The SE Texas Record May 5, 2015, 10:08am


ST. LOUIS – High profile lawyer Mikal Watts of San Antonio and his colleagues in litigation against Bayer chemical company face a federal suit claiming they reaped millions in fees that didn’t belong to them.

Lawyers who led national litigation against Bayer at federal court in St. Louis allege that the Watts group improperly retained fees from similar cases in state courts.

Their complaint argues that the Watts group should pay for advantages they gained in state courts through membership on the legal team in federal court.

The complaint seeks restitution of 11 percent for all recoveries that the Watts group obtained in state courts.

The complaint does not specify an amount for those recoveries, but it asserts that the claim exceeds $5 million.

In March, the leaders of the federal litigation team asked District Judge Catherine Perry to certify a class action against the Watts group.

Perry had dismissed the suit in 2013, but Eighth Circuit appellate judges reversed her last year and the U.S. Supreme Court denied a petition for review in March.

Litigation started in 2006, after the U. S. Department of Agriculture announced contamination of rice by a strain that Bayer had genetically modified.

As prices for rice fell, growers sued Bayer in federal and state courts of Texas, Arkansas, Louisiana, Mississippi and Missouri.

The U.S. Judicial Panel on Multi District Litigation consolidated all federal suits and transferred them to Perry.

Perry chose Don Downing of St. Louis and Adam Levitt of Chicago as lead plaintiff counsel, and she picked six others for an executive committee.

She held three bellwether trials, for the purpose of setting a range of values for possible settlement, and plaintiffs won all three.

Plaintiffs in state courts also prevailed at trial.

In 2010, Perry ordered Bayer to create a common benefit trust fund holding eight percent of any grower’s recovery, plus three percent for expenses.

She urged state court judges to require participation in the trust fund, but admitted she lacked jurisdiction over them.

As an example of a lawyer gaining advantage in state court from the work of the leaders she singled out Martin Phipps, a San Antonio lawyer in the Watts group.

“Although Phipps has used his own expert witnesses, he has also used the depositions taken by the leadership team, and he has used the documents and other discovery from Bayer obtained by the leadership group,” Perry wrote.

She wrote that members of his firm attended the leadership team’s depositions and obtained large portions of transcripts from two trials she conducted.

“The lawyers and plaintiffs who have not agreed to join in the trust will have been unjustly enriched if they are not required to contribute to the fees of the leadership group,” she wrote.

“The leadership group shares the products of its labor with all of the plaintiffs.”

In 2011, Bayer and the leadership team agreed on a $750 million settlement of all claims, state and federal.

The agreement created a settlement fund, with an administrator in Nueces County, Texas, to distribute recoveries and fees from state court actions.

In September 2012, Perry’s leadership group moved for an order allocating $72 million from the common fund among six firms.

In November 2012, Phipps, Watts, and Stephen Murray of New Orleans filed an action for declaratory judgment at Nueces County courthouse in Corpus Christi.

They asked Court at Law Judge Leeanne Galvan to rule that they owed nothing to the common fund.

According to Downing and Leavitt, they did not serve notice of the action.

In December 2012, Perry entered a $72 million allocation order.

“It is not an exaggeration to say that the Phipps group has been unjustly enriched by the work of the common benefit attorneys,” Perry wrote.

In January 2013, Downing and Leavitt filed a class action complaint in St. Louis against Watts, Phipps, their firms, and the firm of Keller Stolarczyk in Boerne, Texas.

Downing and Leavitt filed it as their own lawyers, along with 13 others.

According to Downing and Levitt, the Watts group then served notice of the action in Nueces County.

Next, Downing and Levitt amended the complaint to add Murray as defendant.

The court assigned District Judge Carol Jackson to the case, but Perry granted a motion from Downing and Levitt to consolidate it with the ongoing Bayer litigation.

The Watts group called on Perry to recuse herself, arguing that she demonstrated bias or prejudice in Bayer rulings and in granting consolidation.

Watts filed an affidavit swearing that he first met Downing at a settlement conference in St. Louis, in 2009.

“After I told him I was unwilling to agree to pay him a common benefit fee for state court cases, he warned me that I needed to reach an agreement with him, threatening that ‘Judge Perry is going to give me whatever common benefit fee I ask for,’” Watts wrote.

He wrote that in 2011, Downing flew to Texas and pressed him again about paying a common benefit fee. He told Downing 8 percent was too high and would yield an exorbitant fee.

“When I pointed out that the fee percentage being sought was well above what could be justified with the number of hours he claimed had been worked, he then kept adjusting the total amount of common benefit award he needed upward, and kept changing the total amount of time his group had worked,” Watts wrote.

“When I asked him how he did that, he said, ‘If we need to, we’ll get the records in to support it,’ and, ‘she won’t care that the records are not there yet; she’s going to give me what I ask for.”

Watts wrote that he asked Downing how he knew what the judge would do, and Downing said he was allowed to have “ex parte” communications with her.

He wrote that he said Perry couldn’t tell Arkansas and Texas state court judges what to do.

“He warned that Judge Perry would exert influence over those judges, and she would make sure they knew that she thought they should order us to pay him,” Watts wrote.

He wrote that Downing pressed him again in 2012, after intervening in multiple Arkansas state court cases. One judge denied intervention and Downing dismissed an intervention.

He wrote that he said his group was entitled to some of the common benefit assessment, since it provided some of the work.

“At that meeting, before the common benefit rulings were even issued by Judge Perry, Downing told me point blank: ‘Judge Perry is going to f--- Martin; she hates him; he will never get a dime,’” Watts wrote.

Perry’s next decision showed no bias for Downing and Levitt, however, for she dismissed the complaint.

She ruled that neither Missouri’s long arm statute nor due process permitted the exercise of jurisdiction over the Watts group.

Downing and Levitt appealed to the Eighth Circuit in St. Louis, where judges reversed her last August.

“Each defendant traveled to Missouri to negotiate settlement of their state court cases with Bayer,” the judges wrote.

“The fact that the location of the negotiations was not selected by the defendants does not mean that their decision to travel to Missouri was involuntary,” they wrote.

Meanwhile, in Corpus Christi, Judge Galvan denied a motion from Downing and Levitt to enter special appearances in opposition to declaratory judgment.

Downing and Levitt petitioned for review at the 13th District appellate court in Corpus Christi, and judges there stayed the proceedings before Galvan.

They heard arguments in December, and had not reached a decision as of May 4.

In January, in St. Louis, Downing and Levitt amended their complaint to install their firms as plaintiffs rather than themselves.

They added Charles Banks of Little Rock as a defendant, along with his firm.

In February, the Watts group moved to split the federal case into two or three cases and transfer them to other courts.

They proposed to send claims against Watts, Phipps and the Keller Stolarczyk firm to eastern Arkansas or western Texas.

They proposed to send the claim against Banks to eastern Arkansas and the claim against Murray to eastern Louisiana.

Downing and Levitt opposed transfers in March, arguing that Perry’s special knowledge of the underlying case suited her to bring the claims to resolution.

They moved for class certification on March 27, claiming defendants injured more than 1,000 persons by refusing to contribute.

“The three percent cost portion of the common benefit assessment was either absorbed by the lawyers or passed on to rice producers,” they wrote.

If plaintiffs prevail, they wrote, all who paid three percent would benefit.

Michael Vitale of St. Louis opposed class certification for the Watts group on April 23, arguing that no contractual relationship existed between them and plaintiffs.

He wrote that if anyone received a benefit from the federal litigation, the farmer clients of the Watts group did.

“Defendants themselves were not parties to the underlying cases and therefore could not have enjoyed and appreciated the benefit plaintiffs have alleged,” Vitale wrote.

Perry has set trial next Feb. 29.

Watts attracted national attention in 2010, by filing more than 40,000 individual claims in litigation of the BP oil spill.

In 2011, the New York Times reported that some of his clients did not exist and others said they had not retained him.

Federal agents raided his office and seized records in 2013.

No arrest or indictment has occurred.

BP sued Watts at federal court in New Orleans last year, seeking to halt distribution of funds to a group that included his clients.

He moved to stay the suit pending the criminal investigation, invoking Fifth Amendment protection against self incrimination.

District Judge Carl Barbier denied an injunction in February 2014, and asked for a report on the status of the criminal investigation in 120 days.

Barbier’s docket shows no report at 120 days, and no report since then.

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