITE, Circuit Judge.

Three firms represented a group of Re-lators in a False Claims Act (“FCA”) suit against General Electric Aircraft Engines (“GEAE”), and in related retaliation suits. After settlement of the claims, the Rela-tors received roughly $2.5 million. Pursuant to a contingency-fee agreement, the Relators paid just over $1 million in contingency fees. Because the law firms could not agree on the apportionment of those fees between them, the district court assumed jurisdiction and apportioned the fees. One of the law firms appeals, and we affirm.

I

The Kentucky law firm of Priddy, Cutler, Miller & Meade (“the Priddy firm”)1 represented a group of Relators in an investigation of alleged substandard manufacturing of jet-engine components produced by GEAE for use in military aircraft. In October 2000, the Relators filed an FCA action against GEAE in the United States District Court for the Western District of Kentucky. In 2002, the Priddy firm approached Helmer, Martins, Rice & Popham (“the Helmer firm”), an Ohio firm specializing in FCA claims. The two firms entered into a Co-counsel Agreement (“Agreement”) that provided, inter alia, that the two firms would share equally in a forty-percent contingency fee.2 The firms also agreed on the procedure for involving additional counsel, if it proved necessary. [267] The firms obtained the Relators’ consent to the Agreement.

After the Agreement, Helmer-firm partner Frederick Morgan, Jr., led the effort on the FCA claim and was the primary contact for the Relators. In January 2005, Morgan, along with paralegal Mary Jones, left the Helmer firm to join another Ohio firm, Volkema Thomas (“the Volkema firm”). The Relators expressed a strong desire that Morgan continue to represent them. At the Priddy firm’s urging, the Relators did not conclude the Helmer firm’s representation, and the firm remained as co-counsel, though in a limited capacity. Thereafter, the Helmer and Volkema firms engaged in a series of negotiations to determine how the Volkema firm would be compensated. Discussions centered on the division of the Helmer firm’s half of the contingency fee. The firms were unable to reach an agreement, and although Morgan continued to perform the majority of work on the case, the Volkema firm had neither an agreement with the other two firms, nor one with the Relators.

The United States intervened in the case in July 2006 and an $11.5 million settlement of all FCA claims was reached a month later. The Relators’ share of the settlement was paid into the Priddy firm’s non-interest-bearing escrow account. The Relators signed an agreement allowing the distribution of the funds, including a distribution of one-half of the contingency fee to the Priddy firm, and the other half to the Helmer and Volkema firms jointly. The Helmer firm objected to its share being divided with the Volkema firm. After an unsuccessful attempt to submit the dispute to arbitration by the Ohio State Bar Association, the Volkema firm filed a motion in the district court for acceptance of supplemental jurisdiction to resolve the dispute. The district court accepted jurisdiction and granted the Priddy firm’s motion to inter-plead $517,000. The court referred the matter to a magistrate judge, who found that absent an agreement, Kentucky law regarded the Helmer firm and the Volke-ma firm as engaged in a “special partnership,” and that their half of the contingency fee should be divided equally between the two firms. The district court adopted the magistrate judge’s recommendation without modification.3 The Helmer firm appeals.

II

This court reviews a district court’s award of attorneys’ fees for abuse of discretion. Gonter v. Hunt Valve Co., 510 F.3d 610, 616 (6th Cir.2007); see also Kalyawongsa v. Moffett, 105 F.3d 283, 289 (6th Cir.1997). “The district court abuses its discretion if it applies the wrong legal standard, misapplies the correct legal standard, or relies on clearly erroneous findings of fact.” Cherry Hill Vineyards, LLC v. Lilly, 553 F.3d 423, 435 (6th Cir.2008) (internal quotation marks omitted). Abuse of discretion is “defined as a definite and firm conviction that the trial court committed a clear error of judgment.” Garner v. Cuyahoga County Juvenile Court, 554 F.3d 624, 634 (6th Cir.2009) (quoting Berger v. City of Mayfield Heights, 265 F.3d 399, 402 (6th Cir.2001)).

III

The Helmer firm first challenges the district court’s assumption that the dispute concerns only the interpled, one-half share of the total contingency fee. It claims that under the Agreement any award to the Volkema firm must be paid in equal parts [268] from the awards to the Helmer firm and the Priddy firm. We disagree.

The Agreement states, in relevant part:

B. Costs And Expenses
(3.) The parties agree that the scope of the case and necessary discovery may expand to such an extent that it is prudent to involve another firm in the litigation. Should the parties mutually agree to associate with another firm, the parties will agree to a percentage of the total Relators’ share of the contingency which will be designated to the third firm, and the contingency fee shares of both [the Priddy firm] and [the Helmer firm] shall be reduced equally to account for that portion being allocated to the third firm.

The Priddy and Volkema firms assert that the first sentence and the first clause of the second sentence express a condition precedent to the application of the fee-splitting provision of the second sentence; i.e., a contingency fee paid to a third firm is to be drawn equally from the Priddy and Helmer firms’ shares only if the Priddy and Helmer firms chose to associate with a third firm due to the expanding scope of the FCA action. They argue that because this did not occur, the Helmer firm’s reliance on paragraph 3 is misplaced.

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United States v. General Electric Co., 394 F. App'x 265 (6th Cir. 2010).

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