Coon, Umphrey in dispute over tobacco fees

Marilyn Tennissen Dec. 19, 2007, 8:18am

Brent Coon

Two of the biggest names in civil litigation in Southeast Texas have filed suits against each other over the mega-billion dollar tobacco settlement.

Brent Coon, once a partner in the Provost Umphrey Law Firm, claims he has not received his share of the more than $3 billion in attorneys' fees from the $17.3 billion tobacco settlement with the State of Texas.

On Nov. 2, Coon filed a Complaint to Compel Arbitration in federal court in the Western District of Texas. As defendants, the complaint names the Provost Umphrey Tobacco (PUT) Partnership and the following individuals or their professional corporations: Umphrey, Bryan Blevins, Paul "Chip" Ferguson Jr., Keith Hyde, Greg Thompson, Mike Ramsay, Glenn Steele, Jr., Robert Giblin and David Brandon.

Coon is represented by two Austin lawyers, Donald Taylor of Taylor, Dunham & Burgess LLP, and Joe K. Longley. The case has been assigned to U.S. District Judge Lee Yeakel.

Beaumont's own "King of Torts," Walter Umphrey, and his tobacco settlement partners have fired back at Coon, filing their own petition alleging that Coon is violating an arbitration agreement established in the event disputes arose over the settlement and Coon's withdrawal from the PUT partnership.


Coon was a partner in the Provost Umphrey Law Firm in Beaumont in January 1998 when the firm, as well as attorneys Wayne Reaud of Beaumont, John O'Quinn and John Eddie Williams of Houston and Harold Nix of Dangerfield, represented the State of Texas in a lawsuit against the nation's largest tobacco companies. The suit alleged the companies violated racketeering and conspiracy laws, committed fraud and other offenses.

"The Tobacco Five" as Umphrey and the other lawyers came to be known, secured a $17.3 billion settlement for the state and 15 percent for themselves --- estimated at more than $3.3 billion in attorney fees.

"As a result of Coon's position as a partner of the Provost Umphrey Law Firm, he was entitled to a portion of the attorney's fees from the settlement," Coon's complaint states.

Coon is alleging that he "did not receive any of his scheduled attorney's fees payments despite Defendants' obligations to pay those attorney's fees."

Claiming his former partners breached several agreements, Coon has filed an arbitration complaint with the American Arbitration Association.

Moving ahead with that arbitration is exactly what Umphrey says Coon cannot do.

Umphrey and his tobacco partners responded to Coon's arbitration complaint and federal lawsuit by filing an Original Petition for Declaratory Judgment and Proceeding to Compel Arbitration against Coon in Jefferson County District Court on Dec. 14. Gary Neal Reger of Orgain, Bell & Tucker LLP in Beaumont is representing Umphrey and the Tobacco Partners.

The state suit, assigned to District Judge Donald Floyd, states that after the tobacco settlement, Coon and other lawyers created the PUT partnership for the sharing of fees. The partnership agreement contained an arbitration provision.

In May 2001, Coon left Provost Umphrey to start his own practice.

He also withdrew from the PUT partnership and entered into a Redemption and Withdrawal Agreement containing an arbitration provision.

That provision calls for a three-person panel in any arbitration proceedings, one chosen by Coon, one by the Tobacco Partnership and one mutually agreed on. If Coon and the Partnership could not agree, then the two arbitrators each selected would choose the third member of the panel.

Umphrey's suit says Coon has breached the Redemption and Withdrawal Agreement and other contracts. The suit asks the court to declare that the controlling arbitration agreement and the controlling method for selecting arbitrators are contained in the Redemption and Withdrawal Agreement.

"Defendants (Brent Coon and Brent W. Coon PC) improperly commenced arbitration under the auspices of the American Arbitration Association," Umphrey's petition states. "There is not even an undisputed mechanism in the Coon Arbitration to select a proper arbitration panel or to determine how the arbitration panel is to be selected. Plaintiffs will be irreparably harmed if the Coon Arbitration proceeds and they will have no adequate legal remedy."

The Tobacco Partners want a declaration that Coon's only share of tobacco fees is his Distributable Share of All Regularly Scheduled Tobacco Payments beginning with the first quarter payment of 2007.

The suit also states that amounts owed to Coon are subject to be offset against amounts Coon owes to Provost Umphrey Law Firm.

In the alternative, the Tobacco Partners seek an unspecified amount of damages for Coons' alleged breach of the Tobacco Redemption and Withdrawal Agreement.

Also on Dec. 14, Umphrey and the Tobacco Partners filed a motion to dismiss Coons' complaint for lack of federal jurisdiction. Umphrey is represented by the Scott, Douglass & McConnico law firm in Austin in that case.

The partners argue that Coon's complaint fails to raise diversity or federal-question jurisdiction.

"The only federal law invoked by plaintiffs' complaint is the Federal Arbitration Act," the defendants' motion states. "The Federal Arbitration Act, however, does not confer jurisdiction on federal courts."

In addition, they argue that if the federal courts indeed have jurisdiction, then the case should be transferred to Beaumont.

Brent Coon et al vs. Walter Umphrey et al, Federal Case No. 1:07-cv-923-LY

Walter Umphrey PC et al vs. Brent W. Coon et al, District Court Case No. E180-900

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