Floyd grants emergency TRO against Coon in tobacco fee arbitration dispute with Umphrey
Attorney Brent Coon needs to stop trying to force his former employers at the Provost Umphrey Law Firm into arbitration over tobacco fees, a Jefferson County judge ruled recently.
On Feb. 22, Judge Donald Floyd approved a motion for an emergency temporary restraining order requested by Umphrey and other attorneys, stating it would be "unfair to force the plaintiffs to arbitrate a dispute they did not agree to arbitrate."
As reported by The Record on Dec. 17, 2007, Coon and Umphrey are in a dispute over tobacco settlement.
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 in 1998.
On Nov. 2, 2007, 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: Walter Umphrey, Bryan Blevins, Paul "Chip" Ferguson Jr., Keith Hyde, Greg Thompson, Mike Ramsay, Glenn Steele, Jr., Robert Giblin and David Brandon.
Umphrey and his tobacco settlement partners 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 January 1998 when the firm was part of a team representing 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 partner, Coon claims he is entitled to a portion of the attorneys' fees and alleges that he has not received any of the scheduled payments from the tobacco fund.
Claiming his former partners breached several agreements, Coon filed an arbitration complaint with the American Arbitration Association.
Umphrey argued that Coon had no authority to move ahead with arbitration, filed his own suit in Jefferson County on Dec. 14 and asked Judge Floyd to stop Coon in his tracks.
In its suit, 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 the Provost Umphrey Law Firm.
According to Umphrey's complaint, after the tobacco settlement Coon and the other lawyers involved in the case created the Provost Umphrey Tobacco partnership for the sharing of fees. The partnership agreement contained an arbitration provision.
In May 2001, Coon left Provost Umphrey to start his own firm. He also withdrew from the PUT partnership and entered into a Redemption and Withdrawal Agreement that also contained 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."
Judge Floyd agreed, and issued the emergency TRO against Coon.
If Coon's arbitration proceedings are not restrained, the plaintiffs (the Tobacco Partners) will "suffer irreparable injury and damages because plaintiffs' contractual rights to arbitrate will be lost, damaged and greatly prejudiced," Floyd wrote.
By proceeding with the Coon Arbitration, the pending lawsuit in Floyd's court would be ineffectual and deprive the Tobacco Partners a right to litigate their claims in a court of law, the order stated.
Floyd ordered that Coon desist from selecting any arbitrators or imposing any deadlines on Umphrey and the Tobacco Partners.
He also set a temporary injunction hearing for Thursday, Feb. 28.
Case No. E180-900