HOUSTON – A squabble between trial lawyers fighting over proceeds from Paxil litigation settlements has given rise to a lawsuit – a complaint teeming with allegations ranging from skimming off the top to pocketing money from lawsuit lenders.
Claiming he was “cheated” out millions of dollars, Houston attorney Adam Peavy has filed suit against Floyd and Kenneth Bailey of Bailey Cowan Heckaman.
In April 2007, the Baileys entered into a joint venture agreement for Paxil litigation with Clayton Clark, a well-known pharmaceutical attorney. In turn, Clark recommended Peavy, according to the lawsuit.
GlaxoSmithKline manufactures Paxil, a drug used to treat depression.
After he was brought on, Peavy claims he “took charge” of the Paxil cases “while the Baileys did nothing.” In September 2009, the first case went to trial with Peavy as one of three lawyers on the trial team.
“A favorable, multimillion-dollar verdict was obtained after a three-week trial – a test case,” the suit states. “The Baileys had no involvement; they did not so much as bother to show up and watch as money was being made for them.”
Peavy further claims he and his staff were responsible for organizing all the cases for settlement as the “Baileys did nothing” other than send emails asking when “they would get their fees.”
After settlement, the Baileys allegedly withheld compensation to Peavy on $12 million in fee income, which only recently came to light in March 2018 when the attorney saw an email reflecting that he had been misled.
Peavy also claims he was not provided all the details to his agreement when he joined the Baileys’ firm in August 2011.
“This is not a situation where a party did not read what he signed…,” the suit states. “Rather, this is an instance where Peavy was not provided the … agreement and did not sign it.”
Peavy was named a partner in 2013, becoming heavily involved in multiple profitable torts beyond the Paxil litigation.
“Millions of dollars were made on Avandia, PPH, Trasylol, Prozac, Wellbutrin, Celexa, Depakote, Depuy ASR, Wright Conserve, Stryker, State AG cases, Asbestos cases, Biomet and even individual personal injury cases – all of which generated tens of millions of dollars in settlements,” the suit states. “During this whole period of time, the Baileys were not sharing fees with Peavy, while claiming that they would make it up to him on future settlements.
“Unfortunately, the Baileys did not live up to their rosy promises and representations of income. Instead, the Baileys gave Peavy his same old draw, and told Peavy time and time again that his share of the firm’s profits would be made up once the second round of Paxil cases, and also pending Mesh and GM cases.”
Peavy claims the Baileys diverted tens of millions of dollars in fees and in loans “to secretly benefit themselves.”
In March 2014, the Baileys took out a loan with Virage Master (a litigation financing company), borrowing against all future Paxil fees and pocketing $17 million for themselves, according to the lawsuit.
“Apparently, the Baileys also took out separate personal loans … on a variety of their dockets, including Mesh cases,” the suit states. “This secret profiteering generated tens of millions of dollars in money pilfered by the Baileys, while burdening the firm with debt and liens on the Paxil and Mesh dockets….”
Once the next batch of Paxil cases settled, the Baileys once again started finding ways “to milk money” out the settlement for their personal benefit, according to the suit.
“Ultimately, Peavy informed the Baileys that he would insist that they pay him fairly for the work he had done over the years,” the suit states. “They refused every last chance to do right by him. They short-changed him on fees by millions of dollars, stopped his draw, and canceled his medical benefits. Now they claim that he is not even a member anymore…”
“The Baileys need to provide an accounting and make good on their obligations and misdeeds in winding up this entity, which still exists.”
Peavy maintains that he was involved in cases that generated “hundreds of millions in fees” for the firm but was cheated out of compensation, “like so many other lawyers the Baileys have stiffed or cheated the past few years.”
The suit accuses the Baileys of fraud, embezzlement, breach of fiduciary duty and defalcation.
Peavy is suing to recover actual and exemplary damages.
Houston attorney Alan Daughtry represents him.
The suit was filed Jan. 28 in Harris County District Court, cause No. 2019-06454