The equity partners at the Provost Umphrey recently answered a lawsuit brought by Paul ‘Chip’ Ferguson, asserting their former partner took advantage of firm founder Walter Umphrey and his ailing mental condition.
A total of three lawsuits have been filed in the unfolding drama between Ferguson and PU – all of which center around a settlement agreement Ferguson negotiated with Umphrey before officially resigning on Aug. 3.
PU seeks to force Ferguson into arbitration in accordance with a 2012 partnership agreement he signed, while Ferguson is seeking to have the settlement agreement enforced.
Court records show that Ferguson filed his second suit against PU equity partners Walter Umphrey, Bryan Blevins, Edward Fisher, Joe Fisher, D’Juana Parks, James Payne and David Wilson on Sept. 1 in Jefferson County District Court.
A month later, the defendants answered the claim on Oct. 5, asserting Umphrey’s mental capacity began to decline in 2014 and that he lacked the capacity to contract, let alone negotiate, Ferguson’s “side agreement.”
Ferguson knew of Umphrey’s diminished mental capacity and intentionally took advantage of him, the partners claim.
“Ferguson’s betrayal of Walter Umphrey, his colleagues and his former partners is disgraceful to the profession and repugnant to common decency; his actions must be brought to light,” the answer states.
According to the lawsuit, Ferguson’s successes and profile provided a significant positive public relations boost to PU. After 25 years of “faithful service,” he became frustrated with state of the firm and its future.
In December 2014, Ferguson resigned, despite Umphrey pleading with him not to do so. On Feb. 4 the two executed an agreement to settle all disputes.
A week later, none of the other PU equity partners had questioned the validity of the agreement reached between Umphrey and Ferguson, the suit states.
In hopes his frustrations would be resolved, Ferguson agreed to remain an equity partner with the firm until Aug. 1. However, the guarantees made by Umphrey were not met, leading Ferguson to officially resign on Aug. 3 and invoke provisions of the February agreement, the suit states.
“On that date, Umphrey, in an effort to forestall Ferguson’s resignation, offered to resign and name Ferguson as managing partner, telling Ferguson to take ‘two or three weeks to think it over,’” the suit states. “Ferguson ultimately declined that offer.”
That same day, the PU partnership disseminated an unsigned memorandum criticizing the settlement agreement as “unconscionable and unenforceable” and directed Ferguson to immediately vacate the firm premises, the suit states.
“Ferguson called Umphrey at his home and reported this activity,” the suit states. “Umphrey replied that it was ‘a mistake.’”
On Aug. 4, Ferguson attended a meeting at the firm until Blevins, the current president of the Texas Trial Lawyers Association, banished him.
“At the conclusion of that meeting, Ferguson and his staff, under threat of being removed by armed escort, left the firm’s premises,” the suit states.
According to the PU partners, Ferguson claims he is entitled to:
• Fees up to eight times his equity share at the time of his withdraw;
• No liability to the firm for existing expenses;
• The sole, unassailable right to claim ownership of client files;
• The right to unethically prohibit the firm from communicating with its clients;
• 20 percent of the annual equity partner bonus for the next 10 years;
• 20 percent of life insurance proceeds for which Sheila Umphrey is the beneficiary related to the death of Walter Umphrey, whenever that may be; and
• The right to arbitrate any challenges to his one-sided agreement in an arbitration forum where he can select two of the three arbitrators, arbitrators that need not be neutral.
Ferguson, on the other hand, has contended in court documents that Umphrey was still the managing partner of PU at the time the settlement agreement was executed.
The partners claim that they did not want to force Umphrey to step down and instead to took steps monitor his actions.
“Of course, the firm’s equity partners never envisioned one of their own knowingly circumventing these safeguards,” the answer states.
They seek to have the settlement agreement rescinded and Ferguson’s suit dismissed.
PU is represented by Fields Alexander of the Houston law firm Beck Redden.
Attorney Ricky Raven of the Houston law firm Reed Smith represents Ferguson.
The case has been assigned to Judge Kent Walston, 58th District Court (case No. A-197499).
PU’s suit against Ferguson is being handled by an outside judge, Judge Olen Underwood of the Second Judicial Administrative Region of Texas.
PU asserts a Jan. 1, 2012 partnership agreement in place between the parties contains a broad and mandatory arbitration clause.
According to PU’s separate lawsuit, Ferguson is claiming he is not bound by the partnership agreement and that he is entitled to “much more than a departing partner is entitled to receive” under the agreement.
Court records show a motion on file to have the suits consolidated.
Ferguson has handled several prized cases for PU, which includes scoring a $32 million jury verdict against Domino’s Pizza in 2013 – a top five verdict in Texas that year, according to the National Law Journal.