Appeals court tapped to referee Coon vs. Umphrey dispute over tobacco fees

By David Yates | Jul 28, 2009


For the past two years, two of Texas' most influential plaintiff's lawyers have been embattled over millions in attorney's fees stemming from the state's mega-billion dollar tobacco settlement.

And with that much money on the table, Brent Coon is apparently unwilling to allow his old boss, Walter Umphrey, to select an arbitrator of his pleasing to mediate the dispute. Coon alleges the prospective arbitrator may be biased toward Umphrey.

Coon has filed a motion for a writ of mandamus with the Ninth Court of Appeals of Texas, asking justices to revoke Umphrey's selection of Frank Newton as his firm's arbitrator. The case has been set for submission on briefs on Aug. 6.

The crux of the dispute arose in November 2007, when Coon, once a partner at the Provost Umphrey Law Firm in Beaumont, claimed he never received his share of the more than $3 billion in attorneys' fees from the $17.3 billion tobacco settlement with the State of Texas.

As the Southeast Texas Record previously reported, on Nov. 2, 2007, Coon filed a complaint to compel arbitration in federal court in the Western District of Texas, naming the Provost Umphrey Tobacco (PUT) Partnership and several area attorneys as defendants.

The federal suit was dismissed in January 2008 when the parties agreed to arbitration through the American Arbitration Association.

Beaumont's own "King of Torts," Walter Umphrey, and his tobacco settlement partners quickly fired back at Coon, filing their own petition in Jefferson County District Court. They alleged Coon violated an arbitration agreement that was set up in case such a dispute arose over the settlement and Coon's withdrawal from the PUT partnership.

On March 20, 2008, Judge Bob Wortham, 58th District Court, side stepped the American Arbitration Association and compelled arbitration under the agreement, which called for a three party panel to arbitrate the dispute, court papers say.

According to the order, each side was to pick one arbitrator and a third was to be jointly picked. Coon selected Chuck Herring, a partner in Austin's Herring & Irwin, and Umphrey chose Newton, current CEO of the Beaumont Foundation of America.

The Beaumont Foundation of America was created with funds from the $2.1 billion settlement of a 1999 federal class action against Toshiba filed by several Beaumont attorneys.

Coon objected to Umphrey's selection and moved that the AAA decide whether Newton was qualified to serve as arbitrator.

Judge Wortham denied Coon's motion, leading the attorney to appeal his ruling.

"In this case (Judge Wortham) has followed the suggestion of Walter Umphrey and held the party-selected arbitrator need not meet any test of impartiality," Coon's appellate brief states.

"This contradicts AAA rules. Following (Judge Wortham's and Umphrey's) logic, one could appoint your spouse or law partner to the panel of arbitrators. This ruling undermines the entire … panel and must be reversed."

In his brief, Coon argues that Newton has "connections and an apparent bias in favor of the Umphrey plaintiffs."

He also says the appointment is a conflict of interest, since Newton is serving as an arbitrator in a different dispute between the attorneys.

"The record clearly shows Newton is currently serving as an arbitrator in another arbitration between Umphrey and Coon in another dispute related to Coon's withdraw from the PUT Partnership."

Conversely, Umphrey and his attorneys argue Coon has no grounds to appeal Judge Wortham's ruling and are beseeching justices to toss his writ for mandamus.


Coon was a partner in the Provost Umphrey Law Firm in Beaumont in January 1998 when the firm – along with 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 and 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, which amounted to more $3.3 billion in attorney fees.

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 called 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 had already selected would choose the third member of the panel.

Umphrey's suit says Coon 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."

Coon is represented in part by two Austin lawyers, Donald Taylor of Taylor, Dunham & Burgess LLP and Joe K. Longley.

Umphrey is represented in part by attorney Gary Reger.

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

Appeals case No. 09-09-00264-CV

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