Arbitrator from PA orders O'Quinn to refund $35 million to clients

Marilyn Tennissen Jul. 23, 2007, 12:35pm

John O'Quinn

An arbitration panel that includes a Jefferson County native has ordered prominent Houston plaintiff lawyer John O'Quinn to refund at least $35.7 million to more than 3,000 former clients.

With interest and attorneys' fees, O'Quinn could owe almost $60 million.

The arbitration decision arose from a class action lawsuit against O'Quinn filed in 1999 by three women from Rusk County that O'Quinn had represented in breast implant litigation against Dow Corning.

Thousands of other women later joined the suit against O'Quinn, alleging that he improperly took funds from their settlements for group charges they had not agreed to pay.

The three-member arbitration panel includes David Beck, a Port Arthur native and graduate of Lamar University in Beaumont. In June, The Record reported on Beck's $1 million donation to his alma mater to establish a fellowship for outstanding undergraduate students.

Other members of the panel are former state District Judge Susan Soussan, who was picked by O'Quinn and Kenneth Tekell Sr., who was selected by the plaintiffs. Beck was chosen by Soussan and Tekell.
Beck and Soussan signed off on the final opinion released July 19.

"Quite simply, if O'Quinn is allowed to improperly withhold client funds with impunity, other lawyers may believe that they can do likewise. Such a result would destroy the very integrity of the
special and unique relationship that exists between attorney and client," the final order states.

The order says that O'Quinn, through three legal entities under which he has practiced law, must pay back $10.7 million he improperly charged clients and a $25 million penalty because he broke his
contract with them.

Those improper general expense deductions included professional association dues, flowers, fundraising, other lawyer's fees, and overhead, the arbitrators said.

Although the order seems like a hefty sum for O'Quinn, the arbitrators estimate that he received around $260 million from the original settlement.

O'Quinn has made millions in mass tort litigation and has had a colorful career.

He was one of the five Texas lawyers, along with Beaumont's Walter Umphrey and Wayne Reaud, that received more than $3 billion in legal fees from the 1998 settlement with tobacco companies.

O'Quinn filed several lawsuits in Jefferson County during the 1990s, many against big-name defendants like Union Oil, Exxon, Southern Pacific Railroad and Colonial Pipeline.

Earlier this year, O'Quinn unsuccessfully represented Virgie Arthur, the mother of former model Anna Nicole Smith, in a Florida court to determine who should have control over Smith's body. The media circus focused on O'Quinn temporarily, after he fainted in the courtroom during the hearing on Feb. 22.

He has also been prosecuted by the State Bar of Texas for improperly soliciting clients and was once found in contempt for sleeping in the jury room during a trial.

When O'Quinn learned that the women had filed suit against him in 1999, he told the Houston Chronicle that they "got more money than they would have gotten from any other lawyer in America."

But the arbitration panel found that the contract that O'Quinn had with his clients did not authorize the 1.5 percent that he collected from each client's settlement for general expenses.

Joe Jamail, lead lawyer for the women suing O'Quinn, called the decision "a victory for the bar."

"It stands for the proposition that a lawyer has to obey the rules regarding his client," Jamail said in an article first printed in the Houston Chronicle July 19.

"In a contingency case, you must outline expenses, you can't add them on unilaterally," Jamail said. "He charged off Bar dues, he charged off overhead. You just can't do it. What's the 40 percent (contingency
fee) for if you're charging off your overhead?"

Jamail has faced O'Quinn in litigation before. In 2001 Jamail represented an O'Quinn associate who claimed O'Quinn shorted millions in fees.

Ironically, it was a case involving his old tobacco case buddies from Beaumont that may have set the stage for O'Quinn having to pay back the legal fees he had collected.

After an explosion at a Phillips 66 plant in 1989 killed 23 workers and injured hundreds of others, Umphrey, Reaud and their partners represented more than 125 clients against Phillips. The case settled for $190 million, and the Umphrey, Burrow, Reaud, Williams & Bailey Law Firm received more than $60 million in contingency fees.

In 1999, 49 of the plaintiffs from the Phillips case filed suit against their attorneys, alleging professional misconduct and demanding forfeiture of all the attorney fees.

In the Burrow vs. Arce case, Umphrey, Williams and Reaud reached a settlement with the plaintiffs and the Texas Supreme Court eventually held that if a lawyer breaks his fiduciary duty to a client by putting his own interest above the client's, that he can lose part or all of his fee.

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